Hysteria
There does appear to be no lack of doomsayers in the market today. Personally, you do have to wonder if things are really that bad. I took a quick look at some numbers (and I know the statisticians are now salivating) today in the Perth market. REIWA website - Perth median prices. (say what you want about their validity)
In 1999, the median house price was $150K and no boom was happening. Historically, property does about 10-11% per annum (8% in real terms) - hence the real estate agents 'doubles every 7' catch cry. So in 2006 the median house price should have been around $300K but it was more like $400K, quite an overshoot. (33% too high)
The median price 'should' be $368K this year, in Sep quarter it was $426 however, and it looks like the the peak is definitely tracking back closer to the norm. In fact by 2010, according to the long term average, the median price should be close to $450K. (triple 150K) So to me it appears a natural historical level rate of return is emerging, and I take that to mean that there will be little to no growth in the market for two years.
The fact that people are predicting 30% drops, particularly Perth, suggests the median should be around $330 (based on the 2007 peak) but historical data doesn't bear that out. Granted there may be an overswing correction, but the lowering of interest rates should mean homeowners have less reason to sell.
The great thing about stats is you can make them say whatever you want, but sometimes they're needed to counter some pretty emotional commentary. Australia is 5 mins away from a market of 2 billion people on the Asian sub-continent who all want a better lifestyle. Even with the doom and gloom being shoved down our throats (no shortage of experts on how bad things are) I have difficulty believing we are headed anywhere near a depression if we are smart and confident in our economy.
But the pundits have us scared out of our wits and will will us into one.