Alan Kohler says there is no property bubble, just real demand
Commenator Alan Kohler has written that the demand for Sydney and Melbourne property is real, not speculative.
He says it was prompted by super-low interest rates, the global trend to urbanisation, the well-heeled baby-boomers downsizing to make up for inadequate superannuation and China’s capital outflow.
The Australian columnist noted high prices in the east coast mainland cities "remain a problem because the boom turns out not to have been a bubble."
"Prices have inconveniently not fallen 30-40 per cent as predicted by the bubbleists.
"If it were a bubble there wouldn’t be a problem because prices would collapse, and policymakers would be dealing with the economic fallout of that event — recession and unemployment — rather than unaffordable housing.
"But regrettably it seems that the demand for Sydney and Melbourne property is real, not speculative, prompted by super-low interest rates, the global trend to urbanisation, well-heeled baby-boomers downsizing to make up for inadequate superannuation and China’s capital outflow."
He noted in the absence of a curative crash, there has been a series of well-meaning attempts to propose a solution:
1. The Labor Party’s election plan last year was to stop negative gearing for established houses and only allow deductions for new ones, but the Coalition naturally said that was the worst idea ever conceived throughout all of history. Labor lost, the Coalition won, so that’s out.
2. The Weekend Australian’s Bernard Salt suggested that millennials stop eating smashed avocado for breakfast and save more, which didn’t go down well, the counterargument being that you’d have to eat cornflakes for breakfast, lunch and dinner for 1000 years to save a deposit for a place in Sydney.
3. Barnaby Joyce has now proposed moving to Tamworth, where he lives, or even Charleville (population 3728, about 800km west of Brisbane) which also didn’t go down well.
4. This week, Scott Morrison reported back from an all-expenses-paid fact-finding mission to London that the solution is, as the Treasurer’s always suspected, more supply.
"As someone tweeted — that was money well spent, wasn’t it?"
Looking at Australian housing approvals, he noted house starts have not changed for 35 years - and the rate of apartment approvals has quadrupled.
"Last year more than 200,000 dwellings were started.
"The idea that the problem is a shortage of supply is, as Trump would say, fake news."
Kohler did warn there seems to be a glut looming, not a shortage, and bankers are getting worried about settlement risk.
He concluded the real solution was already being implemented by families, especially in Sydney and Melbourne, helping the kids buy a house.