News today that Melbourne real estate is down 2.9% over the past year made me chuckle. Because for prices to get back to any reasonable level of affordability - they will need to drop a further 25% to 35%. Vendor fear is about the only thing that is keeping them from going off the cliff.
Question #1 - "Will real estate affordability ratios revert to the long run average - in the short term or the long term"?
If short term - then lots of people will go bankrupt and probably take a couple of banks with them.
If long term - then the future will look much like what Japan has endured for the past couple of decades.
Either way - it won't be a lot of fun getting there.
Question #2 - "Why are we so susceptible to marketing hype and irrational purchasing behaviour"?
What is it about the human condition that causes us to pay way too much for stuff? How is it that we ignore inherent value and get carried away with hype and marketing and end up outbidding our neighbors? Is it just about competitive spirit?
I am wondering if this is an inbuilt human genetic trait - or something that is more a learned thing that has been developed and tweaked over time by the marketing gurus?
Actually it probably doesn't much matter - because the end result is the same.
PS - this provides some explanation.
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