Australia’s Real Estate Culture – Part 1

February 14, 2020
by Rob Zdravevski

This is a response I wrote to a LinkedIn article and it’s also my broader thoughts about Australia’s real estate culture.
Part 1 – The Cycle and the Trap
“The promotion of the Australian homeownership dream has become such a self fulfilling prophecy and has propagated so deeply that it can’t be unwound.
The cycle is to get into debt to buy into an ever rising housing market within large cities (that’s where the jobs are) because I can’t get any security of tenure in a rental property of more than a year, the government enjoys ~5% stamp duty on real estate purchases, it pads you with capital gains free incentive on your primary residence, while citizens beg for relief with either a continuation of the rising price trend (to improve their equity position) or “hoping” for lower interest rates.
If borrowers are willing more interest rate stimulus, even at these rates…shouldn’t they ask themselves if they have borrowed too much?
Government can’t be frustrated about lack of consumer spending when it has been part of a grander harmonious plan to have made residential real estate such a cornerstone of many people’s lives.
The greater your debt, the longer you stay in the workforce.
This maintains the government’s tax base just in case they need to cut corporate tax.
This is not a conspiracy thought. Just ponder how it’s not even tolerable for house prices to even entertain a reversion to its mean, which is a natural part of asset prices through their cycle.”