What is up with housing? (Rant)

Housing prices have been going through the roof. The reserve bank recently increased interest rates. Now the housing industry is advising that another rate increase is a bad idea. That’s just a quick list of recent events, but what does it all mean?

What’s behind it all?

Established people are buying investment properties using money borrowed against their current property. Demand is high and they are competing with people who want to buy somewhere to live. The government provides a first home buyers grant to help prospective owners compete in the market. Arguably a positive gesture, but it fails to offset rapid price inflation. Many people can’t get into the housing market and end up renting.

What does it mean in the long run?

Maybe interest rates increase and people default on their loans and have to sacrifice their homes. A bunch of people lose out and spend their money paying off overseas banks, instead of spending their money here. That can’t be good for the economy. Would this really happen? Maybe the government will bail people out if it’s a widespread (vote affecting) problem.

Maybe people actually manage their loans by offsetting them against their real estate assets and a lot of people get rich. Of course this happens for the people buying investment properties, and not for the people buying their first home (who get stung by interest rate increases). One generation owns the majority of the land and subsequent generations are stuck in the rental market. Unless they get land via inheritance. Yay. Nouveau riche and a greater gap between rich and poor.

If the government has to choose between (high percentage of the voting population) baby boomers and (lower percentage of the voting population) later generations… well, someone is going to get screwed. Maybe a better preemptive move than the first home buyers grant would have been to increase taxes on speculative investment properties… but that wouldn’t have been popular with their demographic.

Is it wrong?

Is it ethical for people to own property that they don’t live in at the exclusion of others that need it? Especially when they can exploit the need (for housing) and (collectively) set a rental fee that is the maximum the underprivileged can tolerate?