There is no question that Australian property is over-valued. But we need to acknowledge that it is for structural reasons, and just as the Chinese govt is keeping its currency artificially low, the Australian govt is keeping its property prices artificially high. The Chinese govt using currency regulation; and the Australian govt uses land use regulation. So much for the communist-democratic dichotomy. Near-perfect synergy if you ask me....so we will meet somewhere in the middle, but since we will end up selling our individualistic souls in the process...engaging in moral relativism or moral scepticism if you prefer...we will end up with global collectivism...with govts working in synergy to control your lives. This is probably reason enough to have property or other assets dispersed all around the world. You know about having a diversified asset portfolio...well this is reason enough to spread your exposure. Governments are playing lottery with your money...and lives. The reason they hardly persecute anyone anymore is because you are drowned out by PC-compliant media and organisations, and because they have your money. Is there a conspiracy...its not centralised....and certainly not so conceptually well-planned. Its an alignment of economically and politically compatible interests. They don’t even realise what they are doing to their national values.
So back to the Australian property market. The IMF says the Australian property market is overvalued....Duh! It has been for a decade. The issue is whether its going to fall. The answer is no...at least not nationwide. They might do a few ‘strategically’ placed land releases to the poor, but expect the Australian govt to control prices. You might think they cannot do this. They can so long as they control interest rates (and they do) and the China has a requirement for our commodities. This will be the case for 20 years so no problem. We cannot therefore expect huge increases in Australian property, but you can reasonably expect good growth. Probably bubble? Not likely...at least not for the next 10 years. Strong commodity prices are going to demand interest rate increases. Expect a strong currency too as property prices rise. The AUD is going to break parity with the USD, and do even better. Yep we are probably looking at 1.15. Why? Paradoxically because of high property debt which will give Australians some sensitivity towards excessive consumption. The problem of course is greater import penetration. In a weak global market foreign enterprises will be targeting Australia. So in the long term, we might expect import penetration to balance out those currency gains. Govt spending will also have an impact. The high prices can be expected to remain in the cities because of strong population growth and employment.