Finally, here comes the price crash!

That was the title of an article I read the other day by Kris Sayce, editor of the daily blog “Money Mornings”. Now you may or may not agree with Kris’s sentiments but nonetheless, his views are worth consideration as an alternative to the usual spruiking of vested interests in the real estate and banking industries.

Over the past 30 years or so we seem to have acquried an unhealthy obsession, as is the case with other English speaking countries, with house prices.

There was a time, in the good old days, when houses were seen as a place to provide shelter. Now it would be a rare event to go to a social gathering without someone asking me “How is the real estate market?” and then proceed to tell me how house prices always go up!

The truth is, house prices have become so expensive that, according to a study by Bankwest, a person on the average wages of around $47,000 per annum, is unable to afford the median priced house of $485,000.

Maybe this is the reason it takes two incomes to provide shelter for the average family! What are the social consequences of that?

Do you know some people actually think real estate agents set property prices? If only!!

Of all the “expert” predictions by the real estate industry I have seen over the past 25 years, I don’t think even one has come remotely close to getting it right. Same with economists and stockbrokers!

If real estate agents, economists and stockbrokers had the power to set prices, by definition we wouldn’t have a free market economy. We would have a command economy, which is what they have in China.

A free market is exactly that; the market determines the value of a good or service. Real estate agents and stockbrokers simply interpret in hindsight, what the market has done in the past.

The truth is we don’t even know whether prices are going up or down at present. It is only in hindsight, that we can say what has happened.

Anyway, check out the article by Kris Sayce on his daily blog at www.moneymorning.com.au

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