The Motley Fool has long been warning that Australian house prices are too high. They have already fallen, with prices recently falling for a second consecutive quarter, with more declines expected to follow.
Not surprisingly, National Australia Bank (ASX: NAB) chief economist Alan Oster recently said housing affordability was becoming more of a factor for buyers.
You could have knocked us over with a feather…how any young first home buyer on a wage of say $50,000 can afford a $450,000 is beyond us.
The best-case scenario is more of the same…steadily falling house prices over the next decade, or even more.
Worst-case, house prices fall quickly and somewhat uncontrollably. A scenario that could be brought on by sharply higher unemployment. Whichever way you cut it, Australia would be staring at its first recession in over 20 years.
Given that outlook, who'd want to be buying an investment property today? Or in fact the Aussie dollar (AUD)? Not we.
Rough ride for sharemarket too…
The sharemarket is where The Motley Fool's interests lie. And sharemarket investors have had a rough ride of it over the past 4 years.
From its peak in October 2007, the S&P/ASX 200 index has plummeted 38%. Few companies have been spared, with Rio Tinto (ASX: RIO), AMP Limited (ASX: AMP), ASX Limited (ASX: ASX) and Qantas Airways Limited (ASX: QAN) have all fallen more than 40% over the same period.
And the winner is…shares
But that was in the past. Going forward, from a base of high house prices and a relatively low sharemarket, we think the winning investment class over the next 10 years will be shares.
We're not alone. A report by Australia and New Zealand Banking Group (ASX: ANZ) forecasts equities will overtake residential property as the strongest performer over the next 10 years.
Are you still sure about buying that investment property? It could be the biggest investing mistake you ever make.
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Of the companies mentioned, Bruce Jackson has an interest in NAB and ANZ. The Motley Fool's disclosure policy is an investment in itself.