Red balloons
Creative Commons License photo credit: Jakob E

28 September 2011

MELBOURNE:- 40,000 young families turned away from a lifetime of heavy debt and bitter disappointment in the last year refusing to accept Australia’s grossly inflated house prices, according to a survey overnight by website RateCity.

“Here is the evidence FHB’s are on strike, as we announced in March,” Prosper Australia Campaign Manager David Collyer said today.

Housing is heavily dependent on FHB’s bidding up prices. Their large borrowings bring new money into the market, increasing the equity of existing owners and freeing them to trade up. This percolates throughout the market. Further, FHB’s are the most innocent buyers, easily led into mis-judging and over-paying for homes.

“The Home Buyers Strike was not an attempt to brew up a social movement and install Prosper at its head – far from it. We wanted to illustrate the massive economic forces at play when Prosper called the market top and the new downward trend.

According to researcher Philip Soos, only 18 people predicted the bursting of The Great Australian Land Bubble, four of whom are Prosper affiliates.

“40,000 households privately decided to delay buying and defer starting families. Their absence is sorely felt by the housing industry left holding tens of thousands of unsold new homes on the outskirts of our cities.

“These young adults have turned their attentions and energy elsewhere: to higher study, travel, the sharemarket or merely to saving a giant deposit. It will take substantial price falls to coax them back.

“My heart aches for the 90,000 FHB’s who did buy,” Collyer said.

“Their limited equity leaves them totally exposed to falling house prices. And the loss of an income or lower earnings could easily turn them into sub-prime borrowers with mortgage repayments above 30 per cent of household earnings.

“We are now in an era of falling house prices, widespread debt reduction and domestic economic underperformance as the high Aussie dollar makes trading conditions very difficult for non-mining exporters and import-competing businesses.”

Prosper affirms its prediction land prices will fall by 50 per cent over six years in real (inflation adjusted) terms.

“Halving merely returns land prices to the long-term trend line. If anything, prices may well over-shoot that on the downside. This is the end of the Ponzi scheme, as Hyman Minsky would describe it,” Collyer said. ENDS

Media comment: David Collyer

About Prosper: Prosper Australia is a tax reform lobby group and think tank that is now 120 years old. It seeks to move the base of government revenues from taxing individuals and enterprise to capturing the economic rents of the natural endowment, notably through Land Value Tax and Mining Tax.