Wednesday, August 15, 2012

Education and Skills

I know that every Australian who is aged between 18 and 80 is an expert on *house prices* - so I thought that I would make a small contribution.

Because unusually, I am one of those people who thinks that a house is something you live in - and if you are after a "get-rich-quick" scheme then you would be better off looking elsewhere.

Like perhaps investing in your education and developing some skills and then parlaying those into some *clever* ideas for the benefit of our society.  Unconventional I know.

If you were old enough and lucky enough to be in on the "home ownership" gig prior to the start of this century - then you were indeed fortunate.  Demand and prices soared as banks shovelled someone else's cash out the door as fast as they could.  The effect was to create the mother of all housing bubbles.

Many of these people are counting on the bubble staying inflated - just long enough to sell their house(s) - and capture the windfall - as they head off into retirement.

If you weren't quite so old or so lucky then you could still get into the "home ownership" gig - the only problem is that you now have to pay *huge* percentages of your income in support of "the mortgage".  Now you have your nose to the grindstone - permanently.

But that's not so bad because there are usually two of you earning a good income and you can always put off the decision to have kids until after your home has been established - right?

But it wouldn't take much for the economy to go pear shaped - given what's happening in Europe and elsewhere.  And that's the biggest worry for those of us who are paying attention.

Demand has already collapsed.  If prices collapse then the older folks who haven't yet managed to sell will endure a frugal retirement.  And the younger folks who own "the mortgage" will have lost their equity and blown a large slice of their income.

All of which explains why Uncle Glenn and his little helpers are doing their best to keep the bubble from bursting.

Because the OZ housing market is a Ponzi scheme - pure and simple.

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