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Sunday 25 September 2022

Fake Wealth

Image: Unsplash

In many ways Aussie prosperity is a mirage. It is a true bubble that one day will burst. Aussies look wealthy when you look at their homes, cars and appliances, but really the bank, in most cases, owns it all. Australian wealth is really fake, it is a debt bubble. 

Finally, we can hear business making the same point:

"Aussies bask in fake housing wealth

Is having so much wealth locked up in expensive homes really beneficial to Australian?

Everyone needs somewhere to live and expensive housing serve little purpose to the overwhelming majority of owner-occupiers, who typically must sell and buy into the same market.

Expensive housing also punishes recent entrants or those locked-out of the market. The former is required to take-out mega-mortgages and serve a life of debt slavery, whereas the latter are forced to rent.

Would Australia really be worse-off if the median dwelling price was $370,000 instead of $740,000, aggregate mortgage debt was 70% of disposable incomes instead of 140%, and the banking sector was smaller and less profitable?

The answer is clearly no. Having lower debt loads to service would make Australian households better-off, whereas the broader economy would benefit from the productivity-boosting effects of lower land prices, increased business lending (investment), and a more balanced economy overall."

House prices need to fall, significantly, for Australians to be able to service their debts in a sustainable manner. Aussies aren't wealthy, most are debt slaves. This is just reality. House prices need to fall even more for people to be able to save to buy homes outright. That should be a societal goal. 

Homes should come to be viewed as places where families are nourished. Not places where investment portfolios are stored. Until we change this mind set the average home will continue to get out of reach of the average family.

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