Looking through the lens

I have been fortunate over time to receive a wealth of insightful messages from Aussies telling me their stories, challenges and views on how they see Australia as a nation progressing. One of those individuals (who asked that his name be withheld) was kind enough to allow me to post his message on my blog. Its definitely worth the read as this gentlemen probably explains my concerns on Australia’s progression better than myself. See below;

To Lindsay David

I have recently read you book ‘Australia: Boom to Bust’.  I thoroughly enjoyed it and found it very insightful and would like to thank you for taking the time to write it.  I am however amazed that I was not able to buy the book in Australia and had to order it from a UK supplier.

I would like to share with you my thoughts on Australia and its current economic state, in particular the property market. I would also be interested in your response and feedback.

 In 2015 my wife and I (together with our son, now 5 years old) sold our home in the inner city of Brisbane and moved to Melbourne.   

Our first motivation to sell, was we thought Brisbane was more expensive to live, insofar as day to day living expenses i.e. public transport, rates, amenities, food (groceries and eating out) and entertainment costs.  Although Brisbane housing prices were lower than Melbourne, we also thought there were more things to see and do in Melbourne.  We felt Brisbane started to have a franchised feel to it, everyone was trying to keep up with the Jones’ and family time was spent going to the nearest Westfield shopping centre for something to do, and to consume more things.

Our second motivation was that we/I started to become aware that there was a large property bubble, and in my opinion was becoming seriously unsustainable. So we have decided to rent in Melbourne, as the cost of rent for us is on par with Brisbane, with the added benefit of being able to live in Melbourne and immerse ourselves in its offerings for the time being.

Over recent months I have become increasingly concerned in relation to where Australia is headed and the Property Bubble.  Things seem to be getting worse not better, and there doesn’t seem to be an end in sight. The Government and banks seem content to let it continue and the Media just seem to add to the hysteria.

One of my issues is, I cannot find enough people to talk with, who share my opinion.  Let alone anyone being able to conceive that there IS an actual housing bubble and no one seems prepared to make financial plans.

It’s almost as if, most people are in a transfixed state!  As if the property market is the new Nirvana and everyone that owns property, is essentially a millionaire, sitting on their own mini bank with a money tree growing in the backyard.  Home owners are all just waiting for the price to go up.

I follow your comments in the media and agree with them 100%.

In Australia I feel the country has only two main income streams: mining and the property market.  With the four Big Banks, Government and the Media being the major power brokers behind them. the Government only seem concerned with what is the largest amount of money they can make in the shortest period of time, and the banks, only seem concerned in their overall forecasted net profit.  Neither seem to have any polices or reform for how to run the country, nor are they concerned about the Australian citizens.  The Media is clearly being controlled by people with a vested interest.

I feel it’s highly negligent for the Government, RBA and banks to allow the property prices to reach the staggering amounts they are currently.  Furthermore, allowing people to go into large amounts of debt and financial burden, is just reckless in my opinion.  All without having any other industries’ incomes to support the economy.

From speaking with people, there seems to be a benign trust, that the Government and banks know what they are doing and that the housing market is safe and the current prices are the norm.  There is a strong sentiment of “That’s just the way it is”. 

Almost on a daily basis now, there’s a news article about the Australian property market.  Most boast large value increases, booming property sales and high clearance rates. Very few talk about the negatives in a sum total, and when they do, it’s a very generalised statement i.e. mortgage stress, rates arrears or the ever favourite “First home buyers”.  

My concern is how high property prices are and how far into debt a person or family has to go, to live in a particular city (especially Brisbane, Sydney and Melbourne).  This is without taking into fact that people are spending large amounts of money to move into a particular school zone or, drawing back on their mortgage to purchase new cars, holidays or whatever else they desire.  I even spoke to one person who drew back on his mortgage to buy several guitars!

This is also without factoring in the current historic all-time low interest rates, as well as Chinese and other Asian foreign investment.

People just don’t seem to be aware of how much property is costing them and how much it’s going to cost them in the long term, especially when and if the property bubble bursts.

In the past the average property had an average cost ratio of 4 x 1.  This seemed to be a stable figure. Now it’s more like 8 x 1; or 10 x 1 and in some cases 12 x 1!  On top of this, when you factor in other costs such as health insurance, general insurance and other household bills such as mobile phone, cable TV, internet costs etc, I seriously wonder how people are affording their mortgage repayments, with after tax dollars and still have a surplus for disposable income.  Surely not everyone is an Executive working for a bank or Government?!

When I do the calculations based on today’s figures, most people would be financially better off living in a smaller township, with a house mortgage of $400k to $500k on smaller salaries, rather than living in the larger cities paying premium prices.

I am also astounded when Australia is compared to the global market, both in property prices and the amount of personal debt.  By comparison, in most cases, Australia is more expensive to live than New York.  This alone indicates there is something seriously wrong.  Australia has nowhere near the amount of people (per capita) nor the industries, job market etc, so why is it so expensive and what is the need for it to be so expensive?

I can’t understand why Australians on a whole aren’t concerned about this or think that it is acceptable?

When I look at Australia as a whole, in the past, Australia used to have a lot more focus on agricultural exports beef cattle, food etc.  Australian Government seems to have lost it way and forgotten the real reason the Government actually exists – to serve and manage society for the people.  Not to feed off the people and rob them blind.

I feel Australian Government and politics need to go back to basics and look at current world markets to  see what it can produce and align itself accordingly.  Not just dig up the earth and create its own overinflated markets and Ponzi schemes, including immigration.  Nor should Government be allowed to sell off land and natural assets to overseas corporations.

Australia should focus on technology, science, renewable energy, other food markets, children, education, farming water supply.

But which Politicians would have the courage to do this and go against the people that paid for their campaigns or forgo their large over inflated salaries for a mere 65 days’ work per year?

I am just not sure where Australia is headed nor its success.

A lot of the media articles mention a correction in the property market – not a total price drop, somewhere in the range of 10%.  However, I don’t understand what these figures are based on, when you still calculate the cost of living, mortgage rates and consider house prices have all but nearly doubled in the last decade.  I don’t see how a 10% reduction allows people a life and a lifestyle that Australia was once known for?

When I look at recent Government history in such events as the mining boom, they were happy to profit and sign trade agreements, but when it slowed down and the workers and township fell into economic despair, the Government have been no were in sight.

I liken it to a game of Monopoly, when you change the rules and take out all the pit falls such as ‘Don’t Pass GO!’ and ‘Go Back To Jail!’.  There’s only so many times you can go around the board collect $200 and have all your property developed with hotels.  Eventually there is no more money left and the game comes to a grinding halt.

Sorry for such a long rant, but it weighs heavily on my mind.  I am hoping you might be able to offer some further insight.  It feels like I am just sitting around waiting for the property market to burst, taking the Australian Economy with it.  The truth is – I feel like a doomsayer.

However, I do wish to move on and feel secure that I have made and am able to make good informed decisions for myself and my family.  But the truth is, I really feel like a puppet on the end of a string, held by the Australian banks and the Australian Government, who also have their other hand heavily pressed on the scales.  I do not trust them and strongly feel that a crisis is coming, but don’t know what to do about it.  I feel confident in interpreting the market, but am unsure of the when and how.  This may also be due to the Governments, banks and media doing a stellar job of keeping the real facts hidden.  But in any case I don’t not know what to do next !!!!!

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