Dwelling on Housing
Readers of FinDem will recall the number of articles we have written regarding the Australian housing dilemma http://www.findem.com.au/news/archiveh.php . Since 2001 houses have cost between 6 and 8 times annual average earnings while between 1970 and 1990 they cost 4 times average earnings. The Reserve Bank has been an active communicator of this dilemma. State governments have lacked courage to change the supply – the federal governments have added to demand through negative gearing, first home owner ‘grants’ and increased immigration (now running at 2% of population) creating the highest population growth since the 1960’s.
Meanwhile the houses which have been built are MacMansions where two stories of lights-on rooms, air conditioning and plasma TV’s for 3 or 4 inhabitants make a mockery of energy efficiency discussions. Once again the RBA is to be commended for raising the issue in Philip Lowe’s speech to the Urban Development Institute today. But no solution is offered.
The seeds are being sown for an Australian sub-prime crisis. The US disease which spawned the 2008 crisis was Bill Clinton’s philanthropic drive for all Americans to have a chance to own their own home and for looser regulation of mortgage agencies and banking while the ‘musical chairs’ money flowed. Australian Gen-Xers have been lucky enough to be bank rolled into housing by the home equity loans of their parents. GenY’s and Z’s will not be so lucky and will look to a government magic pudding to come to the rescue.
Posted Wednesday, 10 March 2010
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