Three factors contributed to the current softening of house prices: more stringent lending standards especially to real estate investors, higher commissions for foreign investors and restrictions on money that can be stolen from China.
Many commentators consider the Australian economy as fit. The regulatory changes have removed the intensity from the real estate market, but not much has changed. Australians can still get loans for property purchases, foreign investors still have access, the amount of liquid capital in the world looking for safe shelters is still terrifying.
Regulatory changes have taken away the real estate market
The suburbs that register the biggest declines are those that have been more inflated and that need corrections. With the less inflated areas already combed for the next big "investment opportunities", the most likely scenario is that the real estate market is recovering too well.
Long-term correction is still needed. If Australian governments must be serious about the accessibility of housing, the incentives to treat housing as a speculative investment product must be removed. The way to do this is, of course, by reducing the negative gearing, by limiting the number of properties to which it can be applied and by eliminating the completely unjustified discount on taxes on capital gains.
Regardless of the real numbers we are talking about, how many families spend according to the current value of their home? This is the imagination of an economist. The available income of new homeowners and investors is determined much more than what they paid for the property than from what they could get if they sell at the moment. In the worst case, they may be less inclined to overturn while the capital gain prospects seem uncertain. This translates into a reduction in the abandonment rate on the market and is a good thing.
In the unlikely event that "nervous borrowers" began to discharge property, low-income families might have some hope of buying a place to live at lower prices. This is good too. An increase in convenience will stabilize an out-of-control investment market.
It will also provide an environment where further improvements to Australia rental protection laws become more attractive, as investors appreciate long-term tenants more than when the prospect of easy sale with free possession is behind ;angle.
Strong rental protection also plays a role in stabilizing real estate markets. This self-reinforcing relationship has for decades supported fair access to housing in European countries, leaving behind neither the highs nor the lows of more volatile neoliberal states.
Every media has a choice about how it presents the news, and about the local and global context for that content. Stay tuned for many more dire predictions of the Government of the Coalition and its fellow ideologues among the major banking analysts, international credit rating agencies and the International Monetary Fund
. They will not waste time presenting any reduction in property values and slowing economic growth as bad for any company. The way the media deal with these statements will shape the context of this debate and have a real effect on the policies that will result
Dr. Kate Shaw is an urban geographer of the University of Melbourne.