On the back today's news story below about the Sydney market...there are many who think that this is not much of a correctonm....in fact it is the first signs of that the Sydney market is now entering a correction phase. Sydney house prices drop 3 per cent A lot on this forum think that this is not going to be significant. People's natural reaction is to say it can't drop 20% can it? Well ask the question if it increased 50% in three years..can't it drop 30%...that still leaves a 20% gain? I see that certain markets of Sydney will continue to deflate...already certain areas of the West have experienced this...the Southwest and Bankstown-Canterbury had the hardest hit. Interestingly..it will be areas like the Upper North Shore which will continue to hold their values well...they did not go up as much. Areas like the Hills, Campbelltown, Blacktown, and Mt Druitt suburbs will have the largest drops. The smart money moved into Brisbane over 1 year ago... The calamity for Sydney is when (not if) interest rates head...up towards to the 7% mark. Most buyers are highly leveraged...rise will deflate the Sydney market in particular. Why is this? Well humans are like sheep once the panic via news stories like the above enter people's minds they are conditioned to think its all bad. 99% of people will get worried and it becomes a self-fulling prophecy. I have seen it many times. A recent example was a person told me that the Perth market will hold up as China was always going to have strong demand for Australian resource...the rest is history...... I feel that this is an exciting phase for people who are patient...they will be able to pick up some excellent buys very shortly. Despite a few on this forum being in denial. I feel that the areas targeted by new immigrants (Indian and Chinese) buyers will feel it hard as most have not seen a downward cycle in Australia...this will be a great education for them.