Who can predict the future? Certainly not me. We can look at the underlying dynamics, though, and point out the direction we think the trends may be heading.
Over the last few months there has been a resurgence in consumer confidence and house prices have increased by about $6000 per month in some places. There is also an official rate rise expected on Melbourne Cup day. Both of these things together are not good news. The combination may make a large number of people try to put their house on the market. If prices start falling because of an oversupply it might trigger a panic with more people trying to sell while the market has higher prices, while at the same time buyers will try to push for bargains in an oversupplied market – a typical bursting of a boom bubble.
The last couple of governments have been trying to keep house prices inflated for a long time now. The Rudd Government seems to have become more penny-conscious of late, with a number of funding initiates being suddenly wound back – notably in areas to do with energy efficiency (thermal insulation and solar cells). They might not be able to do much if there is a downward trend in housing prices. But there will be hell to pay at the ballot box.
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