The House Price Enigma !

 The most frightening news for many Australians should be the prediction that house prices are expected to surge another nineteen percent by the end of this year.   Data shows that Sydney prices advanced  six percent in the past three months while Melbourne prices lifted by 4.4 %.

That might be good news if you already own a house, but buying into the market is fast becoming unrealistic for the average wage earner, despite interest rates on house mortgages being set at an all time low.  That is a contradiction by our Reserve bank trying to get Australia to spend its way out of recession and it is inevitable that these low rates can not hold indefinitely.

Traditionally, the housing market in Australia has been split between owners and renters.  The rents charged are governed by scarcity of  rental stock and the fact that we have a glut of unsold apartments is keeping rents low in contrast to house prices., but that will not last indefinitely.

Thousands of Australians are stuck overseas because the coronavirus shut down international air travel and the vaccination of the nation will see them come home in the months ahead.  We traditionally grow by regularly granting entry to new citizens from the world's refugee camps and our need for new housing will steadily increase into the future.

We are already seeing  evidence of " homeless people " sleeping rough in our cities. In other parts of the world this takes the form of what is called a " Favella " - a shanty town where people put together rudimentary shelter from whatever they can find to shield them from the wind and rain.  Usually it is on public land and presents a fire risk for the people living there.

There is every chance that this will be the fate of poorer Australians unless this price inflation of housing is not brought under control.  We would do well to remember the housing shortage after the end of the second world war.

Vast estates of cheap land saw many families live in a caravan or build a garage to live in while they constructed a home.  Many of the facilities we take for granted were missing, but it was a way for the average person to move towards home ownership which served the need at that time.

Of course, the answer best suited to bringing home prices under control would be a building boom in which the supply of homes was greater than demand - and priced accordingly.  That would be possible if the government acted to acquire land for home sites and made blocks directly available to buyers who would contract with the building industry to provide the homes they need.

Basically, we need to build our way out of this price inflation that see s home prices increase by thousands of dollars in a bubble that must eventually burst.  If we fail to bring home prices within reason, the " Favella " in Australia  will emerge.