13 ms·

Housing wealth is meaningless, destructive and fundamentally changing society

149 points by pabs3 3y ago

iteratethis 3y ago
There's a few "valid" reasons why homes get more expensive over time that you cannot attribute to malice or greed. Population growth whilst land does not grow, homes being more advanced, and the 1950s not being a very reasonable comparison. The single breadwinner rich middle class was a blip in history, a temporary post-WW2 effect. But still if you account for all of that, something is surely off. And as so many countries face this problem, I'm quite sure that you can't solve it with the simple stroke of a pen. I don't think it's useful to say "a house is for living". Most home owners do use their house to live in, the value appreciation is a side effect of a market that fails to address supply. Heavy government intervention into private rent markets and project construction so far tend to have the opposite effect. Landlords and development companies simply pull out. One often suggested approach is to build lots of very high rise apartment towers. Even then I'd expect a price decrease of say 30% only, for a type of living most will not be very fond of. It's a big cultural change. You'll still pay quite a lot, for something that sucks. My less practical idea is about geographic distribution. Western Europe as an example, some parts incredibly dense. Where we think the "solution" is to endlessly make them even more dense. Whilst Eastern Europe is 80% empty. I know, there's reasons for it, but when you think about it this way, you'll understand why there's no solution to our current problem. Because we're not solving a problem, we're increasing the size of the problem. I would advocate for fresh thinking in redistributing population pressure.
futureamish 3y ago
As an elder millennial, I feel like I've been living in the great depression, merely eased through modern monetary policy to last throughout my life. The depression is our lives.
huevosabio 3y ago
The author should read about Georgism, he is on the right path.
- epistasis 3y ago
  However I hope the author doesn't learn about Georgism from other Australians, as there seems to be a rather twisted view of it down there. Toilets may not circulate in the opposite direction in Australia compared to the Northern Hemisphere, but their Georgists seem to have very opposite views on whether there needs to be enough housing for people, and whether that housing should be allowed to be built in urban areas or if it should be constrained to sprawl. (Edit: however there are some really astute housing economists in Australia, I can't recommend the book "The Asset Economy" enough)
  - futureamish 3y ago
    Georgism is the wealth concentrator's "clean coal" solution to housing, their "libertarian freedom." It's an idealogical advertisement for the Lords, letting larger actors liquidate smaller with greater ease.
  - Apocryphon 3y ago
    Australia’s local Georgist party seemed to fare alright https://www.sealionpress.co.uk/post/other-ideologies-ii-georgism https://www.sealionpress.co.uk/post/other-ideologies-ii-geor...
wwwtyro 3y ago
I assume people will continue to use real estate as an investment for as long as they are forced to escape the inflation of their currency.
- jlmorton 3y ago
  People don't just get to decide something is an investment. It depends entirely on the behavior of the rest of society.
  - logicchains 3y ago
    >People don't just get to decide something is an investment They absolutely do in a democracy in which they (home-owning baby boomers) represent the biggest demographic voting block.
    - jlmorton 3y ago
      Well, I meant individuals don't just get to decide something is an investment. Certainly society as a whole, or even a large bloc of voters can decide something is an investment.
  - paddez 3y ago
    Behaviour by the rest of society is influenced largely by public policy. In Ireland, investing in Housing/Land is largely one of the best investment assets you can own due to the lack of Capital Gains or Deemed Disposal rules.
- kmlevitt 3y ago
  This is such a cop out response. Even if we want to pretend there are no other investments, the real question is why don’t we just upzone cities end build more housing instead of artificially constricting supply so the baby boomers can get rich off the younger generations.
  - kiratp 3y ago
    Because the boomers vote and the younger generations do not.
anovikov 3y ago
That should naturally happen in every democratic, rich society unless it's population plummets right? How do you fix it without "fixing" "rich" or "democratic"? If you remove "rich", larger proportion of people's income will go to pay for foodstuffs, clothing etc basics, and they will have much less left to pay for mortgages, and housing prices will fall. Problem "solved". If you remove "democratic", there will be no NIMBYsm because no one will give a damn what people living in the area want - developers will built as much housing as people will be willing to buy, flooding the market, and prices will fall. Problem "solved". What are other solutions? I can't think of any. What are rich, democratic countries that do not have that problem? Only one i can think of is Japan, but they largely fixed "rich" (their GDP is stagnant over 30+ years while it more than doubled in both US and Australia. They are also dying out very quickly and have no immigration to replace dying out people. They are also only nominally democratic. This is certainly not the outcome anyone in their sane mind would like to replicate.
- jlmorton 3y ago
  Note that NIMBYism has little to do with democracy, and it is mostly the opposite. NIMBYism is about a small, concentrated group of people wielding large amounts of veto power granted to them in various ways by local government. Democracy is the solution to NIMBYism, not the cause.
  - eru 3y ago
    Democracy is such an unwieldy, overladen term that it's hard to use in a technical discussion. It means all kinds of different things to all kinds of different people. Sometimes even at the same time.
  - mahkeiro 3y ago
    I'm not sure of that. In Switzerland people vote against their own good by refusing new neighborhoods, high rise building, and constricting constructions to the current extent (and this at all levels city/state/federation). Cost of living is not the main driver as all the projects are refused for quality of life reason, Most people think that the only solution is downsizing the population (good luck with that). I have few hope for an improvement.
jen729w 3y ago
This is an Australian article, where I am. House prices are, I can confirm, insane. And I've always wondered whether it isn't a bit of a scam, really. Not a deliberate scam, just one that we've all fallen in to. [0] People buy a house for $1m and then they're pleased as punch when a few years later it's 'worth' $1.5m. But what's the point of it being worth $1.5m? Because now if you want to move, the house that you have to buy is worth proportionally more. So at what point does anyone get to keep the money?! The only ones that win are the banks. [0]: Except me, because I never bought a house, and now I'm 46 and I rent. :-/
- mrslave 3y ago
  It's the slave morality for an inflation-based economy.
- nordsieck 3y ago
  > So at what point does anyone get to keep the money?! You get to keep the money when you move to a less expensive area. Or you retire and downsize.
  - richev 3y ago
    Not if you end up having to help your children buy their house(s).
    - shiroiuma 3y ago
      Problem solved: don't have children! (Just look at the current birthrates.)
  - tuatoru 3y ago
    ... and no-one does that, to a first approximation.
  - monkeydreams 3y ago
    > You get to keep the money when you move to a less expensive area. Or you retire and downsize. I live in a satellite township to one of the poorest suburbs in Melbourne, Australia. My house is tiny, too small for the four of us, and has cost us nearly $100k just to make it weather-tight (also with $10k of solar panels). So, in total, we have spent nearly $800k for a small home that is too small for our needs. If I were to move somewhere less expensive I would not be able to do my job. As it is I have to spend 3 hours a day (minimum, some days it can be up to 5 hours if there are train issues) commuting to my place of work. Australia is a huge country with a handful of large cities with amenities and only hundreds of small towns which do not. The only places where housing is on par with US towns (i.e. 150k-300k) may be in the middle of the outback, 10 hours drive from the nearest city, and be so ramshackle and run-down as to be unlivable.
beoberha 3y ago
I don’t disagree with the sentiment of the author. The runaway cost of owning a home is a huge problem. But what’s the solution? If people are willing to pay a price for a home, that’s what it is worth. Nobody is going to take less for their home. Upzoning or splitting parcels is only really a solution in cities. IMO, it will also just skyrocket the cost of existing SFH which are what people actually want to raise their families in.
- lmm 3y ago
  > Upzoning or splitting parcels is only really a solution in cities. IMO, it will also just skyrocket the cost of existing SFH which are what people actually want to raise their families in. Plenty of people will happily raise a family in a smaller but more central apartment with better services rather than a SFH in the suburbs. And worst case upzoning doesn't mean we have to use that zoning capacity - if it turns out people would rather build SFHs (and are willing to pay what they cost) then they can still do that.
  - dottjt 3y ago
    Problem is that apartment quality in Australia is beyond bad. We have quite a lot of apartments, but no one wants to live in them for that reason. But yeah, if they were better quality I imagine people would move into them.
    - lmm 3y ago
      Well, if no-one wants to live in them then no-one will pay much for them and they won't be economical to build.
      - jfim 3y ago
        People have to live somewhere, so they might live in them begrudgingly, even though they'd rather live in higher quality dwellings.
        3y ago
monkeydreams 3y ago
Wealth is only useful if it increases the net options of the wealth holder. In the case of housing wealth - if base level housing is expensive - then owning a home is less of a measure of wealth than it is a balwark against the cost of renting and a bet on the ongoing increase in the cost of housing. If you sell your house the only option is to re-enter the housing market through a different, equally expensive, door. You can't repurpose the money for any other purpose. The only time it becomes "wealth" is when parents die, leaving their children with a suddenly valuable asset.
- tyre 3y ago
  In your example, the bulwark against rising cost of renting leaves optionality for the net $$$
- epistasis 3y ago
  It does increase the net options of the wealth holder. The home owner can always sell, move to a smaller home, or, shudder, start renting. The options of somebody with a massive amount of housing wealth are so much better than those without the housing wealth.
  - monkeydreams 3y ago
    My point was rather that the person with $600k of shares has more options than a person with $600k of housing wealth.
- Spivak 3y ago
  Or when you move somewhere cheaper. Or when the equity increases and becomes a financial instrument to borrow against for lower interest rates than personal loans.
- octodog 3y ago
  If the value of your house increases by, say, $100k, the play is not to sell the house but to tap into that equity to make new investments. The ability to do that will depend on your income, as you still need to be able to service a larger loan. But if your loan-to-value ratio improves you will also get a better rate from your bank, which makes this process a little easier. The main benefit is to individuals who have a high income but not a lot of capital. Generally this benefits early or mid career professionals who are high earners but may not have come from really wealthy backgrounds.
robocat 3y ago
Like most property articles it confuses cause and effect. For the housing market: the cause is high borrowing and the effect is high house prices - not vice versa. From article: Six per cent compound annual growth in the value of houses over the past 23 years versus 3% annual growth in average incomes has meant that household debt has had to increase from half to twice average disposable income That explanation makes no sense. Houses are in short supply. That means that individuals who want houses are competing with each other to bid as much as they can. The amount they can bid turns out to be as much as they can borrow. The amount they can borrow is a function of their income and interest rates. The more we can borrow the higher we bid. The economic winners are those that get paid the mortgage interest (appears to be banks at first glance but is more complex than that) and those that sell a house without buying another the same. Feels a bit zero-sum for the economy as a whole - but house buying and status upgrades are a major driver of our economies. The original Ponzi scheme. Fucks people that don't have a good enough income to borrow the market clearing price for houses (mostly neither can they save enough for a deposit). I'm in New Zealand where our previous lefty government made some positive steps towards making access fairer. Unfortunately our new government will probably undo those changes: giving an advantage to the wealthier. I saw a lot of strange pricing edge cases in my city after the earthquake in 2010 because years later there were houses that could not get a mortgage. There were as-is houses you could buy cheaply for cash, compared to a similar property with a mortgage costing a lot more.
- crtified 3y ago
  Australias property market trends and sentiments seem to be trailing perhaps a couple of years behind New Zealands, in recent times. We are now seeing in Australia the very same accelerated rising trend that New Zealand went through prior to 2022. Beginning with a slight but distinct feeling of public discontent at unaffordable prices, and soon morphing into actual panic, as entire (younger) generations (and their disgruntled, voting parents) realise that they've firmly entered the Never Own-your-own-home Zone. If NZ is any future omen for what will happen next in Australia, then the fact NZ peaked and then retraced somewhat over the past 2 years - firmly assisted by a very fast rise in mortgage interest rates - may well inform what is coming up for Australia's next few years. Once they reach a certain point, which, given the above-linked rhetoric, can't be too far away... (quiet-P.S.-while-trying-not-to-start-a-political-argument : commiserations on the regressive new government!) And, while I am not an economist by any means, the above is interesting in light of the fact that Australian banks own most of New Zealands financial market. One might almost think NZ were being used as the guinea-pig beta testing service for its larger neighbour!
sunpazed 3y ago
27 million people live on a continent the size of North America! Australia’s geography and climate plays into the housing crisis. We have concentrated our population density in only a dozen or so locations (ie; major cities like Melbourne, Sydney, Brisbane) as Australia is only habitable at scale along the coast. Australia has also doubled in population size over the last 40 years without corresponding investment, putting significant pressure on the housing market.
- jojobas 3y ago
  We also have a desert almost the size of North America. The population centres crystallized around gold mining and other non-urban activities back in a day, you can't just will another Melbourne into existence.
- sarchertech 3y ago
  >27 million people live on a continent the size of North America What? North American is more than 3x the size of Australia.
  - Grimburger 3y ago
    I'm seeing 7.6m km^2 vs 9.8m km^2?
    - mgbmtl 3y ago
      https://en.m.wikipedia.org/wiki/North_America https://en.m.wikipedia.org/wiki/North_America 24,709,000 km^2
    - sarchertech 3y ago
      That’s the size of the US, not North America.
  - sowbug 3y ago
    > North [America] is more than 3x the size of Australia. A generously loose interpretation of the original claim is that the continental US, rather than North America, is about the same size as Australia. Which is true.
slg 3y ago
This seems like a natural result when you combine democracy and a growing population with the persistent nature of younger generations having less permanent living arrangements and a lower dedication to politics due to the psychology of youth. It is a "the majority discovers it can vote itself largess out of the public treasury" situation in which the older generations build a political environment around real estate prices always increasing which causes them to increase more consistently and to a larger degree. The longer that is allowed to persist, the more difficult it becomes to change. The older generations now rely on that implicit social contract of increasing prices as their primary savings vehicle and the younger generations lack the political capital to interrupt the cycle, at least in part because they don't have the literal capital because of the ever-increasing cost of real estate. Is there a single growing democracy that has been able to avoid this trap?
- futureamish 3y ago
  The US isn't a democracy; 1 vote on 1 square foot of land counts for ~80x the vote on another square foot of land. If it was a democracy, these forever-issues would already be solved.
- Roritharr 3y ago
  What I do not understand is the mechanism people are referring to here. What political action was taken, which party voted? The entire western world shares the same problem, you'd think there would be exceptions if it was just politics.
  - mdorazio 3y ago
    It's all parties acting in basically the same way. Examples from the US: 1) The mortgage interest tax deduction directly incentivizes people to buy rather than rent. 2) Property tax instead of land value tax removes incentives to build higher-density housing on valuable land. 3) Most importantly, local zoning regulations outright prohibit dense development of land in desirable areas. 4) Regional acts like California's absolutely insane Proposition 13 (enacted by the people themselves) massively distort markets and act as giant ladder pulling mechanisms against future generations. 5) Additional tax incentives exist for capital gains on the sale of houses, again incentivizing "house prices must go up" thinking. When your core voter base is Boomers who enjoy the benefits of all of these actions and no one cares about future generations because staying in office means campaigning for the next term, it creates a feedback loop between the voters who "got theirs" and the politicians who help them do it. It takes radical action, like Gov. Newsom unilaterally ending single-family zoning, to make any change.
geekpowa 3y ago
Podcast with the author on same news outlet: https://www.theguardian.com/australia-news/audio/2023/nov/25/alan-kohler-on-how-housing-policy-entrenches-inequality-australian-politics-podcast https://www.theguardian.com/australia-news/audio/2023/nov/25... Cannot be stressed enough how much of a pernicious and destructive force housing policy is in Australia. I am working class background and my boomer parents have not been as fortunate as some of their peers with housing driven wealth creation. I am lucky enough to own a home. All my siblings will probably never ever own a home.
- zo1 3y ago
  I can't imagine ever living in such a place. Sounds like modern-day serfdom and I'd be moving out within a year, don't care where to.
  - ix101 3y ago
    If you require an English-speaking country with with a warm climate, and stable infrastructure, you have barely any other options. Bear in mind foreign languages are not a strongpoint of the Aussie education system.
    - zo1 3y ago
      I agree, it's a tough decision and very few options. Me and my wife have been keeping an eye on it as we need a fallback if South Africa ever has a meltdown.
dottjt 3y ago
I live in Melbourne and I remember when I was working at a web agency, one of our clients was some kind of building supplier. They were originally from Ireland, and one of the things they were complaining about was how Australian tradies are inherently lazy. Like, if you ask them if you can do X by Y they'll often push back and say it can't be done, even though it can be done but it's just a lot of work to do and they see that as a genuine obstacle to doing it. So they were saying you often have to push and be persistent to convince them to do stuff in the first place. But yeah, the housing situation here is genuinely scary.
pmg102 3y ago
> At the end of your life, your children get to use your housing wealth for their own housing would that this were true. In the UK at least, that wealth is often needed to pay for end-of-life care. The government will only pay for care once your own wealth including property wealth has been spent.
- 4death4 3y ago
  Do people use trusts?
- MattGaiser 3y ago
  Can you just give it away earlier in life to avoid that? I have heard of plenty of people doing that with Medicaid.
  - pmg102 3y ago
    I believe it's called Deprivation of Assets if they catch you doing that and they won't play along. Even if you suddenly start buying sports cars you never used to. Pretty Orwellian if you ask me, but then if you want other people's tax to pay for your care I guess gov can set whatever criteria they want to on that.
zerbinxx 3y ago
For what it’s worth, I fully agree with the author that the trends we see in housing availability and affordability are driven largely by perverse economic factors, and that the result is destructive. However, “creating new wealth” is kind of a weird way to judge the validity of investments - many companies we invest in are not profitable due to wealth creation, they’re vehicles for growing wealth because of speculation, and for a lack of better options. A lot of this boils down to inflation and the need to keep debt prices low to fuel growth. Countries can’t really unwind the ball of noodles that neoliberalism has cooked up, the transition from a moderate growth economy to a high growth, low risk environment necessitated low interest rates and low inflation, and the rest of the market has followed suit. In light of all of that, it’s still true that unless the world’s government change course to disincentivize real estate speculation, owning your own house will create wealth by the basic fact that they allow you to lock in a fixed cost essentially forever while everything else gets more expensive. I will pay the same amount on my mortgage for many years while salaries gradually increase, to the point where 40 years from now my $2000/mo payment will look to us like the $200/month payment of 1980. In the past few years, I’ve seen several friends go from paying $700/month for rent to well over $1000, with some renting smaller places for prices that massively exceed my mortgage. At some point, something will have to change - whether that means new development in smaller communities, rent regulation, negative speculation incentives, or something else. As a homeowner, I personally don’t care, because I bought my house to live in, and trust that whatever happens, it will first need to affect flippers and speculators over people who actually utilize their real estate.
technotony 3y ago
You can wring your hands about this, but it's largely a function of interest rates. Those have fallen dramatically over the time period, mortgages used to be in the teens. Let's see if this persists in the new interest rate environment we are in.
0xbadcafebee 3y ago
Stupid question: can't we just start selling homes to each other at cost? Like, the cost it would take to build that same home again [on the same land], rather than speculative value. I imagine the price of the house would fluctuate with the price of construction costs, so if you bought a home when construction cost $300k, and now it costs $250k to construct the same home, you'd be underwater if you tried to sell it. So either people would be stuck in the same home forever (which won't work for some people) or the home could be sold at the value that the owner originally paid. Which would mean the home would cost the same... forever... which would lead to homes that are more expensive than new construction. I suppose that would then cause new construction to increase, until new construction is more than the cost of existing homes, in which case the market would get tighter as new construction slows. I can't think of the other potential ramifications, but it does seem like it would get complicated and might not be the solution I'd like (assuming people would ever go along with it to begin with, which they wouldn't...)
cliffccc 3y ago
Apartment prices in China reached their peak last year or the year before. Before reaching the peak, young people could only afford apartments if their wealthy parents supported them or they worked in high-paying industries. But China's real estate price growth is not market behavior. Regional governments sold land at high prices to support local finances and maintain local government operations. Now this method no longer works.
monero-xmr 3y ago
An alternative way to look at it, is that central banks' inflation target of 2% (and likely much larger that official statistics) means that anything that is naturally scarce goes up in value. You see this in housing, education, healthcare, and anything that can't scale like software gets ever more expensive. IMO the inflation target should be 0%. I don't agree with arguments about artificially inflating the currency. We don't need to use psychological tricks to make people consume more. We should aim for stable prices. This would reduce the value of housing as an inflation hedge for the common man. Right now it's like a quasi-bank.
- ffgjgf1 3y ago
  > We don't need to use psychological tricks to make people consume more. It’s not a psychological trick, when prices are increasing at a stable and predictable rate it’s perfectly rational to spend more instead of saving. Which is good for economic growth. In many way the economy has been inherently deflationary over the past several decades. Due to growing productivity the cost of certain goods and services has been going down consistently. The outcome being that in sectors which this doesn’t happen due to scarcity or other reasons like housing prices have been going up at significantly higher pace. I’m not sure reducing inflation to 0% would helpful for that considering the context. Price growth might slow down at the cost of slower real GDP growth but that’s probably not ideal either.
- syndicatedjelly 3y ago
  Any market where the inflation rate has been 0% has seen a natural decline in the quality of the offering. Look at the airline industry - prices have not changed in about 40 years. It cost about $1200 USD to fly to the other side of the world in 1980: it’s still the same price in 2023. How did airlines do it? By making the product much shittier in that time.
retube 3y ago
I skimmed it, so maybe i missed it, but, i don't think i saw it mentioned anywhere - but interest rates the last 10 years have been at record lows, and even with the recent increases are still low vs the long term history. This is a material driver of price increases. Other effects are, as he mentions, but fails to make the link, its now common to have two earners per home, again increasing purchasing power. And finally, the cost of other expenses, proportional to salaries, has decreased enormously - food, clothing, leaving more money available for housing.
- ffgjgf1 3y ago
  > and even with the recent increases are still low vs the long term history I don’t think that’s true. Certainly not relative to inflation/nominal income growth.
kazinator 3y ago
The focus on the wealth side of it is pointless and misplaced. Housing prices are driven by demand, which comes from immigration. There is nothing you can do no the supply side, because the demand is limitless. Cut of all the immigration and foreign buying, and the problem will fix itself in a hurry.
oliwarner 3y ago
Well I'm torn. Property has irrefutable value from location, size, features, condition and a certain je-ne-sais-quoi… by extension a limited supply and increasing demand of this commoditised necessity would naturally push prices up… … but if you look at the past 30 years, something has broken. Population sizes haven't exploded in the same way that housing has. Jobs haven't centralised. All to say: demand is not that much higher. You can only levy a small amount of this on more complex materials and inflation. Some on demand. Do we blame the rest on lenders? If we couldn't afford to borrow, we wouldn't buy the houses we have and therefore wouldn't be competing for more expensive houses, so they wouldn't be as expensive. Lenders have changed how much they lend you in relation to your income. It was x3 when we bought our first house, then x4 when we bought our second and x6 most recently. I thought this was a reaction to house prices, but have I had this the wrong way round? Do we need to strangle the market and get mortgages back to the "gross x2" that was common in the 90s? What happens to the people that own property now? Why should we pay for the banks' greed again?
- rstuart4133 3y ago
  > Population sizes haven't exploded in the same way that housing has. I presume you mean population sizes haven't exploded like house prices have. True, but I would not expect that. What we see is the marginal cost of house prices increasing. Maybe that's the wrong term, but I mean the people being hurt are people entering the housing market. If you owned a house 20 years ago, you are sitting on top of a rising tide. All it takes to make a house cost 7.5 times the average wage is a couple of decades of demand outstripping supply. And on that topic here are some copy & pastes from: https://www.macrobusiness.com.au/2023/07/australias-housing- https://www.macrobusiness.com.au/2023/07/australias-housing-... Australia has had one of the highest rates of housing construction in the developed world We also have one of the highest numbers of construction workers per capita in the OECD Australia also ramped-up housing construction to record levels last decade However, this surge in construction was swamped by the unprecedented jump in net overseas migration from 2005, which is projected to run even higher over the next five years Perhaps you prefer pictures. This is a graph of historical population growth rates: https://api.macrobusiness.com.au/wp-content/uploads/2023/11/Historical-NOM.png https://api.macrobusiness.com.au/wp-content/uploads/2023/11/... Notice how the uplift in the graph reflects the uplift in in house prices. It started with John Howard era, and I suspect it was a deliberate "Big Australia" policy from his government. As an aside I will forever remain impressed by Howard pumping Australia full of immigrants, while at the same time winning elections based on his efforts at stopping immigration ("the boats"). The big Australia policy was then enthusiastically continued by federal governments of both colours in the 2 decades since. It's taken 20 years to bite as hard as it has. It looks like the media is finally waking up to what is really driving house prices, hospital ramping, clogged roads and a myriad of other problems. I base that on seeing the commercial TV news shows ascribing those problems to population growth rather than state government / airbnb / speculators ... (pick any plausible sounding thought bubble to spout as "news") in the 2nd half of this year. This in turn is driving the blame for those outcomes to the federal government (where it belongs, because they control immigration intakes). The current mob seems to waking up to the fact that "big Australia" might be turning into electoral poison. But it took 20 years of big immigration to create the current situation, even if they fixed it tomorrow I doubt sane house prices will return for at least another decade.
leeeeeepw 3y ago
Hi from NZ where we share the same problem friend. Airbnb very efficient at extracting value from housing too.. NZ is getting micromanaged in a similar way... Lots of big building projects extract masses of value from govt, similar to roadworks are a mind boggling exercise where they seem to find one good part of the road to "fix" every day with massive costs to the taxpayer. There should be Some kind of a real simple solution like container style mass produced homes, but the home has become a status symbol and we are left with growing disparity. I lived in Sydney there for a while which was crazy to see how visually bad the inequality in homes can get with these huge evacuated concrete cancer skyscrapers in Parramatta vs the opulent East coast homes
ballenf 3y ago
> although we were better off than my parents because my wife was working I found that line interesting as he was making the point that they paid 3.5 times their salaries for their house in 1980 just like his parents in 1951 on one salary. I wish he'd explained in what way he felt better off with needing two salaries to buy the same thing as his parents. I'd guess the house he bought was larger than his parents, but I didn't see those details.
cuSetanta 3y ago
I am in the process of house hunting and buying my first place at the moment (Ireland), and there are many aspects of it that frustrate and anger me, but I think the most aggravating part of it is everyones obsession with the value increasing over time. I think I get the idea that its an expensive thing to buy, and paying a bank significantly more money that you actually borrow makes you feel like you need to be making money on the investment. But no other object I buy for regular use and functionality would I expect to increase in value. So why should we feel the same way about a house? Honestly I think if people were less obsessed with their house increasing in value they would see that the terms of a mortgage are crazy, and would refuse to play the banks games.
cannabis_sam 3y ago
Governments all over the western world has been fueling a housing bubble to artificially inflate GDP to make up for disgustingly unfair tax cuts to corporations and wealthy people, who’ve been laughing all the time he way to the bank. It won’t stop for years, and nothing fundamental will change until supposedly middle class families are forced out onto the street. Then, maybe, we will see the political will to change this insane, cruel, predatory and hateful housing policy change. To everyone who owns property, YOU are complicit. Either deliberately evil or willfully ignorant, there is nothing else.

149 points by pabs3 3y ago

There's a few "valid" reasons why homes get more expensive over time that you cannot attribute to malice or greed. Population growth whilst land does not grow, homes being more advanced, and the 1950s not being a very reasonable comparison. The single breadwinner rich middle class was a blip in history, a temporary post-WW2 effect. But still if you account for all of that, something is surely off. And as so many countries face this problem, I'm quite sure that you can't solve it with the simple stroke of a pen. I don't think it's useful to say "a house is for living". Most home owners do use their house to live in, the value appreciation is a side effect of a market that fails to address supply. Heavy government intervention into private rent markets and project construction so far tend to have the opposite effect. Landlords and development companies simply pull out. One often suggested approach is to build lots of very high rise apartment towers. Even then I'd expect a price decrease of say 30% only, for a type of living most will not be very fond of. It's a big cultural change. You'll still pay quite a lot, for something that sucks. My less practical idea is about geographic distribution. Western Europe as an example, some parts incredibly dense. Where we think the "solution" is to endlessly make them even more dense. Whilst Eastern Europe is 80% empty. I know, there's reasons for it, but when you think about it this way, you'll understand why there's no solution to our current problem. Because we're not solving a problem, we're increasing the size of the problem. I would advocate for fresh thinking in redistributing population pressure.

futureamish 3y ago

As an elder millennial, I feel like I've been living in the great depression, merely eased through modern monetary policy to last throughout my life. The depression is our lives.

huevosabio 3y ago

The author should read about Georgism, he is on the right path.

epistasis 3y ago
However I hope the author doesn't learn about Georgism from other Australians, as there seems to be a rather twisted view of it down there. Toilets may not circulate in the opposite direction in Australia compared to the Northern Hemisphere, but their Georgists seem to have very opposite views on whether there needs to be enough housing for people, and whether that housing should be allowed to be built in urban areas or if it should be constrained to sprawl. (Edit: however there are some really astute housing economists in Australia, I can't recommend the book "The Asset Economy" enough)
- futureamish 3y ago
  Georgism is the wealth concentrator's "clean coal" solution to housing, their "libertarian freedom." It's an idealogical advertisement for the Lords, letting larger actors liquidate smaller with greater ease.
- Apocryphon 3y ago
  Australia’s local Georgist party seemed to fare alright https://www.sealionpress.co.uk/post/other-ideologies-ii-georgism https://www.sealionpress.co.uk/post/other-ideologies-ii-geor...

wwwtyro 3y ago

I assume people will continue to use real estate as an investment for as long as they are forced to escape the inflation of their currency.

jlmorton 3y ago
People don't just get to decide something is an investment. It depends entirely on the behavior of the rest of society.
- logicchains 3y ago
  >People don't just get to decide something is an investment They absolutely do in a democracy in which they (home-owning baby boomers) represent the biggest demographic voting block.
  - jlmorton 3y ago
    Well, I meant individuals don't just get to decide something is an investment. Certainly society as a whole, or even a large bloc of voters can decide something is an investment.
- paddez 3y ago
  Behaviour by the rest of society is influenced largely by public policy. In Ireland, investing in Housing/Land is largely one of the best investment assets you can own due to the lack of Capital Gains or Deemed Disposal rules.
kmlevitt 3y ago
This is such a cop out response. Even if we want to pretend there are no other investments, the real question is why don’t we just upzone cities end build more housing instead of artificially constricting supply so the baby boomers can get rich off the younger generations.
- kiratp 3y ago
  Because the boomers vote and the younger generations do not.

anovikov 3y ago

That should naturally happen in every democratic, rich society unless it's population plummets right? How do you fix it without "fixing" "rich" or "democratic"? If you remove "rich", larger proportion of people's income will go to pay for foodstuffs, clothing etc basics, and they will have much less left to pay for mortgages, and housing prices will fall. Problem "solved". If you remove "democratic", there will be no NIMBYsm because no one will give a damn what people living in the area want - developers will built as much housing as people will be willing to buy, flooding the market, and prices will fall. Problem "solved". What are other solutions? I can't think of any. What are rich, democratic countries that do not have that problem? Only one i can think of is Japan, but they largely fixed "rich" (their GDP is stagnant over 30+ years while it more than doubled in both US and Australia. They are also dying out very quickly and have no immigration to replace dying out people. They are also only nominally democratic. This is certainly not the outcome anyone in their sane mind would like to replicate.

jlmorton 3y ago
Note that NIMBYism has little to do with democracy, and it is mostly the opposite. NIMBYism is about a small, concentrated group of people wielding large amounts of veto power granted to them in various ways by local government. Democracy is the solution to NIMBYism, not the cause.
- eru 3y ago
  Democracy is such an unwieldy, overladen term that it's hard to use in a technical discussion. It means all kinds of different things to all kinds of different people. Sometimes even at the same time.
- mahkeiro 3y ago
  I'm not sure of that. In Switzerland people vote against their own good by refusing new neighborhoods, high rise building, and constricting constructions to the current extent (and this at all levels city/state/federation). Cost of living is not the main driver as all the projects are refused for quality of life reason, Most people think that the only solution is downsizing the population (good luck with that). I have few hope for an improvement.

jen729w 3y ago

This is an Australian article, where I am. House prices are, I can confirm, insane. And I've always wondered whether it isn't a bit of a scam, really. Not a deliberate scam, just one that we've all fallen in to. [0] People buy a house for $1m and then they're pleased as punch when a few years later it's 'worth' $1.5m. But what's the point of it being worth $1.5m? Because now if you want to move, the house that you have to buy is worth proportionally more. So at what point does anyone get to keep the money?! The only ones that win are the banks. [0]: Except me, because I never bought a house, and now I'm 46 and I rent. :-/

mrslave 3y ago
It's the slave morality for an inflation-based economy.
nordsieck 3y ago
> So at what point does anyone get to keep the money?! You get to keep the money when you move to a less expensive area. Or you retire and downsize.
- richev 3y ago
  Not if you end up having to help your children buy their house(s).
  - shiroiuma 3y ago
    Problem solved: don't have children! (Just look at the current birthrates.)
- tuatoru 3y ago
  ... and no-one does that, to a first approximation.
- monkeydreams 3y ago
  > You get to keep the money when you move to a less expensive area. Or you retire and downsize. I live in a satellite township to one of the poorest suburbs in Melbourne, Australia. My house is tiny, too small for the four of us, and has cost us nearly $100k just to make it weather-tight (also with $10k of solar panels). So, in total, we have spent nearly $800k for a small home that is too small for our needs. If I were to move somewhere less expensive I would not be able to do my job. As it is I have to spend 3 hours a day (minimum, some days it can be up to 5 hours if there are train issues) commuting to my place of work. Australia is a huge country with a handful of large cities with amenities and only hundreds of small towns which do not. The only places where housing is on par with US towns (i.e. 150k-300k) may be in the middle of the outback, 10 hours drive from the nearest city, and be so ramshackle and run-down as to be unlivable.

beoberha 3y ago

I don’t disagree with the sentiment of the author. The runaway cost of owning a home is a huge problem. But what’s the solution? If people are willing to pay a price for a home, that’s what it is worth. Nobody is going to take less for their home. Upzoning or splitting parcels is only really a solution in cities. IMO, it will also just skyrocket the cost of existing SFH which are what people actually want to raise their families in.

lmm 3y ago
> Upzoning or splitting parcels is only really a solution in cities. IMO, it will also just skyrocket the cost of existing SFH which are what people actually want to raise their families in. Plenty of people will happily raise a family in a smaller but more central apartment with better services rather than a SFH in the suburbs. And worst case upzoning doesn't mean we have to use that zoning capacity - if it turns out people would rather build SFHs (and are willing to pay what they cost) then they can still do that.
- dottjt 3y ago
  Problem is that apartment quality in Australia is beyond bad. We have quite a lot of apartments, but no one wants to live in them for that reason. But yeah, if they were better quality I imagine people would move into them.
  - lmm 3y ago
    Well, if no-one wants to live in them then no-one will pay much for them and they won't be economical to build.
    - jfim 3y ago
      People have to live somewhere, so they might live in them begrudgingly, even though they'd rather live in higher quality dwellings.
      - 3y ago

monkeydreams 3y ago

Wealth is only useful if it increases the net options of the wealth holder. In the case of housing wealth - if base level housing is expensive - then owning a home is less of a measure of wealth than it is a balwark against the cost of renting and a bet on the ongoing increase in the cost of housing. If you sell your house the only option is to re-enter the housing market through a different, equally expensive, door. You can't repurpose the money for any other purpose. The only time it becomes "wealth" is when parents die, leaving their children with a suddenly valuable asset.

tyre 3y ago
In your example, the bulwark against rising cost of renting leaves optionality for the net $$$
epistasis 3y ago
It does increase the net options of the wealth holder. The home owner can always sell, move to a smaller home, or, shudder, start renting. The options of somebody with a massive amount of housing wealth are so much better than those without the housing wealth.
- monkeydreams 3y ago
  My point was rather that the person with $600k of shares has more options than a person with $600k of housing wealth.
Spivak 3y ago
Or when you move somewhere cheaper. Or when the equity increases and becomes a financial instrument to borrow against for lower interest rates than personal loans.
octodog 3y ago
If the value of your house increases by, say, $100k, the play is not to sell the house but to tap into that equity to make new investments. The ability to do that will depend on your income, as you still need to be able to service a larger loan. But if your loan-to-value ratio improves you will also get a better rate from your bank, which makes this process a little easier. The main benefit is to individuals who have a high income but not a lot of capital. Generally this benefits early or mid career professionals who are high earners but may not have come from really wealthy backgrounds.

robocat 3y ago

Like most property articles it confuses cause and effect. For the housing market: the cause is high borrowing and the effect is high house prices - not vice versa. From article: Six per cent compound annual growth in the value of houses over the past 23 years versus 3% annual growth in average incomes has meant that household debt has had to increase from half to twice average disposable income That explanation makes no sense. Houses are in short supply. That means that individuals who want houses are competing with each other to bid as much as they can. The amount they can bid turns out to be as much as they can borrow. The amount they can borrow is a function of their income and interest rates. The more we can borrow the higher we bid. The economic winners are those that get paid the mortgage interest (appears to be banks at first glance but is more complex than that) and those that sell a house without buying another the same. Feels a bit zero-sum for the economy as a whole - but house buying and status upgrades are a major driver of our economies. The original Ponzi scheme. Fucks people that don't have a good enough income to borrow the market clearing price for houses (mostly neither can they save enough for a deposit). I'm in New Zealand where our previous lefty government made some positive steps towards making access fairer. Unfortunately our new government will probably undo those changes: giving an advantage to the wealthier. I saw a lot of strange pricing edge cases in my city after the earthquake in 2010 because years later there were houses that could not get a mortgage. There were as-is houses you could buy cheaply for cash, compared to a similar property with a mortgage costing a lot more.

crtified 3y ago
Australias property market trends and sentiments seem to be trailing perhaps a couple of years behind New Zealands, in recent times. We are now seeing in Australia the very same accelerated rising trend that New Zealand went through prior to 2022. Beginning with a slight but distinct feeling of public discontent at unaffordable prices, and soon morphing into actual panic, as entire (younger) generations (and their disgruntled, voting parents) realise that they've firmly entered the Never Own-your-own-home Zone. If NZ is any future omen for what will happen next in Australia, then the fact NZ peaked and then retraced somewhat over the past 2 years - firmly assisted by a very fast rise in mortgage interest rates - may well inform what is coming up for Australia's next few years. Once they reach a certain point, which, given the above-linked rhetoric, can't be too far away... (quiet-P.S.-while-trying-not-to-start-a-political-argument : commiserations on the regressive new government!) And, while I am not an economist by any means, the above is interesting in light of the fact that Australian banks own most of New Zealands financial market. One might almost think NZ were being used as the guinea-pig beta testing service for its larger neighbour!

sunpazed 3y ago

27 million people live on a continent the size of North America! Australia’s geography and climate plays into the housing crisis. We have concentrated our population density in only a dozen or so locations (ie; major cities like Melbourne, Sydney, Brisbane) as Australia is only habitable at scale along the coast. Australia has also doubled in population size over the last 40 years without corresponding investment, putting significant pressure on the housing market.

jojobas 3y ago
We also have a desert almost the size of North America. The population centres crystallized around gold mining and other non-urban activities back in a day, you can't just will another Melbourne into existence.
sarchertech 3y ago
>27 million people live on a continent the size of North America What? North American is more than 3x the size of Australia.
- Grimburger 3y ago
  I'm seeing 7.6m km^2 vs 9.8m km^2?
  - mgbmtl 3y ago
    https://en.m.wikipedia.org/wiki/North_America https://en.m.wikipedia.org/wiki/North_America 24,709,000 km^2
  - sarchertech 3y ago
    That’s the size of the US, not North America.
- sowbug 3y ago
  > North [America] is more than 3x the size of Australia. A generously loose interpretation of the original claim is that the continental US, rather than North America, is about the same size as Australia. Which is true.

slg 3y ago

This seems like a natural result when you combine democracy and a growing population with the persistent nature of younger generations having less permanent living arrangements and a lower dedication to politics due to the psychology of youth. It is a "the majority discovers it can vote itself largess out of the public treasury" situation in which the older generations build a political environment around real estate prices always increasing which causes them to increase more consistently and to a larger degree. The longer that is allowed to persist, the more difficult it becomes to change. The older generations now rely on that implicit social contract of increasing prices as their primary savings vehicle and the younger generations lack the political capital to interrupt the cycle, at least in part because they don't have the literal capital because of the ever-increasing cost of real estate. Is there a single growing democracy that has been able to avoid this trap?

futureamish 3y ago
The US isn't a democracy; 1 vote on 1 square foot of land counts for ~80x the vote on another square foot of land. If it was a democracy, these forever-issues would already be solved.
Roritharr 3y ago
What I do not understand is the mechanism people are referring to here. What political action was taken, which party voted? The entire western world shares the same problem, you'd think there would be exceptions if it was just politics.
- mdorazio 3y ago
  It's all parties acting in basically the same way. Examples from the US: 1) The mortgage interest tax deduction directly incentivizes people to buy rather than rent. 2) Property tax instead of land value tax removes incentives to build higher-density housing on valuable land. 3) Most importantly, local zoning regulations outright prohibit dense development of land in desirable areas. 4) Regional acts like California's absolutely insane Proposition 13 (enacted by the people themselves) massively distort markets and act as giant ladder pulling mechanisms against future generations. 5) Additional tax incentives exist for capital gains on the sale of houses, again incentivizing "house prices must go up" thinking. When your core voter base is Boomers who enjoy the benefits of all of these actions and no one cares about future generations because staying in office means campaigning for the next term, it creates a feedback loop between the voters who "got theirs" and the politicians who help them do it. It takes radical action, like Gov. Newsom unilaterally ending single-family zoning, to make any change.

geekpowa 3y ago

Podcast with the author on same news outlet: https://www.theguardian.com/australia-news/audio/2023/nov/25/alan-kohler-on-how-housing-policy-entrenches-inequality-australian-politics-podcast https://www.theguardian.com/australia-news/audio/2023/nov/25... Cannot be stressed enough how much of a pernicious and destructive force housing policy is in Australia. I am working class background and my boomer parents have not been as fortunate as some of their peers with housing driven wealth creation. I am lucky enough to own a home. All my siblings will probably never ever own a home.

zo1 3y ago
I can't imagine ever living in such a place. Sounds like modern-day serfdom and I'd be moving out within a year, don't care where to.
- ix101 3y ago
  If you require an English-speaking country with with a warm climate, and stable infrastructure, you have barely any other options. Bear in mind foreign languages are not a strongpoint of the Aussie education system.
  - zo1 3y ago
    I agree, it's a tough decision and very few options. Me and my wife have been keeping an eye on it as we need a fallback if South Africa ever has a meltdown.

dottjt 3y ago

I live in Melbourne and I remember when I was working at a web agency, one of our clients was some kind of building supplier. They were originally from Ireland, and one of the things they were complaining about was how Australian tradies are inherently lazy. Like, if you ask them if you can do X by Y they'll often push back and say it can't be done, even though it can be done but it's just a lot of work to do and they see that as a genuine obstacle to doing it. So they were saying you often have to push and be persistent to convince them to do stuff in the first place. But yeah, the housing situation here is genuinely scary.

pmg102 3y ago

> At the end of your life, your children get to use your housing wealth for their own housing would that this were true. In the UK at least, that wealth is often needed to pay for end-of-life care. The government will only pay for care once your own wealth including property wealth has been spent.

4death4 3y ago
Do people use trusts?
MattGaiser 3y ago
Can you just give it away earlier in life to avoid that? I have heard of plenty of people doing that with Medicaid.
- pmg102 3y ago
  I believe it's called Deprivation of Assets if they catch you doing that and they won't play along. Even if you suddenly start buying sports cars you never used to. Pretty Orwellian if you ask me, but then if you want other people's tax to pay for your care I guess gov can set whatever criteria they want to on that.

zerbinxx 3y ago

For what it’s worth, I fully agree with the author that the trends we see in housing availability and affordability are driven largely by perverse economic factors, and that the result is destructive. However, “creating new wealth” is kind of a weird way to judge the validity of investments - many companies we invest in are not profitable due to wealth creation, they’re vehicles for growing wealth because of speculation, and for a lack of better options. A lot of this boils down to inflation and the need to keep debt prices low to fuel growth. Countries can’t really unwind the ball of noodles that neoliberalism has cooked up, the transition from a moderate growth economy to a high growth, low risk environment necessitated low interest rates and low inflation, and the rest of the market has followed suit. In light of all of that, it’s still true that unless the world’s government change course to disincentivize real estate speculation, owning your own house will create wealth by the basic fact that they allow you to lock in a fixed cost essentially forever while everything else gets more expensive. I will pay the same amount on my mortgage for many years while salaries gradually increase, to the point where 40 years from now my $2000/mo payment will look to us like the $200/month payment of 1980. In the past few years, I’ve seen several friends go from paying $700/month for rent to well over $1000, with some renting smaller places for prices that massively exceed my mortgage. At some point, something will have to change - whether that means new development in smaller communities, rent regulation, negative speculation incentives, or something else. As a homeowner, I personally don’t care, because I bought my house to live in, and trust that whatever happens, it will first need to affect flippers and speculators over people who actually utilize their real estate.

technotony 3y ago

You can wring your hands about this, but it's largely a function of interest rates. Those have fallen dramatically over the time period, mortgages used to be in the teens. Let's see if this persists in the new interest rate environment we are in.

0xbadcafebee 3y ago

Stupid question: can't we just start selling homes to each other at cost? Like, the cost it would take to build that same home again [on the same land], rather than speculative value. I imagine the price of the house would fluctuate with the price of construction costs, so if you bought a home when construction cost $300k, and now it costs $250k to construct the same home, you'd be underwater if you tried to sell it. So either people would be stuck in the same home forever (which won't work for some people) or the home could be sold at the value that the owner originally paid. Which would mean the home would cost the same... forever... which would lead to homes that are more expensive than new construction. I suppose that would then cause new construction to increase, until new construction is more than the cost of existing homes, in which case the market would get tighter as new construction slows. I can't think of the other potential ramifications, but it does seem like it would get complicated and might not be the solution I'd like (assuming people would ever go along with it to begin with, which they wouldn't...)

cliffccc 3y ago

Apartment prices in China reached their peak last year or the year before. Before reaching the peak, young people could only afford apartments if their wealthy parents supported them or they worked in high-paying industries. But China's real estate price growth is not market behavior. Regional governments sold land at high prices to support local finances and maintain local government operations. Now this method no longer works.

monero-xmr 3y ago

An alternative way to look at it, is that central banks' inflation target of 2% (and likely much larger that official statistics) means that anything that is naturally scarce goes up in value. You see this in housing, education, healthcare, and anything that can't scale like software gets ever more expensive. IMO the inflation target should be 0%. I don't agree with arguments about artificially inflating the currency. We don't need to use psychological tricks to make people consume more. We should aim for stable prices. This would reduce the value of housing as an inflation hedge for the common man. Right now it's like a quasi-bank.

ffgjgf1 3y ago
> We don't need to use psychological tricks to make people consume more. It’s not a psychological trick, when prices are increasing at a stable and predictable rate it’s perfectly rational to spend more instead of saving. Which is good for economic growth. In many way the economy has been inherently deflationary over the past several decades. Due to growing productivity the cost of certain goods and services has been going down consistently. The outcome being that in sectors which this doesn’t happen due to scarcity or other reasons like housing prices have been going up at significantly higher pace. I’m not sure reducing inflation to 0% would helpful for that considering the context. Price growth might slow down at the cost of slower real GDP growth but that’s probably not ideal either.
syndicatedjelly 3y ago
Any market where the inflation rate has been 0% has seen a natural decline in the quality of the offering. Look at the airline industry - prices have not changed in about 40 years. It cost about $1200 USD to fly to the other side of the world in 1980: it’s still the same price in 2023. How did airlines do it? By making the product much shittier in that time.

retube 3y ago

I skimmed it, so maybe i missed it, but, i don't think i saw it mentioned anywhere - but interest rates the last 10 years have been at record lows, and even with the recent increases are still low vs the long term history. This is a material driver of price increases. Other effects are, as he mentions, but fails to make the link, its now common to have two earners per home, again increasing purchasing power. And finally, the cost of other expenses, proportional to salaries, has decreased enormously - food, clothing, leaving more money available for housing.

ffgjgf1 3y ago
> and even with the recent increases are still low vs the long term history I don’t think that’s true. Certainly not relative to inflation/nominal income growth.

kazinator 3y ago

The focus on the wealth side of it is pointless and misplaced. Housing prices are driven by demand, which comes from immigration. There is nothing you can do no the supply side, because the demand is limitless. Cut of all the immigration and foreign buying, and the problem will fix itself in a hurry.

oliwarner 3y ago

Well I'm torn. Property has irrefutable value from location, size, features, condition and a certain je-ne-sais-quoi… by extension a limited supply and increasing demand of this commoditised necessity would naturally push prices up… … but if you look at the past 30 years, something has broken. Population sizes haven't exploded in the same way that housing has. Jobs haven't centralised. All to say: demand is not that much higher. You can only levy a small amount of this on more complex materials and inflation. Some on demand. Do we blame the rest on lenders? If we couldn't afford to borrow, we wouldn't buy the houses we have and therefore wouldn't be competing for more expensive houses, so they wouldn't be as expensive. Lenders have changed how much they lend you in relation to your income. It was x3 when we bought our first house, then x4 when we bought our second and x6 most recently. I thought this was a reaction to house prices, but have I had this the wrong way round? Do we need to strangle the market and get mortgages back to the "gross x2" that was common in the 90s? What happens to the people that own property now? Why should we pay for the banks' greed again?

rstuart4133 3y ago
> Population sizes haven't exploded in the same way that housing has. I presume you mean population sizes haven't exploded like house prices have. True, but I would not expect that. What we see is the marginal cost of house prices increasing. Maybe that's the wrong term, but I mean the people being hurt are people entering the housing market. If you owned a house 20 years ago, you are sitting on top of a rising tide. All it takes to make a house cost 7.5 times the average wage is a couple of decades of demand outstripping supply. And on that topic here are some copy & pastes from: https://www.macrobusiness.com.au/2023/07/australias-housing- https://www.macrobusiness.com.au/2023/07/australias-housing-... Australia has had one of the highest rates of housing construction in the developed world We also have one of the highest numbers of construction workers per capita in the OECD Australia also ramped-up housing construction to record levels last decade However, this surge in construction was swamped by the unprecedented jump in net overseas migration from 2005, which is projected to run even higher over the next five years Perhaps you prefer pictures. This is a graph of historical population growth rates: https://api.macrobusiness.com.au/wp-content/uploads/2023/11/Historical-NOM.png https://api.macrobusiness.com.au/wp-content/uploads/2023/11/... Notice how the uplift in the graph reflects the uplift in in house prices. It started with John Howard era, and I suspect it was a deliberate "Big Australia" policy from his government. As an aside I will forever remain impressed by Howard pumping Australia full of immigrants, while at the same time winning elections based on his efforts at stopping immigration ("the boats"). The big Australia policy was then enthusiastically continued by federal governments of both colours in the 2 decades since. It's taken 20 years to bite as hard as it has. It looks like the media is finally waking up to what is really driving house prices, hospital ramping, clogged roads and a myriad of other problems. I base that on seeing the commercial TV news shows ascribing those problems to population growth rather than state government / airbnb / speculators ... (pick any plausible sounding thought bubble to spout as "news") in the 2nd half of this year. This in turn is driving the blame for those outcomes to the federal government (where it belongs, because they control immigration intakes). The current mob seems to waking up to the fact that "big Australia" might be turning into electoral poison. But it took 20 years of big immigration to create the current situation, even if they fixed it tomorrow I doubt sane house prices will return for at least another decade.

leeeeeepw 3y ago

Hi from NZ where we share the same problem friend. Airbnb very efficient at extracting value from housing too.. NZ is getting micromanaged in a similar way... Lots of big building projects extract masses of value from govt, similar to roadworks are a mind boggling exercise where they seem to find one good part of the road to "fix" every day with massive costs to the taxpayer. There should be Some kind of a real simple solution like container style mass produced homes, but the home has become a status symbol and we are left with growing disparity. I lived in Sydney there for a while which was crazy to see how visually bad the inequality in homes can get with these huge evacuated concrete cancer skyscrapers in Parramatta vs the opulent East coast homes

ballenf 3y ago

> although we were better off than my parents because my wife was working I found that line interesting as he was making the point that they paid 3.5 times their salaries for their house in 1980 just like his parents in 1951 on one salary. I wish he'd explained in what way he felt better off with needing two salaries to buy the same thing as his parents. I'd guess the house he bought was larger than his parents, but I didn't see those details.

cuSetanta 3y ago

I am in the process of house hunting and buying my first place at the moment (Ireland), and there are many aspects of it that frustrate and anger me, but I think the most aggravating part of it is everyones obsession with the value increasing over time. I think I get the idea that its an expensive thing to buy, and paying a bank significantly more money that you actually borrow makes you feel like you need to be making money on the investment. But no other object I buy for regular use and functionality would I expect to increase in value. So why should we feel the same way about a house? Honestly I think if people were less obsessed with their house increasing in value they would see that the terms of a mortgage are crazy, and would refuse to play the banks games.

cannabis_sam 3y ago

Governments all over the western world has been fueling a housing bubble to artificially inflate GDP to make up for disgustingly unfair tax cuts to corporations and wealthy people, who’ve been laughing all the time he way to the bank. It won’t stop for years, and nothing fundamental will change until supposedly middle class families are forced out onto the street. Then, maybe, we will see the political will to change this insane, cruel, predatory and hateful housing policy change. To everyone who owns property, YOU are complicit. Either deliberately evil or willfully ignorant, there is nothing else.