In a press release issued by the Real Estate Institute of Australia (REIA), REIA president, Mr David Airey said he was stunned to hear RBA Governor Glenn Stevens tell Channel 7 Sunrise viewers that “property was no longer the easy path to prosperity”.
In substantiating his claims that property can indefinitely increase faster than wages without any economic consequences, he claimed there was “pent up” demand in the market and this bubble is fueled by “short supply” and not speculation.
He even indicated over leveraging and piling up on debt should have no bearing on interest rates, claiming “Mr Stevens has in the past said that property prices were a ‘social issue’ and have no bearing on monetary policy or interest rates.” This may have been the case prior to a bubble of this size, but the level of debt Australian’s are now carrying along with external shocks such as China’s property market correcting, has the potential to plunge Australia into a long depression.
“When we look back on this period it will be seen as a normal upturn followed by a stabilisation period,” Mr Airey concluded.
» REIA stunned by RBA chief’s remarks about property – Real Estate Institute of Australia, 29th March 2010.
I had to check the date and see if it was April fools day. That press release is laughable – do they really believe what they are saying?
Yes they do – and there are probably millions more that do as well.
The entire real estate and banking industry in this country is built on the fact that prices MUST rise. This means that owner-occupiers have no risk, investors have no risk, and banks have no risk. Rising prices ensures that they have double digit returns with no risk. Increasing immigration (especially weathly immigrants) ensures that the double digit returns are still risk free.
Anyone who knows basic accounting and finance knows that with returns come risk. Both the Government and the Real Estate industry have locked out a generation from home ownership. I dare say that at least 70-75% of the ‘equity’ in Australian property is held by people aged over 40, if not over 50. When these people pass on over the next 10-20 years, there will be a flood of properties on the market. Not just the primary residence, but the 10 investment properties they all hold too.
The government, banking industry, and real estate industry is nervous that prices will plateau or fall for the next 20 years as the baby boomers die (see Japan effect). Hence boosting immigration to create a ‘big’ Australia is the answer.
Property runs this country, I would love to see how much property is as a percentage of GDP. (real estate agents, government jobs based off income from stamp duty, banking and finance jobs in relation to property, property analysts, media coverage).. The elevator in my office block at work has “breaking news” and then it flashes to a new screen and its “property news”..
Investing in existing property does not serve this countries long term prosperity any good.
Only thing that will make the next generation inheriting all the property wealth sell will be a change to inheritance tax. And surprise surprise, this is politically almost as untouchable as changing the negative gearing rules. I personally think that what we’re looking at is the slow creation of a ‘neo-feudal’ society. All the property in the hands of a few and everyone else pays rent forever with prices out of reach by any average person or family.