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The MASTERPLAN (part 8): Real Estate (with podcast)

by Marquette Turner Luxury Homes

in Michael Marquette, News & Views, Special Reports, The Masterplan, Variety

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To find solutions to problems we must first analzye the fundamental causes. Marquette Turner’s MASTERPLAN series is doing just that.

Hindsight is a wonderful thing and can allow almost anyone to feel like an expert. It’s easy to point an all-knowing finger at Governments and Corporations, without also having the common sense to look at consumers. All 3 groups have played their part in creating the problems that the world is currently facing. Therefore in finding the Masterplan Solution for real estate and property we need to examine what were the main factors that each has contributed to the pie.

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Different countries have experienced and are continuing to experience vastly different levels of pain. In Australia over 1 million people are employed in the building industry (almost 10% of the total workforce) so any trend shift in real estate and property will have an enormous effect on millions of families. Millions more are mortgage holders and owe money to financial institutions and millions more rely on the rental market.

In Australia the banks and other lenders have been allowed to lend 100% plus to home buyers and have forced home prices up simply by their lending practices – inextricably fuelled by greed. Housing has become less and less affordable at all levels right across the country and the availability of credit has allowed buyers to offer ever-increasing amounts to purchase property – amounts that were unsustainable.

This has resulted in Australian cities being ranked as some of the least affordable in the world in terms of home prices when compared to wages and incomes. The Government at State and Federal level was silent as the household debt rose from $700 billion AUD to more than $3.5 trillion in less than a decade. At the Same time the Federal Government boasted paying off the national public foreign debt of $96 billion AUD – It took them 10 years to do so.

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As credit availability increased to record levels and individuals and families lived way beyond their means in terms of loans for housing, credit cards and other loans the Government remained ever silent and Banks announced record profits. The Government boasted increased GDP and increased consumer spending – but at what cost? The growth was credit fuelled and unsustainable and the simple fact that consumers were spending on credit and way beyond their means should not have been a reason to celebrate.

The consumerism of the last decade has seen Australians spend more money than ever before. Wages have increased but certainly not in-line with spending and total savings have increased through the Superannuation guarantee forced on all employers so isn’t that a good thing? Well it is but this money is locked away until our big spending workforce retires so it certainly doesn’t assist the here and now.

Ever increasing home prices are also inextricably linked to the growth of Superannuation funds which control the money. Investing in shares, property and other assets these funds have invested in property and real estate, increasing demand and therefore property prices. Their exposure to the stock market has caused enormous problems and as with everything we have discussed to date their actions were simply unsustainable – nothing can increase forever.

The more you blow up a balloon the closer you get to the point where it can move no further without bursting. Some of these funds were and are highly leveraged and as stock prices have tumbled and property prices have headed south returns have also headed into negative territory.

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It’s obvious already that the number of factors contributing to the problems facing real estate and property are multi-layered and I could easily write several books on this very topic. We still haven’t examined the problems of the First Home Owners Grant in Australia and the effect it has had and is yet to have on the economy.

I haven’t discussed Stamp Duty and its effect on property transactions and housing affordability, the lack of Governmental spending on vital infrastructure linking the population to employment and resolving much of the urban sprawl. Regional Australia still languishes behind the cities and no plan has been implemented to solve what is becoming a large crisis.

I will discuss this and much more in part 8b of Real Estate & Property as we draw ever closer to the experience of the United States and Europe.

[podcast]http://marquetteturner.com/audio/090522_Masterplan_RE.mp3[/podcast]

Marquette Turner Luxury Homes on MarquetteTurner.com

Previously in the Masterplan series:

The MASTERPLAN part 1 – My “Solution” to the Economic Mess (with podcast)

The MASTERPLAN part 2 – Credit Cards, Consumer Credit & Endless Economic Growth (with podcast)

The MASTERPLAN part 3 – Government Debt (with podcast)

The MASTERPLAN part 4 – Banking, Company Regulation & Limiting the Size of Corporations (with podcast)

The MASTERPLAN part 5 – Capitalism, Nationalization, and Executive Pay Limits (with podcast)

The MASTERPLAN part 6(a) – The Car Industry

The MASTERPLAN plan 6 (b) – Climate Change

The MASTERPLAN part 7 (a) – The Cost of War & Foreign Policy

The MASTERPLAN part 7 (b) – Foreign Aid

The MASTERPLAN part 7 (c) – Universal Health Care

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