Out of Reach?

3rd of February, 2017

Its farcical really.

The Australian Treasurer travelling to the UK to find solutions to housing affordability. I think this gesture in itself shows just how earnest politicians are at actually finding a solution to this age old problem.

However, first you need to understand a little about the UK housing market:

According to data provided by the UK Land Registry Office http://landregistry.data.gov.uk/ the Average Property Prices for the United Kingdom reached the lofty highs of $190,032 in September 2007. It then fell nearly 20% to $154,452 in March 2009. Remember the riots? Remember the protests? Remember the end of the world? Yep just about everyone else had forgotten too, but that’s what we are here to do, remind you of the future!

Since these cataclysmic economic lows from which there was no way out, average property prices in the UK have risen to NEW ALL TIME HIGHS (sound familiar?) of $217,928. That’s an increase some 40% from its 2009 low! This has led to massive housing affordability issues in the UK.

In fact, affordability of homes in London has reached a record low, with house prices in the capital now 14.2 times the average salary. This places London 8^th on the list of the most Unaffordable Cities in the World.

And give me a break. The UK is literally built on a feudal system where a privileged few control the majority of assets and the subsequent profits!

So where is the most logical place to look for housing affordability solutions?

Exactly! So why did our treasurer go looking for answers in the UK?

Now to give credit where credit is due Mr Morrison has firmly recognised the unaffordable nature of the UK property market.

Further, he has used this logic to irrevocably squash the oppositions logic that the cause of this housing crisis is NOT negative gearing – because the UK has the same issues and they DON’T have negative gearing……

So Barnaby Joyce this week told prospective home buyers to “move out west” that “the houses are much cheaper in Tamworth”.

Well that’s great Barnaby if you can work from Tamworth. So let’s ask all the Nurses, Police Offices and teachers to just move out west and make the 4hr commute from Tamworth to Sydney or if they are lucky 3 hours to Newcastle.

Dr Tim Williams, Chief Executive of the independent think tank, Committee for Sydney tells us that “Housing affordability is a world crisis. It’s not just an Australian crisis, it’s a world crisis,” – Hoo Ray! What next?

Dr Williams tells us that among other things that Australia should follow Britain’s Conservative Party when they cut back on tax breaks for landlords with multiple rental properties in the 2015 budget. Only problem is it hasn’t stopped the sustained raise in UK property prices.

UK House Price Index:

In December, State and Federal Treasurers signed off on a series of recommendations put forward by the Affordable Housing Working Group. Chief among them was the creation of a government-backed vehicle to finance community housing associations through low-interest, long-term loans. The idea is based on the highly successful British model, the Housing Finance Corporation, which began in 1987 under Margaret Thatcher as a response to the depletion of public housing stock.

Only problem here is that house prices have increased in excess than 350% over this time.

If the government does this, it will be like putting dynamite under the property market. BOOM Up it will go!

This week the new Federal Assistant Minister with responsibility for housing affordability, Michael Sukkar said that the target was not to reduce house prices, as that would be “destructive” – but to ensure wages growth outstripped housing inflation.

But the structure of our economy ensures that this CANNOT HAPPEN. So, Michael you simple do not understand the structure of our economy – unfortunately this is fanciful dreaming….

I could go on and on about this topic but I think you get the point.

THE ECONOMIC REALITY IS THIS:

WHILE WE CONTINUE TO HAVE PRIVATE OWNERSHIP RIGHTS OF ASSETS THAT ARE PRICED BY THEIR FUTURE PROFITABILITY WE WILL HAVE A PROPERTY CYCLE.

WHILE BANKS CAN EXTEND CREDIT FOR THIS PURPOSE WE WILL HAVE A BOOM AND BUST CYCLE.

I CANNOT BE MORE CLEAR ABOUT THIS!

The government cannot and will not solve the affordable housing problems without killing the golden goose. It just isn’t going to happen.

I URGE YOU ALL TO POSITION YOURSELF TO TAKE ADVANTAGE OF THE MASSIVE ASSET BOOM THAT IS UPON US. IF YOU DON’T THE BOOM BUST CYCLE WILL TAKE ADVANTAGE OF YOU.

This is why Calnan Flack is here!

To help you capitalise on the incredible opportunity that is currently being presented.

This is why we help investors purchase investment properties.

This is why we have a mortgage broking business.

This is why we help investors leverage into the share market.

If you need some assistance, we’d love to help.

Please don’t let this opportunity pass you by……