An article published a few days ago mentions the Coalition plans to provide strugglers on public housing waiting lists with rent certificates. It means they will get some cash to go and rent in the private sector. Read the article here.

Sounds good, isn’t it? The Coalition is very caring. However, this has the effect of increasing demand for rental places, which are already too expensive, and will become even more expensive as the increased demand will drive up rents. The state governments would provide the funds, the equivalent amount they spend on public housing. So instead of the state governments using the funds to build new premises for tenants on the public housing waiting list, the funds are going to be used to drive these people out into the private sector which they cannot afford – without building a single new dwelling.

The very fact that the representatives of tenants were not consulted, but the Real Estate Institute was reveals that something is wrong. Why is that? Knowing that the Real Estate Institute’s call to increase rent has been followed by landlords all over the country year after year and renters have been ripped off big time, we might wonder if the Coalition is in the business of sanctioning further ripping-off the poor John Howard, our beloved former Liberal Prime Minister was so good at.

People often think that  Coalition governments are good for business and the country, but all I can see is their heavy interference with free market and the further transfer of wealth from the poor to th rich.

Free market is like a religion. There is a lot of talk about it, but hardly anyone follows it.

Instead, we have a manipulated market, more like a sanctioned robbery.

Is it not possible that many of the MPs in parliaments might also be landlords? Just a thought…

People often think that high real estate prices are good for them. I guess not. I have a mate whose home is worth $450k. He wanted to build an extra bedroom, but he could not, because he could not afford to borrow an extra $150k to finance it. My guess is, that is that if his home was worth only $180k (about 3 times the average annual income, as it should be), he would only need an extra $30-$40k. I suppose, building products would also be a lot cheaper. Lower real estate and land prices mean cheaper rents, which in turn mean cheaper goods and services.

I know a lady who owns a small business. She pays $12k rent a month!!! Just imagine what prices she needs to set to be able to pay these enormous high rents and also make a living. And when her earnings drop, she needs to fire her employees.

As you can see,  real estate speculation has the grave effect of producing inflation, and also unemployment. The prices of everything go up because businesses must earn enough to cover their rents or mortgage payments, other expenses like wages and they also need to make a profit. In turn, at the lower end of the society, the general public is also hit by high mortgage payments and rents. Because their income is limited, these have the effect of reducing demand for goods and services, especially, when the job market also gets manipulated by governments, for example, by increase skilled migration and force the disabled to look for work, thereby increasing the job queue. Of course, this means wages cannot grow in line with inflation and people become poorer and the middle class diminishes or completely disappears.

There is a reason why governments and the Real Estate Institute want to keep real estate prices and rents high and growing. When you sell, real estate agents take a certain percentage of the price as their commission (for doing very little indeed), as well as governments take another slice (stamp duty) to register the transaction, plus you pay taxes on the capital gain, and who knows what else. Governments make a lot of money when there are lots of real estate sales, so they have a vested interest in keeping prices high, including land prices. Why would they shoot themselves in the foot? As long as rents go up, investors buy up properties and hopefully first home buyers also try to buy them, and there is a lot of activity on the market. When prices fall, there are very few buyers and hence sales, and government coffers suffer. So now you can see why falling real estate prices and rents are such a big trouble for governments that they do anything to stop them falling.

Though the issue is a lot more complex, I think we can at least say that the real estate market is very heavily manipulated by governments, for example, by controlling the release of land for development, allowing foreigners to purchase property without residency requirements, doubling the first home buyers’ grant, allowing negative gearing (they use our tax money to help investors buy up property), etc. So we don’t have a free market.

Why not restore free market? Why not ban the Real Estate Institute and alike that interfere with the market as well by persuading landlords to raise rents?

Also, those poor guys who are the victim of the so-called “wealth effect” and borrowed much against the perceived equity in their homes, will find themselves in a lot of trouble once the bubble pops.

Since EWI (Elliott Wave International) anticipates the biggest financial collapse of the last 300 years – and they have a very good track record of their forecasts coming true – the real estate bubble will deflate in Australia no matter what any governments do. Did the Americans or Poms succeed in keeping their bubbles inflated? They didn’t. The bubbles now also deflate all over Europe as well.

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