Sunday, 9 April 2006
Looking for a Big House? Wait!
Most discussion you see about the housing market these days tends to focus on a) whether there’s a bubble (reliable sources say yes, at least in many places) and b) when and how it will pop (it already is, and agonisingly slowly).
This little nugget from The Australian makes me wonder;
PLANS by one in five Australians to downsize the family home to fund their retirement may be risky and could cause a market glut.
The report by Citibank warns that ageing baby boomers could be left high and dry if their property falls in value or if buyers desert the market.
According to their poll of 1000 Australians, 21 per cent of current mortgage-holders plan to supplement their retirement nest egg by selling up and buying a smaller home.
Citibank warns this could be a risky strategy.
“The baby boomers … will be collectively attempting to find buyers for their properties over the coming decades, and the result could be chaos,” the report says.
This is interesting; I’ve seen speculation along these lines before, but not backed up with a survey of people’s intentions. Although the effect will be spread over a period of time, it might snowball if there’s a serious effect (or, at least I hope so; I don’t particularly want to wait that long to buy a house ;).
Most people have been assuming that housing prices will only fall in real, not nominal terms, because of greater spread between bid and ask prices; the only thing that would precipitate a fall in nominal prices would be an event that forced people to sell; e.g., a rise in interest rates.
As we see, there may be other reasons that drive people to sell en masse; here, demographics. So, if you’re young, want a house, and can wait, you might get the last laugh, generational accounting-wise.
Ironically, this also may make some of the vertical development in Melbourne (and elsewhere on the planet, presumably) a not-so-horrible investment (or least better than it seems now).