A GREAT ACT OF FAITH?
Just look at those weekend real estate auction results! What an incredible death rattle the Australian market is displaying! Seems we’ve been convinced that the GFC has passed us by altogether and that these ludicrous price levels are intrinsically correct market values because of:
- the purported lack of housing supply reported by our real estate institutions (Read this article, if you want to correct some of disinformation in this regard.)
- our rapidly growing population – we’ve recently hit 22 million. So?
- the relaxation of the Foreign Investment Review Board’s (FIRB) requirements for overseas investors which has seen Chinese buyers flooding into our real estate market.
No, these certainly are NOT not true real estate market levels, and people should steer well clear of them if they know what’s good for themselves. This is the classical ‘irrationally exuberant’ real estate bubble in action in Australia, distending into its twelfth year. It has now become the world’s greatest real estate bubble and must burst shortly.
The view that this is simply the real estate market in action, and that we have reached a permanent plateau from which the market will continue to launch itself ever upward has become the Australian real estate lobby’s Great Act of Faith. Media spivs and radio shock jocks have taken up the lobbyists’ “shortage of supply” explanation for the ridiculous price levels and sold it to many Australians who’ve not investigated the issue for themselves.
Meanwhile, the federal Labor government is rapidly running out of measures to keep feeding real estate prices, in order to ensure that the bubble doesn’t puncture on its watch. The Liberal government got away with inflating the bubble for the best part of ten years, so Kevin Rudd’s damned if he wants to be remembered as presiding over its bursting, and the financial collapse that must ensue. He’s got to go along with all the real estate apologists. [Better, he thinks, to forestall the day and leave the big clean up to somebody else. In fact, Ken Henry’s tax review had better be carefully watched in this connection. What if Henry’s panel actually proposes to address the tax system’s favourable treatment of real estate bubbles at the expense of productivity? As that won’t keep the bubble inflated, any such recommendation from Ken Henry must be resisted!]
If we really want the so-called real estate ‘market’ to become a truly free market, in which vacant or under-used properties may not simply be held out of the market for speculative gain, we’ll have to do much better than threats of increased interest rates from the Reserve Bank of Australia’s governor. We need an ‘all-in’ single rate federal land tax with no exemptions or thresholds. It should be used to replace the damaging goods and services tax, payroll tax, and stamp duty on real estate transactions, and then rebated back to the states for revenue.
This remedy may seem like a great act of faith, too; but at least it’s rational and not based upon the set of lies trotted out by real estate industry boffins. Like the banks, the real estate lobby is no real friend of Australia. It has much to answer for in connection with its Geobbels-like propaganda that there has been no real estate bubble.