10

April 2017

Government Meddling Will Continue To Increase Property Prices

The real estate market has to be one of the purest and simplest marketplaces on the planet. It goes up and down based on supply, demand, and emotion. Any Government interference only seems to make things worse.

Take London for example...

o House prices have more than doubled since 2009, and the median price is A$801,000

o The average house costs 10x the average wage (same as Sydney)

o The London market is driven by strong population growth and under-supply which has been increasing for decades due to strong local resistance to new developments.

o The UK has a low interest rate environment due to heavy competition between the banks.

Does all of this sound familiar?

The British Government have been trying to manipulate the market in many ways to cool it down - they increased stamp duty on homes over $1m, implemented 'rent to buy' and 'first home owner grant' schemes, which only pushed more buyers towards cheaper properties and the prices increased further.

Then they tightened the lending, reduced access to interest only loans and doubled stamp duty to multi-property owners. While this succeeded in slightly lowering demand from the local market, it increased the overseas buying frenzy, as they now had even less competition.

London's property prices continue to rise. And I think Sydney's will too, despite the Governments meddling.

I have said it before and I will say it again, the only way to slow price growth is to increase supply - keep building, and building, and building! Simple economics.