People are selling at higher rates than previously, but
it is not because they are going broke, the data indicates that many are doing it to upgrade. One thing that
economists have been predicting for a couple of years now is that interest rate
rises would cause a flurry of sales, that would have an impact on house prices.
But because of record immigration into the country house prices have not only
stayed up, they have continued to rise even more.
There are signs that the economy is in bad shape. Per
capita we are in a recession. Debt is at incredible levels. Immigration is
being used to limp the economy along. But the response of many Australians has
been to use their incredible equity to sell up and buy bigger. I have seen this
personally, and the data shows that this is happening
across the board,
“Analysis across Australian
regions suggests positive housing market conditions are enabling upgrades
sooner than expected, rather than financial stress forcing owners to sell…
…This increase coincides
with the increase in interest rates from May 2022, which has led some to
suggest that this quick resale share reflects people reassessing the
affordability of homes bought when interest rates were at record lows.
Mortgage repayments have
increased by as much as 70% since 2022, on top of strong general cost-of-living
pressures.
But there are other less
concerning explanations…
…Many refer to the housing
market as a ladder – few can buy their dream home at first. It takes years of
saving and building equity for many to be able to afford the home they aspire
to live in.
But if home values grow
quicker than expected, this can accelerate the jump to the next rung on the
ladder.
Across our cities, we can
see a strong positive relationship between regions where home prices have grown
significantly over the past four years, and the share of sellers in the market
who are reselling their homes after a relatively short period of time…
…This relationship suggests
that a key driver of resales of homes bought over the past year has been
positive financial boosts from exceptionally strong home price growth enabling
home upgrades.”[1]
I find this situation to be quite incredible, to be
honest. Australians just do not seem interested in restraining spending. Though
inflation is increasing, and interest rates are being raised in response, people
are still seeking to increase their “standard of living” and choosing to live
larger, rather than cut back. It is like Australians don’t know how to do
otherwise.
Increasing your debt in an economy like ours, when the
housing market is in a clear bubble is beyond risky, yet it also seems that
many people are just keen to do so. Many have been predicting for some time now
that the housing bubble cannot last, but all predictions that it would come
back down keep being shown to be wrong, and this is leading to a situation where
people feel invulnerable to buy up larger and larger. How could they not? Housing wealth just continues to increase for those who are in the market.
But Australia’s wealth is not invulnerable, currently we
are aligned with the United States in a war against Russia and Gaza, and while
on their own these conflicts are not enough to shake this nation, they are both
part of a larger move of nations to starting to stand up against the American hegemony, and
its allies. This is causing a change in the economic structure of the world,
and the easy wealth Australians rely on is under threat from this changing
economic situation.
It is almost as if God has given Australians over to a strong delusion of invulnerability, at just the same time that our place in the global economy is looking to be under serious threat. Australia could navigate this situation better if it were a neutral party willing to sell resources to both sides, but our government has picked sides and this will have a big impact on our countries economic trajectory in the near future.
Is the golden rug about to ripped out from the feet of
Australians who have indebted themselves massively? We shall see, for now, I
would say if you are thinking of upgrading, don’t do it. Now is the time to pay
down and prepare for hard times, because they look to be on the horizon. Our
largest ally is already involved in two hots wars, and an economic war with the
largest manufacturing country in the world China. There is just no way that
this war is not going to have blowback on countries that are aligned with the
US and trade with China. Don’t increase that debt, now is not the time.
List of References
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