HirdsTheWord
🏆🏆🏆🏆🏆🏆🏆🏆🏆🏆🏆🏆🏆🏆🏆🏆
Veteran
Essendon Player Sponsor 2023 - Archie Perkins and Nic Martin
10k Posts
Essendon Player Sponsor 2022 - Anthony McDonald-Tipungwuti and Archie Perkins
Sin City Swamp Rats - Sweet F.A.
Essendon Player Sponsor 2021 - Anthony McDonald-Tipungwuti and Archie Perkins
Essendon Player Sponsor 2020 - Orazio Fantasia, Anthony McDonald Tipungwuti, Shaun McKernan
BeanCoiNFT Investor
- Jun 19, 2014
- 13,394
- 15,532
- AFL Club
- Essendon
- Other Teams
- New York Rangers, New York Knicks
Again, I agree almost entirely with your post - but think it's (FAR) too late to start that now. Affordable housing should have started a generation (or more!) ago, along with proper infrastructure investment in regional transport, health and services. Our last 30 years of (relative) economic prosperity has left us with very little to show for it.
The damage has already been done. Crashing the market now will just compound the issue.
Rates should never have been used as such a drastic method of economic stimulation to counter COVID. Actually even that's not fair - this cycle of stimulation stretches back to mid 2019, before Covid-19 even meant anything. The COVID economic stimulation packages led to a unique situation - what happens when you give money to the rich? They keep it. Give money to the "poor"? They spend it and everyone benefits - increased sales, more employment, bigger profits. We are now reaping the fruits of that "bottom up" economic decision through higher inflation.
From the perspective of property, prices were already starting to fall in the Sydney/Melbourne markets, and stagnate in other capitals, before rates were increased. We had reached the 'peak' of the economic boost. Even without any adjustment for increasing rates, I think we would have naturally seen a nationwide 5-10% fall over the next 12-18m purely as a result of the ongoing "supply shortage" driven inflation limiting capacity to save.
To now attempt to "artificially" freeze the property market >30% via rapidly increasing rates could end up destroying the entire economy (and still not fix the inflation issue!) If a 0.25% rise (with ~3 months of warning) can clip 6% off the top immediately, then you would think another 0.25 would more than double that effect (maybe 15%?). To even consider the effects another 2% on top of that would have on the market suggests to try to "fix" prices in this way appear foolish.
There's no quick fix available here and it's going to be a long road ahead, however IMO committing to a target of long term neutral (+-5%) capital growth is far, FAR better than a sudden 30-50% drop, triggering mass loan defaults and forced sales (as much as 30% of property sold in last five years), bankruptcy (debt > value leaves virtually no option) and significant (>5%) increases to unemployment rates.
We have the most perfect example of how to control property prices - Supply vs Demand. Increase supply to suppress prices.
Therefore, a very simple solution - capital values increasing? Release more land, incentives for new, cost-effective housing, increase infrastructure spending in regional areas, increase costs of holding capital city property.
Yep i agree with 95% of what you say. But my view has always been that supply is not the issue, it never was. it is over investment. The market needs a serious correction and finally the RBA & government seemingly can no longer artificially keep the housing market afloat. I have always said in this thread housing was a ticking time bomb, and it looks like we have no more room to kick the can. I also noted also the carnage that would be caused by a rise to 2.00% and that's why i said we will see 15%-20% falls this year alone, not in 2023.
Homeowners cant always be winners.
The RBA and Governments lack of action of a number of years in controlling house prices has lead too it being so over inflated that Australian citizens are carrying just about the most amount of housing debt in the world.
Inflation comes and goes. Having your over indebted citizens in a position to be unable to handle it without causing mass economic risk exposure is what the real issue is here. And that blame lies squarely at the RBA and Government.
We are about to enter a recession most of us have not seen before.
Last edited: