Episode Details

Perhaps it's a reflection of how old I am, but as I keep seeing the stories in the media about rapidly rising house prices, I simply think: here we go again.

There are already those out there telling us we are in the housing bubble that's going to crash.

Then there are others who are warning us how the Reserve Bank or APRA are going to interfere and slow things down.

And then the banks that only 12 months ago forecast house prices would fall 10, 15 or 20 percent are now suggesting house prices could rise by 10, 15, or even 20 percent in this year alone in some areas.

While these periods of rapid house price rise essentially come down to the forces of supply and demand, each sprinkled with varying quantities of irrational exuberance, the precise forces behind each of the housing booms I've invested in over the last almost 50 years are not the same.

I remember just after I bought my first investment property early 1970s inflation boomed when the Whitlam Labour government came in. At that time interest rates were much higher than they are now. Inflation had the effect of reducing the real value of mortgages, but it was also a time of strong wage growth.

Then I remember the great property boom of the late 1980s which was one of the factors that led to the recession we had to have in the early '90s and particularly remember the boom in the early 2000s, when investor demand was a significant factor driving up house prices, in part because of the changes made to the capital gains tax regime at the time.

Looking at the current housing boom, there are some very interesting features that contrast with previous cycles.

The first is that population growth is currently very low, in fact, net immigration actually caused Australia's total population to fall over the past 12 months.

That's very different from previous booms — particularly in the middle of the last decade — where strong immigration was an important driver of rising house prices.

Another interesting difference is the relative absence of investors in the current housing market compared with owner-occupiers. This is reflected in the much stronger demand for standalone houses rather than apartments.

In February this year investors only made up about 20% of all home loans while traditionally this is closer to 30%.

And it's not just local investors that are missing.

There is also the absence of foreign investors. During the last boom Asian investors, particularly from China were an important force driving up property prices and buying many of the high-rise apartments being built in our CBD. They are nowhere to be seen this time around.

So far, a significant factor of this property boom has been the presence of first homebuyers assisted by various federal and state government initiatives including the homebuilder program, the first home loan deposit scheme, and various deputy concessions.

While our banks are keen to lend to First Home Buyers, I've heard that the Bank of Mum and Dad is now is the fifth largest lending institution in Australia.

Here homeowning parents who sitting on significant equity in their property help their children get into the housing market either with gifts, loans or they assist by guaranteeing their loans.

So how can you make the most of this property cycle?

Is the Reserve Bank going to interfere and raise interest rates?

Will APRA slow down lending as it has in the past?

These are all questions I'm going to ask of my regular podcast guest, financial adviser Stuart Wemyss.

Truths about the housing boom

Our property markets have been surging this year with double-digit growth in sight for all our capital cities.

And now that more Australians feel secure about our economy in general, and their jobs in particular, this will only place more impetus under our markets.

And it's clear tha