Saturday, 28 May 2011
Australian Property Market, Everythings Fine Till It Isnt
Here in Australia much like others in the rest of the developed world we are told that our economies is different and our asset prices will continue to grow irrespective of world wide economic turmoil. However what separates Australia from the rest is our media, economists and politicians are still on message that everything is going to be fine, when quite clearly it isnt. The way the current situation mirror's that of the U.K and the United States is truly unnerving, economists and politicians in both those nations spruiked their nations economies as they sunk beneath the waves of government debt, personal debt and asset bubbles. Now Australian economists and politicians are like the band of the Titanic, still playing the same tune as the economy sinks and the housing bubble begin to pop.
When Australian economists discuss the economy we hear about how the mining boom is driving the economy ever higher, how migration makes our property market impervious to losses and other drivel with varying degrees of importance and relevancy. Basically how our economy is fundamentally different to all those other failed one's in the rest of the Western world. While not all this data is completely irrelevant it fails to see the bigger picture, we are running the same economic system as the rest of the Western world, we have have high migration figures like the U.K and we personal debt so high that it makes that of the U.S seem not so bad. In spite of all these similarities the propaganda machine keeps on spitting out newspaper article after "investigative report" every other day to reassure the public they didn't make a mammoth mistake buying that new car and that horribly overpriced house all on credit, or at least they did until now.
However a propaganda machine can only go on for so long, we have reached the economic equivalent of when the Iraqi information minister was claiming there was no invasion of Iraq by the United States even when an American tank could quite clearly be seen across the river right behind him. Some news agencies are changing their tune, with some claiming they saw it all coming years ago despite years of articles lauding the Australian property market as the best in the world.
The myth that property doubles every 10 years and never goes down is finally busted. See chart
(the above chart was taken from a Macrobusiness article)
This is only the beginning of the slide in Australian housing prices, whether we have period of stagnation or a U.S style crash one thing is for certain they are going down and certainly not up.
After reading many of the insightful posts and comments on the Macrobusiness blog, it once again becomes abundantly clear that asset bubble's while influenced by economic and political factors are ultimately a result of psychology and the fear of missing out. This fear of missing out has been played upon by the media in Australia for the best part of 15 years, from the 'Rent money is dead money campaign' of the late 90's to the constant articles about first home buyers fear of being priced out of the market forever with the message of buy now or you'll never afford it.
In the current climate however this has fundamentally changed the media are beginning to publish articles that point out a falling market, however they still maintain the articles that there is no better time to buy and that this lull in prices is just a temporary setback. Even David Koch from channel seven's Sunrise program has expressed his concern that the property market has reversed direction. The general Public still believes in the myths of the property market in spite of growing media coverage to the contrary, if they would take the time to look at the data they would realise where exactly the property market was at and where it was going. Some friends and I have a running joke,that a great many people will only realise how buggered the property market truly is when Tracy Grimshaw tells them about it on 'A Current Affair'. Then it will truly be myth busted.