Wednesday, March 29, 2006

Neil Jenman News Articles

You can see why governments like to leave real estate transactions, the largest transaction many people will ever conduct, in the hands of the private sector, usually without scrutiny. Governments like to trust real estate agents and property developers to act as their policy agents in the area of housing.



Australian Securities and Investments Commission chief, Jeff Lucy, said of the financial planners who steered their clients into Westpoint, “They should have known better.”

Yes, indeed, it was all so predictable. Now, it’s all so tragic.

ASIC useless after the fact, as usual.

And finally, a suggestion for Westpoint investors.

Do not feel stupid or embarrassed. [Even the New South Wales branch of the ALP reportedly invested $100,000.]

What a surprise, that the right-winger property ghouls in NSW Labor fell for a get-rich-quick property scam...

Saturday, March 11, 2006

DEMOGRAPHIA: 2nd Annual Demographia International Housing Affordability Survey (2006)

DEMOGRAPHIA: 2nd Annual Demographia International Housing Affordability Survey (2006)

Many analysts and much of the business press have followed the unprecedented housing cost price escalation with seeming glee, while ignoring the reality that household incomes have not been inflating at a corresponding rate. This superficial approach is both naïve and irresponsible. Any number of products might be imagined that might be converted into objects of financial speculation, at the same time as rendering a nation less prosperous. For example, massive and unprecedented price escalation, from speculation in food products or medical markets might serve the short-term interest of investors, while imposing broad detrimental effects. There is a public interest in maintaining house prices within the economic means of most households.

Oddly, the most affordable markets have sometimes been characterized as 'poor performers'. There are many losers when home prices become decoupled from the underpinning income realities. Middle income and lower income households find it impossible to afford the higher prices and may be relegated to renting for many additional years, if not a lifetime. The equity that they would have built up instead goes to the pockets of landlords. Others fortunate enough to afford the higher prices must settle for more modest houses, which are likely of lower quality. Many of households will be able to afford their own houses only through financial assistance from their parents, while those with less affluent parents will remain in rental units. Already there is evidence that the average age of first homebuyers is rising.

By reducing the share of households that can afford to buy homes, high Median Multiples inevitably lead to greater income disparity. Thus, to think of rising house prices as a good thing while ignoring the incomes that support them is to miss the point completely. Australian Reserve Bank Governor Ian MacFarlane emphasized this point in parliamentary testimony with reference to the unaffordable housing prices in Sydney.12 The reality, of course, is that the more affordable markets are the better performers by virtue of the higher standard of living that they facilitate for more households. However, the reality is that declining housing affordability has reached crisis proportions in many markets.

Saturday, March 04, 2006

Poor little rich city

Poor little rich city - National -

Sydneysiders' living standards have fallen over the past year, eaten away by higher petrol prices and falling home affordability.

The Sydney prosperity index, the only comprehensive measure of material well-being in Australia's biggest city, also exposes a huge and widening gap between those who own assets, such as property and shares, and those who don't.

The economic quality of life of these 'have-nots' has been sliding for the past two years and they have fallen twice as far from their prosperity peak as the asset-rich.

Sydney is still Australia's most expensive property market and it is still hard for new buyers to afford a home. In last year's December quarter, a worker on the average wage would have needed 492 weeks (9½ years) to earn enough to buy the typical Sydney house, compared with 398 weeks (a bit more than seven years years) in 2000. In March 1987, that worker would have needed 243 weeks (a little more than 4½ years) to earn enough money.

The capacity to pay the typical monthly mortgage in Sydney has deteriorated in the past two years to levels last seen in the early 1990s.

Interesting how governments allow fallout from the stockmarket crash of 1987 to adversely affect so many in the next generation when it comes to buying their own home.

Wednesday, March 01, 2006

Costello hails revival while economy struggles

Costello hails revival while economy struggles - National -

Australia has undergone an economic revival under his watch, Treasurer Peter Costello says, despite the latest figures showing the economy is struggling and homeowners are continuing to shun malls and shops.

And he said this was largely because of the way he and the federal government had overhauled the nation over the past decade.

But Mr Costello's revival is hitting problems, with the latest national accounts showing the economy grew by a weaker than expected 0.5 per cent in the December quarter.

The growth rate makes Australia one of the slowest growing developed nations in the globe, with annual growth now at 2.7 per cent.

There were downturns in consumer spending with the public, stung by the downturn in the property market and higher petrol prices, continuing to shun the nation's retail outlets.

Costello has done nothing for the economy in the last 10 years, he has basically sat back and watched the private sector operate by itself, taking the credit whenever poorly reported GDP 'growth' figures look cheery. Treasurers do very little to 'manage' any economy, their principal job is to collect taxes for the government and look concerned. It's a myth that they 'manage the economy', and if you listen to and read their speeches very closely, you will realise they never actually make that claim, but they like naive journalists to present that notion to the public for them.

Cheery 'GDP growth' figures were always a sign of empty internal domestic inflation in the housing market, they had nothing to do with increased productivity or real wealth creation for the country as a whole, just more borrowings from the banks. Now the boom has fizzled, the country has to stand on its industries for that elusive glow of 'economic growth'. It's very lucky newly emerging industrial giants like China have pushed commodity prices higher for Australia, or growth would be negative by now. So now the spruikers are advising the horde of slavering property investors to 'invest in Darwin and Perth.' The exploitation and dollar chasing never ends.

Hyperinflated prices for property have impoverished the next generation, who can now no longer afford to shop retail. And remember the Federal Government (Peter Costello) retains negative gearing on investment properties and halved the rate of capital gains tax, making his own contribution to the housing bubble, and doing nothing to prevent it. Also, the First Home Owners Grant (FHOG) also probably further inflated prices in an uncapped free market without government intervention or regulation.

The next thing that will happen while property prices remain so high is that there will be increasing upwards pressure on wages - industrial action from wage workers, and inflationary retail prices from small business.

Finally, the current young generation who were locked out of the housing market and could never afford to invest in the equity of their own home will become pensioners reliant on the Federal Government to pay their rent and otherwise subsidise their old age after they have retired, whereas the current generation of retirees who could afford to buy a house have much lower ongoing living costs. Oh, and there will be the 5% of rich investors who purchased all the housing out from under everyone else as 'investment properties'.