A housing solution that promises a bigger problem

Yesterday I received a notice of termination of rental contract from the real estate agent.

Before you gasp in horror or express sympathy, let me tell you that it was something we’d foreseen months before. Moreover, we have an amicable relationship with our landlord of over three years.

Since the start of the year, my landlord hinted that he and his wife were thinking of selling the place as they felt it was a good time. This was their family home for over two decades and they had touched things up before renting it out.

Our landlord offered us on a few occasions to buy the place, but we politely declined. We liked living there, but there would be significant renovations needed if we owned it. It just wasn’t what we could set aside the time and energy for.

So we lived here for over three years. We forged memories here that we’ll cherish. Cyrus grew up as a toddler here, learned to ride his bicycle, and had his first day of school. Our parents and a couple of friends came to stay over and we became close friends with our neighbours.

We built a new life outside of Sydney and found a small community.

Funnily enough, my wife and I didn’t even know the suburb existed until we came to inspect the home on 2^nd January 2022, moving in on 3^rd February. I was insistent on leaving the big city to a quieter place after those lockdowns. And we came across this rental listing. It ticked a lot of our boxes, including spacious living areas, an oversized kitchen, a separate studio out back for me to work in peace, a sunny garden (you may have seen some footages of me recording my videos in these two places), plus a covered spa pool.

Sounded like a holiday house. Except it was our home.

I believe the next owner can shape the house to their heart’s content and enjoy the fruits of their labour and dreams.

For us, it’s about finding the next place to call home. We’ve got three months.

Except this time, we’ll be buying.

Yes, we’re first homebuyers, albeit a bit old compared to the bulk of those who call themselves the same.

The government is offering us a hand to get in.

But we’re not taking this… not on our lives, and certainly not of Cyrus’!

Government helping first homebuyers… again?

Our government has recently introduced a scheme to help first homebuyers enter the property market.

For properties whose value is up to $1.5 million, the government could provide first homebuyers with a loan of up to 15% and waive the mortgage lenders insurance.

This means buyers may only need as little as 5% of the house value to make a purchase. Of course, they’ll still have to pay stamp duty and assorted expenses.

This scheme sounds great on paper.

Think of it this way. For at least two decades, Australian property prices have risen in the major cities. Sydney, Melbourne, Brisbane, and Adelaide have led the pack, although Perth is creeping up the radar thanks to the resurging commodity sector. Falling interest rates after the subprime crisis led to runaway real estate prices, with many middle-aged and retirees jumping in to capitalise on this boon by buying investment properties.

So those under the age of 30 were effectively locked out of the market. They had less capital to compete against the property investors. Prices haven’t come down and salaries relative to house prices haven’t kept up:

This has contributed to the younger generation stalling their lives. They delay marriage, children, and centre their lives either around earning more or living for the moment. They call it ‘YOLO’ – you only live once.

In short, this mess our society is in resulted from our flawed financial system, failed government policies, irresponsible behaviour by banks and various businesses, and the ignorance of the majority of the general public.

Yet if you believe that this government scheme will help reverse it, well, you must be working with them.

But I’ll tell you my thoughts on why this scheme will make things worse.

Floating lead weight, sweet-tasting cyanide pill

Recall that price is a function of supply and demand.

We’ve seen the government scheme gives first homebuyers a means to enter the market. That’s going to spur demand.

What about the supply side? Does that scheme spur more home building, encourage investors to sell up and consider other assets?

The simple answer is no.

We’re merely seeing people with more funds chasing a property market whose supply isn’t really going to budge.

And not to mention the government just stepped in front of the bank and become another lender. So young homebuyers have not one, but two creditors wanting them to pay up.

Do you think these borrowers are going to pay off their mortgage for longer or shorter? It doesn’t take a genius to know that these poor folks will have a larger and longer mortgage to pay off.

This scheme will spur prices to rise further, bank lending to grow, and bring a boon to the commissions for real estate agents. It’s benefiting those already in the game.

You shouldn’t be surprised our politicians coming up with such a lop-sided scheme. How many of them own multiple investment properties and are in the pocket of lobbyists from the financial and real estate industries?

I could complicate things and throw in immigration, changing societal trends, and familial breakdown that could further boost demand. But I think you get the idea.

We’ll ‘gold’ our own way

So for Cindy and I, and many other first homebuyers, we’re left to our own devices. Now Cindy and I don’t have much to complain about, thanks to the phenomenal performance of gold.

Have a look at their relative performance over the last 35 years:

We’re thankful for the surge in gold and gold stocks especially in the last 18 months. That’s really given us a much-needed boost.

That said, we must carefully weigh up what we have when we make an offer because every dollar matters.

I spare a thought for my fellow first homebuyers in this race. They’re handed a lead weight for a floating ring, and a cyanide pill disguised as a vitamin.

At such times, we must pray there be real leaders and thinkers who run our society better. Because continuing down this path will lead to societal breakdown as nature cannot take its course.

In the meanwhile, we’ll search for our new home and prepare for the next chapter, with God’s blessing.