Posted by Luke in 
When I read articles like this one I am left scratching my head at the ability of people in power to tackle serious problems. Here’s a quote from the RBA (Reserve Bank of Australia) leader man:
“I think it is a mistake to assume that a, you know, riskless easy, guaranteed way to Prosperity is just to be leveraged up into property,” he told the Seven Network. “You know, it isn’t going to be that easy.”
He added that he worries about whether future generations will be able to achieve home ownership.
“I’ve got kids that within not too many more years are going to want somewhere of their own to live and you wonder, you know, how is that going to be afforded because prices are getting quite high.”
Prices are continuing to rise on the back of demand from a growing population outstripping housing supply.
Is this guy on crack? He’s the leader of the reserve bank and he wonders if his children will be able to afford a house? So the leaders of this nation are quite happy to let the rich get richer and increase housing in-affordability in Australia?
The place where I grew up is the third most expensive place to live in the world and it’s not that flash. For me to buy a house in my suburb means that I need 6.5 going 7 times my current income, almost as bad as places like London or Sydney. So what’s the answer from the man in charge. Allow me to paraphrase for you:
“Oh who knows. I mean my kids can’t afford it but instead of actually managing the issue you know what I am going to do? I am going to treat this as if it has nothing to do with me. It’s the market! Oh by the way, if you are looking to get into the market, you can’t because we made it too expensive for the average young Australian wage earner. Sorry about that. So you young people, just sit around collecting degrees and um er… yeah as you were.”
This is not solving the problem, it’s absolving it. Sitting there and wondering as it passes you buy. No offense man, but seriously if you don’t know what to do, what the hell am I supposed to tell my kids? Good luck kids, get a massive home loan and live in the middle of Uranus.
A lesson in Problem Absolving – Problem Solving is not doing nothing!
The late Russell Ackoff called problem absolution (doing nothing) the option most people take. Nothing is being done to fix this issues so it cycles around the system creating no improvement. When a situation is improved, we notice. We say, ‘holy crap, I can afford a house.’ When it gets worse we say, ‘OMG, the problem isn’t getting any better.’ Simple? Doing nothing is, ‘Oh that’s a problem, er… come back and see me in a year and you will be ok.’
I am at a complete loss to explain a lack of governmental response to the price of houses. Even with a grant, the boost and any other kind of incentive, there is no way I can ever hope to live anywhere near I work and raise my family. It just won’t happen. It’s not just me either. Data from the latest ABS survey indicates (it does go here to check it out) that housing debt carried by Australian families is approaching the 40% mark. Putting aside my hobby horse for a moment, consider the ramifications of that. What happens if that becomes too much in the future? What happens to our economy? Forget about home ownership: what about long term security?
Possible Solutions
I am not an economist, I am barely an academic so here goes. A list of things we could do right now:
- Take away the financial imperative: Create a situation where home ownership is regulated by the government. A years wage (on average) for a house. Ok, so like I said, I am not an economist. Economists: why won’t this work?
- Remodel work so it can be done from anywhere and support the mobile workforce: Create hubs and campuses for city dwellers in places like Uranus, I mean Pluto, I mean the country. Change the reason for living in a city to one of lifestyle and promote that. Sure, that will drive prices higher and create weird developer towns like North Lakes. It will give losers like me an entry point.
- Stop blaming the market and think about price ceilings: There is a natural level of supply for demand but here’s the kicker, Price. Supply and Demand is regulated by the price people are willing and able to pay. These stupid arguments about not enough land, blah blah blah. What about price? The argument goes: price drives up demand because of the lack of supply for a scarce resource. I.e. From the above quoted article: “Prices are continuing to rise on the back of demand from a growing population outstripping housing supply.” If this were true why is there so much vacant land in the outer regions of Australia? A better way of saying this would be: At the current price, which is rising due to the perceived lack of supply and a growing base of people wanting to buy in city areas, housing is become more expensive. Therefore, demand for these city properties is surging and the price ceiling (the price people are willing and able to pay), has yet to be reached. Oh but is there a price ceiling? I thought house prices only ever went up… right? WRONG! Conventional economics says that price regulates supply and demand, yet I can’t find a single article that clearly explains this, why? Well, I have no idea about economics that’s why!
- Change our desires: This is a tough one. We want a house because we desire. Give me some drugs so I don’t want me own place. Now I know why a lot of people smoke weed (I don’t).
- Make bigger caravan parks: Okay so now I am getting silly. At least I have attempted to apply some ideas to the problem instead of turning on the money hose or sitting back, scratching my arse saying,’Oh yeah that is a problem eh!’.
As I write this I am pondering my future and looking with dismay as I save money, labour under yet another dragon of a landlord and work towards my first home purchase. The question, that will no doubt go unanswered is this: What are we going to do about it? The answer I expect is nothing because all of the rhetoric I see coming out of the media is complete bullshit. You know, stuff like: Save a deposit (can’t save that much – I have two kids), don’t want a massive house for your first home (I am looking for a small 3 Bedroom place for me and me kids bro), don’t complain, Entitlement mentality (I am not entitled but this is a desire you are profiting from mr. developer, take it away and I write about something else) and all the other shit the media says people in my generation are guilty of. I say, cram it with walnuts jack! How’s this: If I save for ten years I will have saved one-quarter of what I need in today’s prices. What will the prices be in ten years? A million dollars for a complete dog box with no windows in the middle of the ocean? Jesus wept!
I will leave you with this link to remind you of what happens when we don’t take a proactive approach towards our problems. I would also recommend that all Australians read the Subprime Solution by Robert Shiller. Sure, that may not happen here but it may help us structure the problem in a way that leads to… OMG… a solution!
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