Weeoo, weeoo, weeoo.
It’s becoming increasingly difficult to interpret the wild gyrations of The Pascometer, MB’s favoured contrarian signal generator. In the past week or so we’ve seen the siren scream this way then that in desperately souring tones as if its battery is exhausted. A week ago Sydney investors were unstoppable:
The bad news about the regulators’ new attempts to hose down housing investment enthusiasm is that they are, at best, second rate. The Law of Unintended Consequences is always at work, ensuring damage elsewhere in the economy, while the most effective tools for the present circumstances remain locked in Treasury’s cupboard.
Does it do anything to increase housing supply? No. Does it reduce demand? A little bit but it’s marginal and not where you’d like it to. And, like the 2015 macro-prudential squeeze, the impact tends to wear off. Thanks to negative gearing the taxpayer will pick up half the tab for investors in the top tax bracket anyway.
Then the strobe flashed again, only the opposite way, as investors disappeared and it became all about jobs:
Jobs, more than investors, drive the Sydney housing boom.
Jobs draw people to want to live in Sydney, jobs enable people to nearly afford to live here by renting the properties investors own, jobs bring people to work in Sydney even though they don’t live her
…And it all means the pressures on Sydney housing aren’t going away any decade soon.
Over the weekend it was back to unstoppable investors:
No, Australia isn’t suffering a housing bubble. Sydney and to a lesser extent Melbourne might be, but the whole nation is starting to pay the price for it.
…And if the regulators are successful with jawbone and bank-bashing in cooling the market, they also could be denying the provinces the benefits of the real estate arbitrage that sends would-be owners from the big smoke to the provinces.
…In a better political world, where policy was based on economics instead of partisan positions, our housing excesses would be dealt with rationally. Yes, restricting negative gearing to near properties is the most obvious thing to do.
If I didn’t know any better I’d conclude that a desperate rear guard action is underway at Domainfax to bolster its much-adored yet heavily strained gleaming and bulbous progeny.
Ross Gittins boosts that theory with some further rubbish:
When you consider how many people worry about the federal government’s debt, it’s surprising how rarely we hear about the nation’s much bigger foreign debt. When it reached $1 trillion more than a year ago, no one noticed.
That’s equivalent to 60 per cent of the nation’s annual income (gross domestic product), whereas the federal net public debt is headed for less than a third of that – about $320 billion – by June.
Similarly, when you consider how much people worry about the future of the Chinese economy, American interest rates and all the rest, it’s surprising how little interest we take in our “balance of payments” – a quarterly summary of all our economic transactions with the rest of the world.
Note, I’m not saying we should be worried about our foreign debt. We already do more worrying about the federal government’s debt than we need to.
When do we worry about it, Rossco? When international investors ask for it back?
In the past two weeks all of Australia has finally acknowledged the elephant in the room. Out of excuses, Domainfax flunkies have no other option than pointing at the elephant and yelling over and over that it’s really just a gerbil.
It’s pathetic.
Weeo, weeoo, weeoo.
