If I didn’t work in the real estate industry, I would have little concept of who or what to believe.
By CATHERINE CASHMORE
It brings to mind the recent controversial advert depicting Julia Gillard as a puppet of the Labor machine, however instead I wonder if the true puppets depicted should be the public at the hands of the great media machine?
After all it’s the media that decides to make what is often a minor issue a major headline for the sake of attracting a greater readership. Whether we recognise the folly of the debate or not, we can’t help but be influenced. Hear a message enough times, and your subconscious starts to believe it.
It could be argued that the effect is relatively harmless, however when it comes to investment, running sensationalist headlines based on misleading statistics can have far reaching effects on our economy. A mere rumour, whether substantiated or not, can cause the stockmarket to plunge or in an atmosphere already financially unstable, a ‘run for the hills’ scenario such as witnessed in the United Kingdom during the GFC when investors did a panic run on the Northern Rock bank.
Any ‘Chinese whisper’ can create a scenario where we risk becoming writers of our own recessive doom.
The influence is possibly more pronounced than previously because younger generations now have the physical memory of a world financial crisis – something a little more influential than reading about post-war recession in a history book.
A series of reports have recently claimed that housing affordability is unsustainable. Apparently it’s ‘our turn’ to have a major house market crash (similar to that seen in the United States.) Furthermore, according to the media reports, our first homebuyers may as well give up now or look forward to a future of debt like a mill stone around their neck.
A few recent headlines quoted home buying as “a never ending dream”. Saving for a deposit took more than a “decade” in 1955, $7000 bought a house and now “it’s not even a deposit on a dream”.
However talk to anyone who purchased a property 10 or 20 years ago and they’ll tell you it’s no worse now than it was when they entered the market. In fact if you search newspaper archives prior to 2000 similar comments about mortgage stress are reported.
The ones who should know what’s happening to our economy are board members of the Reserve Bank of Australia (RBA). After all they hold the most reliable source of research we have and are not ruled by public debate.
Recently Ric Battellino, Deputy Governor of the RBA, addressed the Financial Executives International of Australia (FEIA). Commenting on a series of financial matters, he placed housing affordability at the top of the agenda and opened with this insightful comment: “The Reserve Bank monitors developments in household debt very closely as they have significant implications for the economy.”
The RBA report shows since the 1980s there has been an increase in household debt. However this is to be expected; since 1980 there has been a sharp rise in the availability of credit which prior to 1980 was under much tighter control (in fact even getting a home loan prior to 1980 was remarkably harder than it is today).
The greater part of our household debt has been taken on by middle aged households – those with secure jobs and assets. The ones with the ability to finance the repayments. Households in the higher earning bracket and at the high end of income distribution and other research cited shows over half of our owner-occupiers are ahead of payments on their home loans – not behind, as many in the media report.
Perhaps the most telling figures come from the recorded arrears rates on loans. Australia has one of the lowest arrears rates out of the major developed economies – currently about 0.7 per cent – so if we take all of the above into account it doesn’t look too bad does it?
Catherine Cashmore is a senior property adviser and buyer advocate for JPP Buyer Advocates in Melbourne. Originally from the UK, Catherine has extensive experience in all matters real estate, successfully purchasing and negotiating on over $100m worth of property each year. Visit: <http://www.jpp.com.au>