Full article: http://www.smh.com.au/business/the-hidden-victims-of-affordable-housing-20130620-2okkg.html I can say from personal experience that this is completely arse-backwards: rising house prices have done more to kill real entrepreneurship than anything else in the last 20 years. Every dollar that gets pumped in the the bloated real estate market is one less that's available to be invested in start-ups. Our venture capital scene is truly woeful because nobody wants to take a punt on funding new ventures when they can put 10% down on a property and double their equity by flipping it to some other sucker a few years down the line. That creates precisely zero extra value. It is not productive. It doesn't create jobs. It doesn't foster innovation. It causes living standards to fall to the point where we now need two incomes to pay for the house that could be bought with one income a few generations ago. And spare me the tears for the younger generations. The young entrepreneurs I know are out there taking risks with their limited capital because they've realized creating a successful business is the only way they're every going to afford a house in the first place. "Get on the mortgage treadmill and build equity" stopped being a realistic way for them to fund new businesses long ago. That is flat-out horrible advice for budding entrepreneurs. Small business and entrepreneurship are not the same thing. If these idiots are worried about small business, they should have done something about it way before we got to the point where houses started earning more money each year than the people who live in them do.
Someones comment - Pretty sure it's much easier to be an entrepreneur if you're not trying to pay off one of the world's most expensive houses.
IMO and from observation, undertaking debt (such as housing mortgage in a peaking market) kills innovation. Entrepreneurship is fueled by innovation and taking risk. Once you have such debt in your life your priority changes to chasing dollar to meet the monthly repayment.
Selling houses to each other for higher and higher prices with borrowed money is not creating wealth - as if anyone here is not aware of that.
My thoughts exactly. What makes the situation truly woeful in Australia is that people are encouraged to take that debt on early in life. The natural way of things is that people become more conservative with age - they spent their youth taking risks and trying out new ideas and eventually settle down after they gain higher earning capacity though their experience. We, on the other hand, have conditioned people to take on loads of debt as early in life as they're legally allowed to and there seems to be some sort of wishful thinking that after spending years and years of being a wage slave and paying down the mortgage that the whole cycle will run in reverse and people will start splashing money around on new and untested ideas. It simply doesn't work like that. People who get into debt early start paying off the mortgage and then go and do the whole thing all over again with an investment property. The sooner real estate becomes a shitty investment, the sooner we'll see some of those investment dollars chasing other sources of income.
ill own up and say i wasnt aware of it, had never put any thought into i must admit, but it certainly does make sense and has got me thinking about what had planned to do in the next few years
I agree, but I think it's starting to become a bit more well known. I think one of the problems for a long time is that it's been hard to articulate and distill the problem into a form that can be understood by many. And when prices are going up people just don't want to know. Everyone's getting rich, why are you trying to be a spoilsport? You only have to look at this forum during the silver parabola or the bitcoin forum during the bitcoin parabola to know that when things are going up and people are making money they don't care about reality. Now the reality of RE in Australia is slowly becoming more and more obvious. "Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one." Charles Mackay Extraordinary Popular Delusions and the Madness of Crowds
The parallels between Australia and Ireland are frightening. but then monetary policy arrives in force. which meant when circumstances tipped: Source: macrobusiness.com.au there was cheap stock on the market: The difference is Australia rode out 2008 and 2009 with a small dip and now the band is playing again and unit sales to 'investors' are up. This will not end well. p.s. I couldn't find an overlay of Aus vs Ireland prices if anyone is more patient than I.
Well you can't expect much from someone who finds it bemusing as to why the markets are falling. http://www.smh.com.au/business/by/Michael-Pascoe Honestly, what did he expect would happen to markets that are addicted to cheap money when it stops? My guess is if it gets too bad they will continue with so much easing to cause high inflation some time next year.
It doesn't create wealth but it transfers it. Rising property prices fuel entrepreneurship in those who own property and restricts it in those who dont. This also works in reverse. C
So it acts to create more wealth where there is already wealth and prevent it where none exists. The classic gap between the rich and the poor, whereas a free market would work in reverse. you would have to work hard to hang on to your wealth and those without wealth would have much greater opportunity. So much for the Aussie fair go. Australian society today much more closely resembles that of the feudalist property barons than a modern open capitalist society.
The only reason it has been sustained where other nations have not been able to, is our ability to pay back the debt/mortgage. With low unemployment and fairly high income base. The fact that the mining industry was moving ahead at a rate not seen before (slowed a LOT now) it kept pays high, with the majority of cashed up bogans spending money on cars, houses, drinks, food and wine dining etc... This kept everything else moving along. However it is all starting to slow down almost to a crawl. Shops are doing it hard, I don't know many planning holidays. Utility bills have risen substantially and we have a Govt taxing harder and not delivering pre-election promises. In the Industrial supply/safety industry I know of 15 positions that have not been filled, and sales with most companies are down 15-30% if those positions were each worth $100K that is $1.5M less inot the economy, add to that the extra dollars lost from sales. You now have millions less being pumped into the local fruit and veg shop (closed) or the hobby shop (closed) vacant buildings that are only 3 years old, I notice about 20-30% vacant. And right around the corner a developer is putting up yup you guessed it more small shops for small business. Around the corner, Woolworths, Coles and Big W and busy and cannot keep up. The sooner I can get rid of my mortgage the safer I will feel.... I encourage other to really think first.
Anyone who missed out on the decade long property boom clearly could've made better investment decisions. Everyone is free to participate if they so choose. Nothing to do with property heirachy and gap beween rich and poor, it's nothing more than a missed opportunity. We can't all be in the right place at the right time. Just the same as the general population will have missed an opportunity when precious metals have their day in the sun and stackers are sitting pretty. There are plenty of other ways to make money in this world and time is better spent looking for new opportunities rather than dwelling on those that were missed. C
Small business is simply business conducted on a small scale. Entrepreneurship requires something new to be created or something old to be transformed. Plenty of small businesses stay small because they don't have an entrepreneur behind them driving the business to bigger an better things. That's not to say those small businesses aren't successful because success is defined by whether the business does what the owners require it to do. The small cafe that keeps the owner and her husband busy, sheltered, fed and clothed is successful if that's what they're looking for in life. Entrepreneurs - the ones I know or know of anyway - are much more creative, love being exposed to new ideas, actively seek out new opportunities and generally enjoy the challenge of starting something from scratch and building it into something substantial or even life-changing.
When I started out with my first mortgage I was hardly game to spend a cent. I was very uncomfortable being in so much debt and I shoveled every spare cent into it to try and get in front. Entrepreneurship, starting a business, investing......these were things that I would never have even thought about. I was only putting enough fuel in the car to get to where I was going that day. After 12 years of owning and investing in property I've now got enough capital to develop property as a sideline. As a property developer I come up with ideas, take financial risks to create new things and transform existing things into something better. This then provides me with spare capital to risk on other ideas that I think may be financially rewarding. This creates wealth and employment. Rising property prices have enabled me to be entrepreneurial. C
You realise that for everyone to make money out of rising property prices is an impossibility, right? You realise the ultimate effects of falling property prices on the banks? The economy? I'd happily give up any potential profits I'd make on PM's now if we actually stabilised the system and got away from all this bubble madness. But I guess that makes me stupid...
I agree on all points. I'm still expecting property prices to fall and have got myself out of debt for this reason. This doesn't change the fact that the decade long property boom that we experienced has enabled me to become entrepreneurial and that falling prices/ stagnant prices /low growth over the next decade will restrict the ability of recent property buyers to be entrepreneurial. This will be another negative effect on the economy. C
