THE AUSTRALIAN REAL ESTATE DELUSION

FIRE Sector Marketing Psychology 101: Property Buyer Manipulation

by Paul Egan

I noted in a previous article the usurer choir chimes in unison “There is no housing bubble!” whilst failing to provide a clear definition of what one looks like. It is clear the FIRE (Finance, Insurance and Real Estate) sector will never admit to a bubble in the housing market; one part of their brand of marketing psychology taking advantage of cognitive biases to reinforce irrational behaviour in the investor herd.[1] In FIRE sector fairytales, everybody lives happily-ever-after due to reaping unearned capital gains in a continually inflating market. The Disneyesque implication is that it is always a good time to buy, with the fundamentalism of ‘fundamental factors’ invoked to explain any and all steep housing price inflation, deflecting from the obvious credit bubble as a primary causal factor.

Billions are spent annually on advertising, paid-for opinion and public relations spin. This is part of an elaborate strategy to embed the delusional belief that housing is rationally priced. Emotional pressure to buy is reinforced by subliminal messages, such as failing to own a home somehow reflects a form of personal shortcoming. Often, homebuyers are blissfully unaware their thinking is being hijacked by incessant propaganda and familial/peer-influenced investment frameworks that fail to distinguish value from price. Buyer conformity is encouraged by cultural conditioning, with skeptical minds ridiculed when they step outside the boundaries of the mainstream narrative. In this way, the FIRE sector has successfully re-written societal norms for housing in its favour.

The FIRE sector has scripted a Pollyanna vision of the Australian housing market, imbuing investors with false confidence and helping to transform various myths into urban folklore. The fourth estate has played tag-team, providing a cornucopia of dubious facts, fudged figures and questionable opinion pieces and advertorials that reinforce the ‘It’s Different Here Syndrome’. Divine renovations and mini-makeovers are portrayed in mainstream ‘reality TV,’ miraculously yielding $100s of thousands in profits for postage stamp-sized pigeon coops. A twisted Marxian logic exists, for the opiate of the Australian masses is achieving land baron/baroness status and expropriating effortless economic rent from land and capital gains, forever escaping the PAYE system.

FIRE sector marketing tools, economic dross rebadged as objective analysis, mainstream propaganda, scripted fantasy TV serials (the ‘Property Twilight’ series) and investor naivety/greed that stem from 1% value systems have together developed a new aspirational norm. Gambling on dirt has become acceptable and woven into the new societal fabric of the speculator nation, leaving foreign visitors aghast at the willingness of a nation’s citizens to financialize dwellings, thus depriving normal families of home ownership. The power of the corporate word upon the housing market is influential in manipulating household decision-making and mental processes.

The investor herd has stepped over the line demarcating housing fantasy from reality. Broadly, people have suspended belief that housing prices can dramatically deflate, presumably thinking housing crashes happen to other markets not sharing Australia’s ‘special attributes’.  Conditioned minds put forward the same rationale that has accompanied every asset bubble.  Cognitive dissonance explains why opinions, facts or observations counter to the accepted belief system are rejected. The alternative reality of committed investors is one transfixed by FIRE sector misinformation and reflexive behavioural responses akin to the automatic response of animals to pre-programmed stimuli in experimental tests.[2]

Hot Property, The Block, Renovation Rescue and other forms of property pulp fiction reflect the pinnacle of the nation’s shared optimistic delusion. Reality TV has spawned infotainment, degenerating further into lightly scripted C-grade celebrity popularity contests that coincidentally take place on a housing set. Modern bread and circuses entertainment is subtly aimed at having the viewer’s suspension of disbelief translate into conditioning that rationalizes buying decisions in an extremely over-priced market. Nuanced and contrived programming lead to a hijacking of beliefs, wherein new values are internalized about housing dynamics. Marketers are well aware most consumers of media will not expend the intellectual effort required to confirm or deny assertions made or implied, and people are unaware of the psychological tools being employed to deceive them and reinforce groupthink.

Like-mindedness of the herd is reinforced by adopting a common set of values and beliefs. Investors typically delude themselves that they are acting independently and are immune to momentum investing, corporate marketing psychology, and the madness of crowds – failing to question investment framework tenets underpinning their future financial well-being. Only a large correction will bring a reality check to the Ponzi market. The credit bubble has spawned a generation of winners over two decades as they rode the roller coaster to the top of the largest residential land bubble on record,  but a painful readjustment of the nation’s collective ego will follow the crash. The carefully constructed and destructive property chimera will be shattered.


[1] The term ‘herd’ is used deliberately, as investors tend to collectively invest/divest in the same direction during periods of irrational exuberance (‘momentum investing’). High prices beget ever-higher prices in an upwards virtuous spiral, with the obverse also being true.

[2] The salivation of Pavlov’s dogs in response to the ringing of bells being the most famous case of controlled animal responses.