$2 trillion!
That’s how much Aussie property has risen since March 2020, according to a stat cited in the Australian Financial Review this morning.
Here’s the key quote:
‘Most of the increase was in the value of land.’
Indeed.
It’s also what makes a similar article in The Australian so hilariously nonsensical.
Naturally, only a politician could write something so ridiculous.
The chairman of a parliamentary inquiry into housing affordability is a Liberal MP.
He writes, in part, that the presentations ‘pointed to one inconvenient truth: our affordability challenge comes down to not building enough homes’.
Blah, blah. Economist Cameron Murray has already demolished this argument before the inquiry even finished.
It was never much of an argument in the first place. Economic think house Prosper showed that for years Melbourne had way more empty homes than the official stats showed.
The current ABS figures on increasing land values clearly demonstrate that it’s absurd to say supply is an issue when the biggest fixed cost of a home — the land — is allowed to inflate at such a prodigious rate.
That such an argument can be trotted out with a straight face tells us the government will do nothing to change the basic dynamic of Australia’s housing market.
Therefore, investor interest is going to ratchet up as they chase the unearned wealth to be captured there.
That $2 trillion figure above went into many a pocket across the country. If yours wasn’t one of them, you’re missing out.
I just spent the weekend down at Wye River, on Victoria’s surf coast. An old mate of mine spent $600,000 back in 2017 to buy an old place up on a hill there. The view from his living area is fantastic.
He told me it’s since gone up 85%. Even better, he can Airbnb it half the year to pay the mortgage, with cash to spare!
The rest of the time it’s his weekender, 10 minutes from the pub and a walk to the beach. Heaven!
This is creating wealth and advancing lifestyles for some, on a vast scale, across the country. But only for those that know how to play the game and can afford to buy into it.
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The young and the low-paid get torched in this dynamic.
Our Liberal MP also writes in his piece:
‘Any country with as much land as we have and wages as high as ours, should have the most affordable housing in the world, not the least. For years governments, through inaction or special interest lobbying, have denied young Australians their chance at the Australian dream.’
I’m not sure if this man is a fool or just spouting what people want to hear. Australia’s housing market is entirely a function of a tax system that does not capture the rental value of land.
Instead, it taxes wages and profits. That is to say, it punishes productive wealth creation and rewards rent-seeking.
Most of us are happy to go along with this because we get a free kick on the house we own. This is sold to us by the media and financial industry as ‘creating’ wealth instead of what it is…appropriating wealth.
The sheer idiocy of this, at the societal level, can only be seen in the homeless that go cold, in the young that think a free-standing house anywhere you want to live is beyond them, in our sprawling cities that continually consume peripheral farmland, and in the gigantic mortgage debt that most of us carry for our working life.
All because we refuse to treat the land as a shared resource whose bounty belongs to all.
As laughable as such a system is, it’s the only one we are likely to have to live and prosper in. Plenty of others do. It will never be equitable, but why can’t you and I, together, make the most of it? Let’s start with that.
All this will play out on the stock market too.
You should be taking an interest in relevant stocks, like those I suggest here. What a tailwind they have at their back. In my presentation, I sum it up as ‘banks, builders, and REITS’.
But the level of opportunity goes much deeper than that. Retailers and advertisers feed off a strong housing market, as do mortgage brokers and real estate agents.
All can be monetised on the ASX. My humble suggestion is stop listening to political waffle and get real about who makes money in this economy.
It’s certainly not those naive and stupid enough to believe articles about housing ‘supply’ being THE problem of high house prices.
Get wise here! The good times most certainly don’t last forever.
All the best,
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Callum Newman,
Editor, The Daily Reckoning Australia
PS: Our publication The Daily Reckoning is a fantastic place to start your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here.
