Housing
In today’s opinion piece, Kenneth Davison suggests that the domestic housing market is heading for crash, that real estate prices may actually go down!
The Ponzi analogy seems appropriate, certainly the current prices seem more based on speculation than regular supply and demand forces. And the banks have been more than happy to participate in the orgy of debt that has driven house prices to their current record levels. Certainly house prices today are considerably more expensive today as measured by average weekly income than they have been historically. Whilst some of these increases might be due to genuine demand pressures it seems belied by the huge increase in domestic debt that we now have.
This amazing amount of national debt rarely makes the news headlines, in much the same way as news about ecological disasters seems not to be on the news agenda. The figures from Kenneth’s article are impressive 600 billion in overseas debt and total domestic debt of 1.7 trillion dollars!
That governments seem unconcerned about both high house prices and burgeoning national debt is hardly surprising. One suspects that high house prices have inflated the personal balance sheets of many upwardly mobile middle class voters who are a significant constituency for the politicians. Poor people who cant afford to be in the real estate game are probably less outspoken that those whose have benefited from the real estate bubble so on balance government policy will tend to favour the voters who have mortgages over those that don’t. When you add the various stamp duties and other taxes to the mix it is easy to see that government also has a vested interest in this real estate game.
The cost to the nation is significant. It is also yet another example of the growing inequity in this country. As things stand it is not yet an example of market collapse or failure yet the machinations taking place to keep the ship afloat must be taxing the ingenuity of a few people. Unfortunately there is a considerable danger that should a recession and real estate price collapse coincide then our collective “common” wealth will be called on to fix the problems. At this stage the only substantial common wealth asset is the future fund and the superannuation reserves, which we have already seen used to prop up near term bank shortfalls.
What a decidedly tricky situation! No wonder the right wingers wanted to lose the last election, their neo conservative extravaganzas have created more than a few headaches. At least this way they don’t get to be the ones with egg on their faces when it all goes pear shape.