Is the Australian residential property market so overpriced that we should be shorting our banks? Or is it reasonably priced because of low interest rates? In attempting to assess residential property’s fundamental worth we need to recognise that residential property has two very different functions - as a home providing safe shelter and as an investment providing a return.
There is no question that negative gearing artificially increases demand resulting in higher prices. The problem is that turning it off will reduce residential prices.
Property Valuers are often perceived as being out of touch because they "value" our properties for less than what we think they are worth to procure finance; yet most Property Valuers do not estimate a property's true intrinsic value at all.
In attempting to quantify mortgage stress we impassively talk in economic units such as household income and house prices. However to really understand mortgage stress we need to consider a home instead of a house and a family instead of a household.