Now I am taking a wild guess you but I would say that you are under 40 years of age. The reason I say that is it your advice and belief structure is based upon one of the foibles shared by the inexperience and that as “ As it was in the beginning, it is now and shall be for ever more ”.

There are not a lot of Mariners left that steer their vessels by looking entirely at the wake.

Real estate prices are driven by a two simple forces – population growth and community wealth. History is strewn with not hundred but thousands of examples of when real estate values have dramatically decreased in the short (years) and medium (decades) term and sometimes for periods in excess of a 100 years. (.i.e the fall of Rome and the Black Death)

Yes it is absolutely true that based on all the history available to us that over the long term (the period of recorded history-10000 years) real estate in most parts of the globe is currently at their highest levels. (Exceptions are places like “Tenochtitlan” the Mayan capital in Central America) but with 6 billion people and $1000 trillion in wealth it is easy to understand why this is so

However, there is two crucial factors that any person under the age of 40 should be aware of, and they are

1. That we, as a human species, are nearing the solstice of our population growth in our occupation of this planet and predictions are that this will occur this century and most likely in the lifetime of the generation born between 2000 and 2005.
2. With global warming, humanity will face economic stress on global wealth the likes of which has never been eclipsed in the recorded history of human socialization.

Any person with a grade 12 knowledge of biology is well aware of the curve for population growth and demise in any species countering favorable growth conditions and there are no exceptions for our species. The science also tells us that the exact point at which the triggering event occurs is unpredictable but the demise phase is both rapid and catastrophic.

And the last chilling fact is that in the absence of both of the above factors, history reveals that property growth, over the last 400 years in England has averaged 1% per annum.

No I am not an alarmist or a doomsdayist, just an “old dude” offering a word of caution

One note of caution though … my bank manager met with me yesterday and wants to get valuations for all my properties … even though they were all valued 18m ago … he said if the values have dropped then the loan limit will need to be reduced … he gave an example – one investment property was valued at 400K, he said if it had dropped to 350K, then I would have to come up with 40K cash in order to keep the loan at 80% or less LVR … this is an interesting reality check…even though you are easily meeting all your payments and “serviceability” is fine, the bank would send you a Letter Of Demand giving you 30 days to come up with the cash … by the way, this is one of the big 4 banks in Australia.

This won’t wipe me out because I have lots of cash and several unmortgaged properties, but I am concerned what will happen to investors already riding close to the edge.

I will be still continue to invest (just not in Melbourne right now because that feels too risky to me). What hasn’t been reported in the press much lately (because so much of the talk has been about the exciting Melbourne boom) is the extraordinary bargains in other areas such as North Qld, country NSW, some parts of TAS.

The price tortured me because my parents at the same time sold the 35 year family home for $115K. That had 2x double garages, a single garage, a triple carport, 2 single carports, fruit trees, a full length cement cricket pitch,lawn to kick a footy, 2 driveways, 3dbr, sep lounge, sep dining, sep “pool room”, study, sep kitchen, huge laundry, 2nd sep wc…
$160k was doing my head in.

Spent 15K on the unit we lived in for 5 years, now valued at $560K. It went up by the exact amount as my take home pay in that 10 years.

I bought an apartment in Sydney in 2004. It is located in a good suburb within 10km of the CBD and is walking distance to transport, schools, shops, cafes etc. The price has not moved since I bought it and it has been 6 years. Perhaps I had paid too much for it in 2004 but I don’t think so as the valuation at that time was higher than the purchase price. It would be difficult to even sell now in 2010 at the 2004 purchase price. If anyone is looking to buy a well located apartment in Sydney, please let me know as I have a friend who has one in the same block and is willing to sell at 2004 purchase price + 10% (to cover costs).

Works well till you hit a Global Financial Crisis with margin calls, depleted equity and altered lending standards and can’t hold the properties any longer. Fire sales leave you well out of pocket with stamp duty and exorbitant loan costs and this is compounded further if you have been silly enough to pay over the odds for your property in the first place. Only ones to gain from this are the banks and another real estate investor like you and Dymphna Boholt waiting to take advantage of your misfortune