Are Aussie housing regulations the dumbest rules on Earth?
Commenter Colin Docherty sent me an article on the Reserve Bank of Australia’s counterproductive attempt to hold down house prices with tight money:
The Reserve Bank of Australia’s surprise decision to defer its widely anticipated April rate cut for at least another month might have been influenced by the increasingly pricey housing market, which it regards as posing a real “dilemma”.
According to UBS, in March the ratio of Australian dwelling prices-to-disposable household incomes equalled – and is presently surpassing – the previous record of 5.3 times set back in September 2003. And they predict it will climb further.
As a result, Aussie inflation is now sliding far below the 2.5% target, and unemployment has been climbing. This is the same policy the Fed tried in 1929. This is the same policy the Riksbank tried in 2010. Do central bankers ever learn?
Back in 2009 I ridiculed the idea of bubbles by pointing out that while all the English speaking countries had seen huge house price surges in the early 2000s, only the US and Ireland saw a crash. Australian prices were particularly robust. But despite the bubblemongers being wrong about these countries, they continued to insist it was all a bubble.
OK, I can sort of understand how people could make that mistake in 2009. But now, six years later, Australian house prices are still up at the same lofty levels. Is the term “bubble” now so elastic that it can fit a house price boom that’s occupied virtually the entire 21st century?
How about if prices are still high in 2020—will it still be a bubble? How about 2030? How about 2050? Of course the bubblemongers will refuse to answer these questions because like soothsayers they always want an “out” if their predictions fail. They always want to be able to say; “You just wait and see.”
And how about those people who said Bitcoin was a bubble at $25? I’m will to buy coins from you guys at twice the price you said was a bubble back then.
I still haven’t gotten to the dumbest policy on Earth. Australia is the size of the continental US, with a population smaller than Texas. Like Texans, Aussies should be able to afford comfortable single-family homes. But in the right column of the article linked to above, I see links for these articles:
- Australia becoming a nation of landlords
- Melbourne developer experiments with micro-apartments, sliding walls
- http://www.afr.com/real-estate/residential/sliding-walls-tiny-apartments-and-how-to-solve-the-housing-shortage-20150605-ghgfmz I can visualize microapartments in Hong Kong, but Australia? Are the zoning regulators there sadists? What would cause an otherwise sensible country to have such insane housing rules that Sydney would end up with some of the highest land prices on Earth?
Milton Friedman said:
If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand.
Well the Australian government was put in charge of land use in a country the size of the Sahara, and now they have microapartments.
I’m begging regulators there to make me look like a fool. Pop that nonexistent housing bubble by changing the fundamentals. Give landowners the freedom to build, like they have in Germany. Please, make me look like a fool.