Hockey reveals plans for bigger housing bubble – to help affordability!

March 7, 2015 admin Australian Economy, Australian Housing 49

Treasurer Joe Hockey has suggested first home buyers should be able to dip into their superannuation to purchase a first home. It comes after Senator Nick Xenophon was ridiculed in August 2014 (‘Why Australia has one of the world’s largest housing bubbles’) proposing the same idea to a Senate Economics References Committee hearing in Adelaide. Multiple experts came forward suggesting Xenophon’s idea would only increase house prices and further exasperate the problem.

In the weeks following, Finance Minister Mathias Cormann ruled the ludicrous idea out. (‘Mathias Cormann warns super not the key to housing’)

In response to Hockey’s imprudent plan, announced yesterday, shadow Treasurer Chris Bowen said “His [Hockey’s] plan would have the likely effect of not only undermining retirement incomes but also driving housing prices up further and making it harder for first home buyers.”

This view is shared by John Daley from the Grattan Institute, “It won’t improve the problem around supply. If supply remains constant and you effectively increase the amount that people can pay then prices will go up. This is economics 101.”

Chief economist of Bank of America Merrill Lynch, Saul Eslake said “Anything that allows people to spend more on housing than they otherwise would in a supply constrained market will result in more expensive housing and nothing else.”

“It’s exactly the same principle as first home owner grants and stamp duty concessions”

If Mr Hockey is genuinely serious about addressing housing affordability, he should be concentrating on removing current market distortions such as negative gearing and limited recourse borrowing by SMSFs, rather than trying to create new distortions.

Please spare a thought for the council of financial regulators – The Reserve Bank of Australia (RBA), The Australian Prudential Regulation Authority (APRA), The Australian Securities and Investments Commission (ASIC) and The Treasury who are trying to control the overheated market at a time when Hockey wants to throw petrol on it. Ludicrous.

» Joe Hockey raises prospect of first home buyers using super to enter property market – The Age, 6th March 2015.
» Joe Hockey flags opening up super funds for houses, job training – The Sydney Morning Herald, 7th March 2015.
» Mathias Cormann warns super ‘not the key to housing’ – The Australian, 30th September 2014.
» Nick Xenophon internationally ridiculed for plan to buy first homes with superannuation – Who crashed the economy, 9th August 2014.




49 Comments

  1. Treasurer Joe Hockey is an incompetent, corrupt and ridiculous politician whose only concern is to increase the price of his property portfolio. He is a dangerous man to allow to be in charge of Australia’s financial future as his ideas are only slightly better than that of a child’s. He must resign as he is a reflection of the Liberal Party and this is not good. He is a liability and obvious a hypocrite who likes to stage public relations stunts such as attacking welfare instead of dealing with vested interests that run this country and who paid for his nomination and election into office-SHAME ON YOU-GO HOME HOCKEY!!

  2. The banks are now coming after your super account. At $1.6 trillion super now surpasses bank deposits and they see it as a pot of gold in their wealth transference strategy. The use of first home buyer’s super is only the beginning. You will see more banking industry sock puppets like Mr Hockey praise the advantages of letting the banks/government handle your retirement funds until the lot just disappears.

    http://www.dailyreckoning.com.au/superannuation-overtakes-bank-deposits/2013/08/26/

  3. Profits are grabbed,losses are offloaded.Paying interest on paper money is essentially a fraud: paper money costs almost nothing.The issuers of money have entirely different attitudes of normal people.From the reserve bank viewpoint,inflation is good and wars are good,because they offer more large scale opportunity.Then they print more money,and get more interest.And if governments waste money,that suits them.If they can exchange their paper or electronic entries for any real assets-houses,businesses and utilities- they benefit;they get them for nothing.

  4. Well, at this time, all of the dominoes are, or indeed have already lined up for the beginning of much needed and long overdue deflation of the monstrous world-beating Australian Housing Bubble.

    For some reason, ship loads of cheap “foreign” funds are still continuously being made available to the big four Aussie banks even though the economic landscape has deteriorated dramatically since the early days of the initial creation of the bubble (2002). This is probably because there is not much going on in the rest of the world economically speaking anyway.

    Making super available for home loan deposits is the last port of call to give the bubble one more lift and reign in many of those who have been prudently waiting on the sidelines for the desperately required price correction.

    If this super for home loans idea does not pass, then it will probably signal the time for people such as politicians to (very rapidly) start offloading their real estate asset portfolios as the coming price corrections will be literally eye-watering, probably wiping out a good section of the middle-class who live in the average “joe sixpack” suburbs.

    Yes, they are coming after your super anyway, even if this super for home loans idea does not pass. On the other hand, I have (sincerely) never believed that our super would be there anyway by the time many of us reach retirement age. The extreme excesses of the current era need to be paid for by those not yet even born, and chances are that the coming massive real estate price correction will lead to a nationalization of the losses, ultimately falling upon the tax payers anyway.

    At least one can look forward house price drops for at least an entire generation, which is something not experienced since the period 1891-1945. Sort of like starting again, which will the system will need to do just to remain operative in its current inferior form.

    So…don’t buy now…a new era of house prices halving every 10 years is not far away.

  5. That $1.6 trillion could easily become $800 million overnight when this whole Central Bank money printing scam to fund this ponzi driven dividend and share buy backs scheme unravels.

  6. @Claudem77

    Great post, and yes Australia has a monstrous property bubble that has the potential to pop and take down the Aussie economy with it, but both the government and the banksters don’t care, because they are in bed with each other (metaphorically speaking that is). Also, I believe the Australian government has set up a $380 Billion bail out fund (sponsored by the Aussie taxpayer), for the banksters in case the property bubble does pop, if and when that happens.

  7. I have always favoured the big banks here in Australia to go bankrupt. The government already guarantees our savings anyway. However, the political system being so corrupt they will never let that happen because they have the voter who will place the welfare of their personal pockets above that of the country and they will support any action to save their non-existent savings. Voters might be better educated today but they are still intellectually backward. – See more at: http://www.prosper.org.au/2015/03/06/selective-us-deflation/#sthash.Xu6wa9b1.dpuf

  8. Agree with all of the above comments, especially ClaudeM. The writing is on the wall for the housing bubble, it cant go on much longer, the cracks are starting to appear.

  10. I believe the drop in commodity prices is now impacting the economy as mines close. This is only the start. I would let the banks go bankrupt and nationalise them. It would be immoral to bail them out.

  11. I was just researching on where to potentially live as I keep scratching my head why $800000 is the median price for a suburb I live in 25km from sydney, what was sad was this unit in a suburb 40km from Sydney in 2002 was sold for $90000 based on its property report, this unit then sold a year later for $190000, I remember in 2011 this unit was on the market for $210000, now, today is it being advertised for “must be above $290000”, “sigh” It’s stuff like this that is sure fire of knowing people are in the clouds.

    I’m apparently young to be looking at property, even though I’m ready for it (TO LIVE IN, I hate the idea of investing in a rock that doesn’t move), I just can’t pull the trigger on disgustingly inflated prices, we are not Hong Kong where land is scarce, the only reason developers are building sky high apartments in non city suburbs is to take advantage of the monstrous prices. I was at a real estate office two years ago about home releases in a suburb 25km from Sydney, it was total area per home 200sqm, I said where is the backyard, the agent said “who needs that”.

    Every time I hear an official talk about helping the situation, they just make it worse, this is one of them.

    My parents told me in the 80s, 90s or even beginning 2000s my career would reflect comfortable living with no worries. I’m grateful for my career, but this is really stopping young professionals from moving forward. I know people my age are using either guarantors, early inheritance or parental assistance (I.E Granny flat), this will only make it worse.

    When an young Engineer knows a slight interest rate increase is the difference between making it or breaking it, it’s not time to buy.

  12. We’re heading backwards towards another society of Landowners and Peasants. Pretty soon the median house price will be over $1 million, while the median salary (for those lucky enough to be employed) drops to around $25,000. The landowner-investors will keep bidding each others’ house prices to infinity, while the peasants mob around, hoping for a chance to shine the landowner’s shoes for a penny. There is going to be a rebellion. Peasants will not put up with this crap for much longer. The real estate industry, banks, and gov’t are criminals.

  14. Tyrfing

    Bank your money, sit tight and wait.

    The land shortage is a result of a handful of businesses buying up farmland around the outer suburbs, re-zoning it as residential then drip feeding it bit by bit into the market to elevate prices.

    Most of these companies are listed on the ASX and are highly levered.
    A collapse in the stock market will force these companies to liquidate their positions forcing thousands of acres of residential land onto the market. The banks are in a similar position as they have all gorged on cheap credit as it rolls off the printing press.

    You can also add our apartment construction boom to the above scenario.

    A stock market collapse isn’t far away.

  15. @ Michael Francis

    As the banks and corporations own the government what makes you think they will not be bailed out and austerity imposed on the people, a la Ireland, Greece etc?

  20. HOCKEY HAS TO GO NOW!!. […] HOCKEY GO HOME!! BOOOOO AND SHAME ON YOU SELLOUT to the average Australian.

    [Admin: I’ve removed one statement due to the current North Sydney Forum defamation trial… I however note NAB and The Financial Service Council are NSF members]

  21. Warning: Long post (my first and last)

    I am a long term property bear, but I have officially thrown in the towel. The government will stop at nothing to prop up prices, the cash rate is going to zero, super access for first home buyers will most definitely happen.

    Ladies and gentlemen this thing could go parabolic from here. I now would not be surprised if we see another 20%-30% in the next 18 months. What I am seeing from friends and family around me, is really quite unbelievable. $120K salaries, $1.4m loans, no problem. Another darker side to the bubble is how nasty a lot of people have become, like buying property makes you a superior being than all the peasant renters.

    Maybe it is the end game this time, but quite possibly not. Either way, I am done with this country, despite having many amazing friends and contacts I am willing to work abroad for an extended period, possibly forever, we have completely lost our way.

    I am in my mid 30’s with a young family and am lucky enough to be in the process of selling my business, which has been nothing but blood sweat and tears for the last 6 years. Despite being a successful business owner, I have many friends who have created just as much wealth, (in some cases more), simply by chugging along disengaged in middle management jobs, leveraged to their eyeballs and the odd handout from mummy and daddy. Half of them are dumb as a post.

    I on the other hand have sacrificed enormously (80+ hour weeks for years), risked all of my own capital, gone without a salary for 3 years, put a strain on my marriage and young family and have finally come through the other end a success. It has been outrageously difficult, trust me it would have been a lot easier to just keep buying more investment properties in an appreciating property market.

    However, here is the thing, over the last 4 years I have hired over 80 people, yet property speculators have done nothing but steal from future generations at best, and contribute to making the Australian financial system inherently more insecure at worst.

    However, the government does not care about small to medium business owners like myself who create jobs and new services, they would rather support the bogan speculators who want to get rich without doing anything. The recent scraping of the Commercialisation Grant is evidence of this.

    The situation would be comical if it was not so sad. So here I am checking out of this once great country, possibly permanently. I am relocating to Malaysia where the cost of living is cheap, the lifestyle is fantastic but most importantly they are pro business, not pro overleveraged bogan.

    I am super excited to be leaving, which is a shame, but I am looking forward to meeting some like minded people who are interested in conversing in something other than how much their property has gone up and which private school their kids will be attending on their new found riches.

    Anyway, good luck to everybody on this forum, it has been a great read over the years and helped keep me sane when everybody around me think I am the crazy one.

    All the best

  26. @21. John

    If your 120K/year friends are buying 1.4m property, they’re the pesants, self inflicted pesantry too. The amount of money they’ll owe will still be there whether property prices boom to the moon, or crash to the ash. They’re not rich, they’re conned into thinking they are. Do you believe they are?

    Ask your friends if their income/salary was to stop today, how long could they sustain their current living standards, and hold on to their assets, or liabilties for?

    If they can go for 5 years, they’re wealthy. If they don’t answer, it is usually a case of one or two pay cheques away from disaster.

  27. There can be only one explanation for the apparent economic ignorance of our Treasurer Mr Hockey. He must be using the same chief advisor to the British Chancellor who was recently found in a London crack cocaine den. We tend to ignore the effects of drugs on the financial centres like Wall St that make surreal billion dollar decisions that affect us all. Its like living in an “Alice in Wonderland” setting where nothing makes sense anymore. Fraud and corruption are the new business models, borrow more money to solve a debt problem, create money and lend it to banks at zero interest rates to increase economic activity, increase taxes when incomes are plunging, spend money on attacking foreign countries instead of education and health etc etc. These are not decisions made by rational minds.

    http://www.dailymail.co.uk/news/article-2974029/Top-economist-advised-George-Osborne-seen-smoking-crack-cocaine-glass-tube-north-London-drugs-den.html

  28. HOCKEY MUST GO NOW!! He is a dangerous man to be in charge of Australia’s financial stability and future, Its time for all Australians to place their political ideologies behind and put Australia’s economic and social well being first. Don’t allow political corruption and incompetence to poison this great nation. BOOO and condemn any political action that places the welfare of vested interests above that of all Australians. HOCKEY MUST GO NOW!!!

  29. @ John

    Thanks for your post mate.

    I have a lot of respect for small/medium business owners such as yourself. I have never been brave enough to start my own business as I have seen how the banking and taxation system is blatantly skewed towards property speculation and not productive industries and businesses.

    I don’t blame you for leaving and I think we as country will be poorer for it.

    Good luck on your move!

  31. @John

    Yes, hope all goes well with your move. I was originally looking at moving to America back in 2012 (knowing that houses were back to approximately 80-120K after their bust), after I (inadvertently and accidentally) noticed that house prices were coming down hard in the larger regional areas, so decided to stay provided I took up a necessity (government-sponsored) qualified such as nursing (doing that right now). I figured if you can’t find a job doing nursing then we can all kick our rear ends goodbye anyway. I have a million other qualifications too such as qualified electrician already, a degree in psychology, and classical training in music so I figured I should be somewhat employable just about anywhere.

    I realized too that I only “thought” (was made to believe by others) that I “needed” to live in a major city. It is suicide in the middle of a monstrous housing bubble unless you already owned it to begin with.

    Anyway good luck!

  32. John, I also left the country 2 years ago, to Japan… glad I did. The number of people doing the same is not few. In Australia, you are best off being on either extreme of the bell curve. Business owners (unless making millions) are f**ked. I should know, I was one of them. Malaysia sounds good. Actually, you could pretty much go to any country but Australia and be better off. Australia is changing, I don’t think it will “get better”. Change is not necessarily a bad thing… you just gotta do what you gotta do. We may end up going back one day too.

  33. I dont think i will ever have the chance to leave this houseing commision flat to a place of my own. Prior to this #### up bubble us despised in these places could get to a place of our own. I am lucky thoigh more and more are homeless.

  35. If you are willing to take to long view, the whole idea of escaping to some far off land may not always be the best choice. As our civilization continues to slide, what may become more important is a sense of place and a sense of belonging. IMO having lived most of my adult life in far off lands, this is exceedingly hard to achieve.

    It’s a bit like kicking ya spikes into the ground while others slide off the cliff, yet sooner or later we will go off the edge with them mud and all.

    I would agree in full, the future certainly doesn’t look good for most Australians, but it doesn’t look much better in the developing world.

    “Collapse NOW and avoid the rush” JMG

    Glenn

  39. @ Glenn

    If your children are grown up, you are financially independent and have no commitments why put up with living in one country. You have to become a citizen of the world if you want to be truly free. Every country has something good so why be controlled by power hungry psychopathic politicians and banks. Sitting in an overpriced shelter watching Kim Kardashian’s bottom on TV every night is not my idea of life. Sell up now and try some Poisson Cru in Bora Bora or Sangria in Marbella or Bouillabaisse in Marseille. Remember the T-shirt “He who dies with the most toys …… still dies

  40. The banks/government are greedily salivating over our now $1.8 trillion super fund. What are our chances of hanging on to it when the following governments have already confiscated their pension funds since 2012. Poland, Portugal, Cyprus, Hungary, Bulgaria, Greece (In process) Ireland(partial) France (partial).Perhaps Mr Hockey is right get your super out now before it disappears.

  41. @ VINO

    Yep, you brought up some good points. And I am in no position to say there is any one way or right way. It’s always a case of ‘it depend’ and always will.

    And you are right, we are in a unique time in the human story to be able to pack our bags and relocate almost anywhere that tickles our fancy. IMO what we ‘put up with’ in Oz is far less painful than what others put up with around the globe. Oz may well be on the downwards slide of industrialization, unlike many other countries that are yet to reach that point and may not.

    To become a ‘citizen of the world’ might involve shooting off to some far away place, usually a less affluent country than ours, living a great life, eating great food, enjoying the moment and when it’s finally time, turning off the lights. And there is nothing wrong with that 🙂

    Yet it might also mean finding where you can best participate ‘digging-in’ and defending your chosen corner of the world. Who is to say, right?

    From a more personal perspective, many of us baby-boomers raped the planet, fiddled the books, ignored the externalities (true costs) and then took what good was left, and will then blow much of it on ourselves, leaving WHAT for the children of our children? This is our legacy and many of the youth are pretty shitting with us.

    Just saying 🙂

    Glenn

  42. There really is no point in pointing the blame to anyone. All of this is happening out of the ignorance of all generations (which continues into the next as a consequence).

    Boomers for instance grew up in a time when the traditional economy was still more or less functioning as it should; more productivity, more wealth etc and therefore house prices were more or less more honest (tied to actual average wages and productivity growth).

    After the boomer working years, they felt and believed that they had all worked hard (some did) and therefore deserved a handsome pension which ultimately developed into a full-blown entitlement culture.

    What the boomers are NOT aware of is that the global economy as we once knew it, more or less died in the backside (around year 1999) due to systems and mounting debt running their courses. It was becoming more and more difficult to find “growth” in the usual way (e.g. productive enterprises which are about the only things that actually create wealth).

    As a direct consequence of this, the financial banking landscape changed drastically in 1999 to try and “artificially” create “growth” in areas that were normally deemed to be mere necessities (such as housing) so one can actually live somewhere in order to go out and do some productive work; a tell-tale sign that the international banking system as we once knew it was more or less “broken” and that it had already reached its use-by date.

    The boomers then mistakenly believed that “my 80K house is now worth a million dollars!” due to the work that they had done in the years leading up to the breaking of the financial system prior to 1999 when in fact it is a symptom of a broken (international banking) system that had reached its use-by date around 1999. To make matters worse, all of the free and easy artificially created (out of necessity because everything else was broken) fiat money created a type of artificial “wealth effect” tht also led to an entitlement culture in the boomer generation, not realizing that it was merely a symptom of a system deeply in trouble. They were not taught about what real money is (as opposed to fiat money that we have today) in schools (who had an indirect interest in maintaining the status quo anyway). So in a sense, future generations have been sold out but this has occurred mostly as a consequence of historically-unprecedented level of ignorance rather than just “greed” so to speak.

    For house prices to rise 6 fold (which many have done) you could excuse that if the case was that every person could suddenly work 2 or more jobs, and wages had quadrupled as a result of a lack of labour, and orders from overseas were going crazy.

    But when it has happened as it has in the last ten years, no one asked the question as to why it was happening when nothing had really changed in the true scheme of things and jobs were actually disappearing (other than in mining where a lot of the money left Australia anyway). The so-called housing boom started LONG BEFORE the mining boom got under way anyway.

    In any case, due to the fact that the “wealth effect” is in fact artificial many are going to go down with the ship, most of all, those who paid inflated prices, but this was due to historically-unprecedented level of ignorance in the general population rather than the “boomers” fault per se.

  43. @ Claudem777

    I like your Rainbows and Butterflies approach to the causes of the financial crisis we are in but unfortunately it is far from realty. The eye of this financial cyclone is driven firmly by the US central bank and the banking cartels it supports. For the last 50 years they have eliminated government regulations put in place after the Great Depression to stop it happening again. With bribery and corruption they have extended their tentacles to most western central banks and exploded the levels of debt globally to unsustainable levels where a collapse and war become inevitable. Their aim is to maximise profits and exploit the masses with no care for their wellbeing. As with all organised crime .. it’s just business. Sorry to be so grim but we must recognise the true culprits to stop it happening again for the sake of our children. When the world financial system does collapse and resets we MUST NOT accept a return to the status quo of central banks and their out of control money creation. There are many better ways than this crony capitalism which takes from everyone and gives it to the top 1%.

  44. All good, use super for first homebuyers.

    Prices tank all get margin calls an loose everything…

    Canada has just gone through this mess… Super lost property lost family lost..

    Only winner the Bank.

    Banks never lend anything to start with. Without the promise to pay from the mortgagee. The currency would not exist. With this promise the digital entry with mortgagee name on the account is created. Then a numbers put into that account on a screen that allows the morgue to purchase something.

    In default the bank gets the property to sell again. It only cost them a few hundred in wages of its employees to do the paperwork to start with. Anything over a couple of thousand is their brake even. They don’t care either way if you pay them over 2* 30 year loan or default because it has only cost them a couple of thousand in wages either way.

    So who is Joe working for…

    prepper

  48. All those who voted for the Labor/Liberal party monopoly then all I can say is Bon Voyage and have a nice life in another country. To those who did not, lets all stay and fight. Lets place a list of our complaints in the ballot box instead of a vote. Be critical of all politicians actions by telephoning, emailing, faxing and letter writing your complaints to them. Write on our Facebook Twitter etc about their silly and immature behaviour that only preaches divisiveness and contempt for the ‘other side’, meaning amongst ourselves while they have dinner with each other after their sessions in Parliament. We owe all this and more to this great nation as Australia’s social and economic future depends on us alone and not politicians.

  49. @48 – Beautifully and succinctly put my good man. As a wee addendum allow me also to inform everybody of a factoid I discovered in Nick Bryant’s brilliant book “The Rise and Fall of Australia”, namely that GetUp has 650,000 active members, which is ten times more than members of the ALP and the Liberals put together! Interesting eh?

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