Right of Reply – R4R in Fairfax

Our documentary was reviewed on Friday in Real Estate 4 Ransom by Age property journalist Chris Vedelago.

It was the most read Domain article nationally over the weekend. We have received hundreds of emails from people eager to see the film. We are doing our best to get it out there.

In a generally positive review, Vadelago critiques the Real Estate 4 Ransom film on some important points that as Co-Director I must expand on:

There’s no mistaking that it argues from a specific perspective — that we’re in a property bubble — or that its makers at Prosper have a very specific remedy in mind for the problem — a land tax.

But it does deliver them in a persuasive and (mostly) balanced way, which is exactly what Prosper’s caustic and schadenfreude-laden ‘‘buyers strike’’ campaign so badly failed to do before.

Our Home Buyers strike was a strategic tool used to scream out a warning that now is not the time to buy into Australia’s overheated property market. As Chris alludes to, media consumers are sold a sexy real estate story at nearly every add break.

There have been some 40,000 fewer First Home Owners to have entered the market this year compared to last. That is a sign of the effectiveness of the campaign. Many potential buyers had already made their own minds up. We simply provided a focal point, a meeting ground for ostracised renters battle-scarred from the hounding to ‘buy now, property never goes down’ at family gatherings.

At no point did we out rightly call for people to suffer, for others to gain from this (schadenfreude). Our aim was to warn people that Australia’s economy is not immune to the same economic train wreck that has desecrated the US housing market and which soon flowed onto its banking sector.

Read the excellent Bubbling Over report to look at the role of mainstream economists as Property Bubble Skeptics during Australia’s record 12 year property bubble. We are the sane ones!

Vedelago goes on:

Where the doco falls down is its use of hyperbolic analogies to make points, a tiresome and off-putting tactic that has become so much the standard arsenal in arguments delivered from the left and/or right these days.

“The fight against slavery was based on justice. Today, instead of whips and chains we have high rents and low wages,’’ the narrator tells us, flashing up a graphic of aboriginals chained together with neck collars.

Come on, really?

Land monopoly always begins with the theft of land from aboriginal people. Perhaps we have strayed so far with the current intervention/ invasion that we do need reminding of this raw fact.

Instead of the whips and chains, the outright violence that was used to dominate and destroy indigenous culture in the early days, today’s occupants of terra nullius face “high rents and low wages” to undermine their freedoms. Can we participate in society with an empty wallet?

Reports of families trying to send their kids to school at age four (a year early) are endemic of a system on the verge of failure. Two average incomes are barely enough to scrape together a weekly existence. Is 8am – 6.30pm childcare a sane path forward? Or renting a shoebox?

Effective housing policy must be a fundamental tenet to the economic democracy we are craving for.

“It’s central point that the current property system allows investors and speculators to profit from low land taxes and negative gearing, while simultaneously reaping capital gains growth through infrastructure upgrades paid for by taxpayers, is arguably spot on. It’s also hard to argue the point that so much of the boom economy is based on perceptions of scarcity rather than reality.”

Fantastic. But how are we going in the real world?

The property lobby was at it again last week with an aggressive round of requests. The old 500,000 home shortage by 2020 line was trotted out by the HIA on Thursday. Read the comments section, with more people zeroing in on the property spin.

Real Estate 4 Ransom directly attacks this strategy as a by-product of the poor housing vacancy statistics we have peddled by the REIV. Our Speculative Vacancy reports outline the shortfalls of current techniques that only looks at housing on the rental market. This is just a subset of the total housing stock. What about houses held empty in lieu of capital gains? Of particular note is the speculative imperative for housing as outlined by noted property spruiker turned realist Michael Matusik:

… a few years back I started questioning the undersupply myth. I, too, was guilty of its circulation, and maybe more so than others. But once you look into the facts and ignore the spin, you find that Australia’s new housing market isn’t that undersupplied at all. Yes, we don’t have enough affordable new homes (sub-$400,000 for two and three-bedroom stock), but we have an ample supply of new dwellings pitched at speculators.

Also, as I have outlined numerous times before, the housing industry is being forced to deliver the wrong stock; and that which is supplied costs way too much. Ask yourself why new housing sales, and only a decade or so ago, accounted for 30% of the total residential transactions in this country, but today they account for just 10%. Hmmmm. And if we are so undersupplied, why do developers need to sell their new dwellings overseas and increasingly via aggressive investment selling campaigns and expos?

Debtbombs are sitting in the wings with speculative vacancies waiting alongside stale stock. They seem ready to hit the market this Spring Real Estate Reality Check season, but the lobby has another idea. The REIV last week started pushing a new narrative that ‘this spring will be different with only 500 auctions per weekend.’

This is coded language for ‘don’t sell now, there are horrible prices so let’s all hold the market to RANSOM’. This would be a significant turnaround from the 1000 auctions per weekend we have seen a couple of times this year in late Autumn (an extraordinary feat reflecting how many negative gearers are attempting to exit right now).

Currently, in just 12 of Melbourne’s 261 municipalities, there are some 19,000 properties that have been on the market for more than 2 months. An estimated 35,000 auctions are held yearly here.

Everyone is trying to bailout of the market and the property lobby are willing to throw unsuspecting buyers onto the poverty treadmill so that property insiders can slide out with at least some profit. The calls for a renewed First Home Sellers Grant at the start of last week will only grow louder and must be howled down as nothing more than a sellers subsidy.

If not that then calls for cutting GST on building materials, which will do little to curtail land prices, as discussed on last week’s Renegade Economists radio show.

The lobby are using their extensive resources to deflect from the fact that land prices have been pushed too high by a raft of policy concessions for property speculators. With every downturn the lobby uses this as a battering ram to further remove Land Taxes and other impediments to speculative profiteering.

Thus the boom-bust-bailout mentality that pervades current policy making.

Watch the Real Estate 4 Ransom trailer and see details for screenings here. Facebook too. We have sent the film to ABC TV. Their turnaround time is 6- 8 weeks before we get a response. International readers – we are taking it to you as soon as possible.

Let’s see what shape the land game is in at that time.

4 Comments

  1. Matthew M05-09-2011

    Can’t wait to see the film. Hope you guys can get it on FTA telly as well, that would be perfect. Anything that keeps the debate going is well worth the effort.

    One interesting dimension to the property debate that I’m seeing lately, a lesson in the human minds capacity for denial. Like many, my wife and I have endured from friends and family, many years of extreme pressure to “get into the market”. Yet in the last 6 months whenever I politely raise the topic of the property market, the subject is always quickly changed. The turnaround is quite bizarre.

    From what I understand the denial stage is a fundamental of any boom-bust cycle, but to see and experience it first hand is fascinating.

  2. Karl Fitzgerald
    Karl Fitzgerald06-09-2011

    Hilarious Matthew. Well done for standing your ground.

    Fingers crossed for TV, Perth date coming soon.

  3. DrBob12724-09-2011

    “The REIV last week started pushing a new narrative that ‘this spring will be different with only 500 auctions per weekend.”

    So the REIV is trying to say the industry by limiting the turnover (500/wk Vs 1000/wk), but how can they ensure agents comply with imposed restriction of turnover (and associated commision)?

  4. Karl Fitzgerald25-09-2011

    Dr Bob….it’s a hint they are giving, a subtle hint via various narratives that now is not a good time to sell – Dont Sell Now, the counter to our Don’t Buy Now campaign.

    Another hint was given via Ray White this week.

    I imagine the lobby believe that if the market can limp through this spring only going sideways, then the locked out generations will again face the pressure that ‘property never goes down’ from family, friends and various media blitzkriegs..and re-enter the market to bail out the lucky few.

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