So a caveat: My understanding of the macroeconomic climate is hardly different than that of the reading-layman's; I've had little to do with economics since graduation.
The short answer about Australian property prices - to the best of my understanding - is that we're unlikely to see them rise much, but I can't say with any certainty if they're going to fall. If they do fall, it will most likely be on the back of a quite serious macroeconomic malaise. So the problem for any home-buyer in Australia is mostly around an appetite for risk more than anything else: We've no idea how things will play out, but if something dramatic does happen it'll be bad.
The start of the year has been centered around probably three major possible events, all of which are likely to have significant and nasty effects for Australia:
- A hard-stop in the Chinese economy.
- A breakup of the Eurozone
- An emerging market systemic economic collapse*.
The Chinese economy has everyone on tenterhooks, and will be the really big one if it eventuates, but we've virtually no information to go off since their economy is largely opaque. The Chinese government is porbably incentivised to not offer a pessimistic outlook, but simulateously, is able to deploy some fairly draconian measures to stabilize their economy for the short term. It's a real unknown and the RBA is eyeing it warily.
Regarding the Eurozone: It's looking likely to me that the UK may never leave the EU and just delay until the next election. This might stave off some of the scarier breakup-fears, however we're likely to lurch into another disaster wit h the Italian banking system reputedly in strife now, so I can't see that resolving any time soon. The only possible outcomes here are nothing or really bad.
If any one of these eventuate we'll be in a nasty spot, because most of the tools we had to survive the 2008 crisis, we won't have this time: We can't lower interest rates much, if at all either in the US or here, Government's don't have the surpluses to do a Keynsian splurge with. While these events don't happen, we're kind of doing ok.
Property prices here, in the cities particularly, have been driven up by a large quantity of foreign investment, particularly from China. Given the state of things, I can't see that being a driving force again. There will probably be some countering force as the RBA keeps interest rates low, but I'm not aware as yet of this being significantly inflationary. There is mention of negative gearing (a significant coalition policy) driving up prices too. I'm not sure to what extent that's a factor, but, given the election outcome I don't think we're likely to see it change at all. The only possible outcome would be some kind of policy reform, thereby driving down prices as demand falls
So: from a personal perspective, I can't see a lot of incentive to jump into the property market right now. It's true that owning debt could become really cheap, but the flipside is prices don't strike me as going up anytime fast. The worst possible outcome for the individual is to be stuck with a huge mortgage on a property which is now worth nothing (cf 2008 in the USA). Worse still, Australia's private debt is really high, as in people have large credit-card debts and loans already. They are very vulnerable to the slightest change in income, and should this falter the knock-on-effect would be very fast
'* I'm not really sure what the economist is talking about here.