“We don’t understand it, there’s a property shortage but prices are going down,” bleats the property expert in a recent interview.
Property booms are always excused with claims of “shortages”. The US, Ireland and the UK in recent years property markets all collapsed despite business and political leaders claiming there was a “property shortage”.
The shortage meme happens because the property spruikers, economists and finance writers focus on the wrong curve – they look at the supply curve and assume prices are going up because there isn’t enough property to go around.
What drives speculative booms is easy credit – demand driven by access to money drives speculation, not supply shortages.
Australia’s long term property boom which started in the late 1960s and went onto steroids in the late 1990s has been driven by access to credit. Banks were prepared to lend to property buyers, who were increasingly speculators, and government policies favoured those speculating on property over investing or building businesses.
The crisis of 2008 was the end of the easy credit era and the Australian property speculation boom is over. For the policy makers, politicians and economists the basis of the 1980s corporatist ideology is crumbling around them.
No ideologue lets go of their beliefs easily – that’s why Western governments who bought into the corporatist worldview are pumping trillions of dollars into supporting zombie banks and releasing constant stimulus packages to prop up the property market.
Like the communists of the 1970s, today’s corporatists are looking at choosing the statistics that suit their ideological views.
To support their beliefs they look at the wrong curve and then wonder why the world isn’t working as they thought it would.
Times have changed. Have you?