Why is the Residential Property Market a hunting ground for voters and the centre of demographic and social developments? Do restrictive policies resolve competition between homeowners, renters and investors or why do they hit people’s nerves.
Why is the Residential Property Market so different?
Residential property market hits people’s nerves
The specific of the residential property market is that homeowners, buyers, renters and investors bump into each other. In contrast if you look at the share market, you won’t see these conflicting social, financial or business interests. With housing everybody is more or less affected and businesses are secured by properties, too.
That is why when talking about the property market social and economical aspects dominate. Think about the economy (inflation, prices, jobs, income), financial policies (interest rates, LVR restrictions, mortgage rules) and population growth (demographic developments, immigration).
This complexity is well used by media commentators for eye-catching headlines and good selling stories to keep the housing market in the spot lights. Since the financial crisis in 2010 the supply of housing has been in the spotlights, what do you think about the quality of information that has been used by politicians to hunt for voters?
Housing shortage vs. empty homes
The imbalance of high demand and low supply of housing is the centre of the housing crisis while competing buyers are driving up house prices to new heights. Due to this upward trend housing costs become unaffordable and if you follow the stories in the media, more and more families live in garages, not to ignore cases of homelessness.
Well, in contrast a huge number of state houses are empty as they are unfit for renting out or are severe damaged. Why not fixing what is obviously wrong instead of talking about a “housing bubble” and mixing up social housing with the free housing market?
The housing market is different to other markets
Why? Because the majority of dwellings are held by homeowners (owner-occupiers) rather than investors. The stats say less than 10% of the population are actually property investors. Families, owning a home, react differently to politics and the economy as they feel it in their pockets. People’s likelihood depends on jobs, income and expenses such as interest rates, local council rates and taxation. Only look at the annual rate increases and compare them with your last pay raise.
Because of the emotional instability the housing market tends to go up or down, stagnate for a while before going up sharply. This is described with the property cycle, which follows closely the financial market and the economy. Saying the housing market has never been rational, it is a playground of fear, greed (human’s emotions) and global trends.
Remember the impact of the GFC (global financial crisis) or look at the outcome of the recent EU referendum in the UK. I strongly believe the Brexit will cause some political and economic uncertainty for quite some time causing some volatility. Consumers pay by uncertainties with higher prices.
Many homeowners find it hard to cope with an expensive asset that has been purchased for cumulating wealth or backing up the retirement. An owner-occupied home is not an income producing investment. Homeowners must spend less than they earn to meet their financial commitments.
Fear does not exist anywhere except in people’s mind
Actually fear is not your enemy, it is more like a compass pointing you to areas with liabilities. Let me show you three examples;
· Fear of losing a job—are you prepared and have a rainy day fund?
· Fear of interest rates go up—refinance with your bank
· Fear of hiring a builder—be knowledgeable about quote and contracts
Fear is something like a natural defence system. It can get out of hand especially with financial liabilities, but it is also helpful for highlighting risks. Most risks can be reduced or avoided by being prepared and by making informed decisions.
In case of changing housing policies homeowners pay for government’s decisions twice as tax payer for social housing and as homeowner for their own housing costs. With the repairs of empty state houses it isn’t different.
It seems to be easy to hit people’s nerves when talking about the key dynamics of the housing market such as population growth (and change), the availability (supply and demand), cost of and need for finance and the conditions of housing stock. Why not subjoin demographic changes, social and infrastructure problems?
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