Housing Futz

The real estate commentary in Australia is all about how house prices are not rising as they once did - and isn't it just appalling?

Because as we all know, Peter and Pamela Punter are not happy unless their housing investments are increasing in value.  They have been conditioned to believe that real estate is the best investment - ever.  And they never let anyone tell them otherwise.  They refuse to look at or listen to contrary stories - and always find opportunities to talk up the value of the property they own in joint-venture with the banks.

Except it is all a mirage.  They got conned into paying too much and they justify that by living in a parallel universe - where life is just bliss - and house prices are always rising ;-)

It will come as a bit of a shock when it all goes pear shaped.  The only thing that is not yet clear - is when.

The bigger problem is related and it's "housing affordability" - for all those mostly younger people who don't yet own a house.  They would adopt the same attitude as Peter and Pamela - should they ever get on the housing bandwagon - but in the meantime they are locked out because it is all so unaffordable.

And they are locked out because they don't have the income or the job prospects to generate the cash flow that is needed to get them on the bandwagon.  So one of two things will need to happen to change that.

* House prices will need to reduce substantially - in order to make them affordable to the millions of Australian's who aren't yet on the bandwagon or;

* Incomes will need to substantially increase to generate sufficient cash flow to justify current prices.

What do you think is more likely Virginia?

There is another scenario of course.

If the current situation were to remain for an extended period then many smart young Australians will vote with their feet and move overseas where real jobs are more plentiful and housing is affordable.  Many of them will never return.

And the nation can't afford to lose these bright young things - the place is already enough of a retirement village.  Our leaders need to address this issue soon - I reckon they have about 8 months to sort it out.  Will they?