themarketplace to secure a property butwhat we're actually seeing generallyacross the market is the affordabilitythreshold so we're actually seeing wherehousehold income is greater than sort ofthirty five to forty percentof their disposable income now thatmeans that forty percent of their moneyis is out of their household budget isservicing a mortgage in some case we'reeven seeing example is a -percent nowthat's unsustainable in terms of wheninterest rates go higher are thesepeople going to be able to run theircurrent lifestyle but also service themortgage and and that's what we're goingto see you know in and we'renot going to see a pop of this bubble wejust don't see that in our major citiesbecause it's still essential need it'sstill shelter so people aren't going tomove out of their home if they don'thave to and there's a process to gothrough but those people who are findingit harder to service their mortgage arepotentially going to have to put theirproperty on the market and that's goingto change sentiment around where theproperty is a good investment or a gooda good thing to do at that time andthat's going to see the correction occurso it's not going to bubble it's notgoing to pop but it's going to basicallyease its way down like we saw in the price gain.
An upward cycle wesaw between and Property Valuers Adelaide some of thosegains given back how much of an impactthough is the foreign investment sectorin the market and will we see anychanges there Miriam it's a really gaina good question I think we need tounderstand and we need to put it intoperspective the foreign investment thatwe're seeing is critical for our nationin terms of nation building andbasically seeing jobs on the ground andthose types things you know we hearrumors of one in five propertiescurrently being sold or being sold toforeign investors now that's moneycoming into our country that's hittingour gdp line those are important numbersfor for sustainability and GDP growthnow so so I'm very comfortable with thenumber of foreign investors who arecoming in and showing support for oureconomy and they're usually as we knowthat can only buy new property sothey're buying units or they're buyingnew developments our house and landpackages and so forth so they're takingtheir money out of their their countryand bringing it into hours creatingthose jobs what we can't see and whatthey're not doing is they're notnecessarily buying the existing propertystock which a lot of people think thatthey are but now those potential peoplewho are who are bidding at the auctioncould be agents ack sorry Australiancitizens but let me.
I really appreciate it. We're here to talk about the potential, www.westcoastvaluers.com.au I guess, what you considerthe definite property bubble that is happening in Australia. Can we start by explaining toeveryone why you think there is a property bubble and what you have to back this up?Steve Okay. Most people, when you talk about house prices, their instant answer is it'sall a question of supply and demand. And I say, "Okay, I agree with you and I'm goingto show why there is a bubble." which makes me very unpopular. So the usual, if you thinkabout how can you make this supply and demand case is say, well, if it's supply and demand,if supply is tight, therefore, it's just demand for housing driving up the price, then that'snot a bubble. That's the usual logic. Nobody ever goes and explores the demand side.