BONUS | Why Aussie Housing is Screwed - Cameron Murray Author of The Great Housing Hijack

Guys, I had the craziest dream last night. - No, no, no, no one cares about your dream. - Hang on, I might have been in the dream. - You weren't. - But Josh was. - Oh, really? - No, okay. - I dreamt that I joined HBF Health Insurance and it was good. They are one of the largest, not- - For profit health funds in Australia who focus on giving back to members. Yeah, I know. - How did you know that? - Because I'm with HBF. - So you know how HBF always put members first. - Yeah, duh! - And you're one of the one million members across Australia. - Yes, obviously. - So you could kind of say like HBF for your health dream team. - Precisely. - I had a dream too. - No, boring. (upbeat music) ♪ We kick it forward, we kick it forward ♪ ♪ When it comes forward ♪ - Welcome to a bonus episode for kick it forward. Guys, how are you going? - Good, good, good. - Good, good, good, good, good, good, good, good, good, good, good, good, good, good. - Damn it. - Yeah. - Yeah, after. - All right, Josh, what we got today? - Well, I don't know if you noticed, but like, there's been a lot of talk about cost of living and housing and stuff like that, Harry. - Yeah, look, it's a, quite often a scary sad topic. - Yeah. - 'Cause what the hell am I, I'm not a homeowner. - I hope to be one day. - You're not a homeowner. - I'm not a homeowner. - You've got a dull head. - A Bart Simpson. Yeah, but it is frustrating, but I've never really considered, I'm obviously older than you and old as fuck, but I haven't owned a home and for a lot of other, you know, a lot of reasons. One is probably complacency too. - Yeah, mine's about financial dependant. - Yeah, financial help. - Flexibility and stuff. Yeah, I've never liked debt. - Yeah, and like, I don't know what anything like that and probably stupidity bit as well. - But did you know that there are 11.49 million homes in Australia? - Did you just look up a fact? - Yeah. (laughing) Josh said, "I'm doing something about houses." So I looked up some fun facts. - Okay, we have the author of the guy that wrote the book on why Australian housing is fucked. So this name's Cameron Monty, Marie, not Monty. Cameron Monty, he's an economist. He teaches at the University of Queensland. He's wrote, written a couple books. One called REIT and one of the great houses, housing hijack. Now I'm gonna say right at the top, this isn't gonna be for everyone. A lot of you will be like boring sound effect, like a Nigel Frudge. But with all the information and stuff out there, I thought it'd be funny to actually have someone on or interesting rather, if you're into it, to talk about why is it weird now? Why do we have like $11 trillion of our money in Australia tied to housing? Why do people yell certain things and maybe you want to go to a dinner party and you've got your car and dry in hand and backwards cap and so on, says something dumb and you go. - All your keepers, all your Guinness? - It's so true. - Yeah. - We cannot lie. - Oh, sorry, we don't want to be racist. - It's not currently sponsored. - Yeah, not at all. I hope you do anything. But it was an interesting book. I've given it a lot. - Sorry, sorry, sorry, I'm actually joking because this is something that I should be across. - Should. - But I'm starting to consider. - Yes. - Home ownership still would be far off it, but should consider it. - The opening paragraph of the book talks about, you know, why is Australia different to the kind of ever in the world and then there are similarities to other places in the world. But why are we so screwed despite all this space and potentially like a really wealthy country? And he talks about in Sydney on the HMS, HMS Beagle in January 1936, it sailed into the harbour and Charles Darwin was aboard. Now he was coming to Australia to check out the bite of her steam maybe a bit of cricket. - Oh my, yeah, if they can bite the Aussie. - Yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah, yeah. - There's HMS spread Beagle. (clapping) - There's spread Beagle, there's spread Baagle. - Oh my God, maybe that's related to that. - Yeah. - Possibly. - But Charles Darwin noted at the time that the number of large houses just finished or being constructed on the harbour was really surprising. Nevertheless, everyone at the time in 1836 was already complaining about the high rents and difficulty to procure a house in Sydney. So, they're really, that hooked me straight from the start. Now, I interviewed him back in December last year. And a bit of, oh my God, you got a sec? Oh, we haven't had room to play yet. Well, first we didn't have the pod for three months, that was the main reason. I was in November of December. And then we banged it, and I was going to be a bonus set for a break. And I never got around to doing it. But the main reason was I was really embarrassed because I deleted the video box. And then I was trying to make space and delete the video. So I have the audio. - Oh, we're going back to the video. - Back to dinosaur age audio pod. - Yeah, but because this is a video medium. - Yeah. - I've had a bit of a work around. I'm just gonna play stuff for long periods of time in the office that are on the walls, and then cross fade between, and then maybe have like subway surfers. And then we were also thinking, I was looking at a legally downloading the Odyssey. - Oh, yeah, yeah. - Because someone's recorder on a handicap in the cinema. Maybe we just play that over. - I thought it would be a pretty funny idea, but would be the ultimate copyright strike. - Yeah. - Well, maybe we're just like dancing halfway through, but like, so that'll be the video for it. But during the interview, there is no actual video. - And remember, you can opt out of Spotify video, just for the audio experience. - Okay, yeah, as well. - No, it's important, it's important. A bit of a palette cleanser before we were at tomorrow. I just wanted to show you one of a recent yap at that. A lot of people have been sending us. - Okay. - So this is a guy, and it's always a bit of a flag when you look at the ratio of likes and shares and stuff, and unfortunately, we've never had it too bad, but this guy has about 400 likes and about 9,000 shares, maybe more at the time of this release. And he's ejected Yapa, he sells programs for like bodybuilding. - If. - He's sitting in front of the camera in his car. A lot of people have sent us. I just want to hear what your thoughts are. Are you hearing it for the first time? - Let's go. - As I was walking out of the gym today, I had to go past the T8 beat, which is just this place that you go on to play sports bets and gamble. So as I pass it, there are these two guys, both with these massive guards and both holding a can of VR. And this is at like 12 p.m., like in broad daylight, by the way. And because I'm walking out of the gym, with this massive palm, look at my shoulders out. It's kind of like a complete polar opposite of two guys. And you know, I don't say that to be cocky, but it's just the truth. So as I was walking past, I just knew these guys were gonna say something or have some level of judgment towards me. So as I walked past, the guy with the bigger guard says to me, "Oh mate, no beer for you today." And I kind of just ignored him. I didn't even make eye contact to me. - Toxic. - But then he follows up with the, mate, I was just joking, relax. And this whole time, I literally did not even react or even make eye contact with these people. And it just goes to show that people have such deep insecurities that they need to project onto you. Even when you don't even know them. These were complete strangers casting their own insecurities onto me because I was trying to better myself by going to the gym, compared to sitting around the TAB, betting and gambling on sport. - Okay. Well, I haven't we done a parody of this already from the reverse that we're in the pub drinking. - And then going, and then I, no, or do we. - Someone walks past, that's fit. - Yeah. And then I go, "Oh, someone's gonna fucking say something." He's like, "Hey Batcha, how about you put them down "s midday, go to the gym?" - Yeah, yeah, yeah. "Oh, I haven't been to the gym yet today, boys." - I just love the idea of he thinks like, okay, they've projected their insecurities onto me. If they're the guy that is scribing, he's describing in the video, that guy's not having many thoughts. - No, they're not insecure. - Well, not to say that they're dumb, but they're not caring. - That guy sits in the space he's in and just continues moving through space and time. - And enjoys it. - And then he just reacts to anything around him. It's not like he's planning that, and he goes home, he goes, "I really got that guy today." He just goes, "Oh, there's something." Hey, Bill. - Yeah, 'cause I bet that guy over that was was kind of asking for it. - But no, I don't know about that. - Hoping for a comment, maybe. - Well, to make this video. - Yeah, yeah, that's true, but I met more than that other guy. He just sounds like the old dude at the T.O.B. - Having the best time. - And the best time ever. Maybe he's got two divorces and he's just like, I'm gonna chip, my dad chirps to, he doesn't go to the T.O.B. but he chaps to everyone at the shops constantly. It's just what old guys kind of do. Also, it's a joke. - Pretty good joke. - Yeah, super girl. - Bill. - Bill. - Hey, you don't have any beers today. - Yeah, well, you'd be offended by that. - If I had a beer. - No, someone else would have wasn't having a beer today. - Well, you'd go and-- - Yes, I am. - Mate, we should have to do that tomorrow and be not at reverse accuracy. And just like beat dead pan the whole time into it. Guys, so this is Cameron Murray, economists, talking about the great housing hijack is his book. We'll put his link to the book in the show notes if you aren't interested, otherwise enjoyed the video and the interview. - Did you know on Cooper Petty, they built houses underground? (audience laughing) Is that copyrighted, audience? - Yeah, I can't roll the time. - Have you felt disenchanted by the housing market or maybe the chat around it? Cameron Murray is the author of the great housing hijack, The Miss and Hoaxes, keeping Rensen housing prices high in Australia, Cameron. One of your first lines. is about when someone approaches you about the housing market and says supply and demand get over it. I'm paraphrasing you sort of said basically walk away because the conversation is not worth having. Can you explain to the listener why that's the case and why you thought this book would need it to be written? So when someone just says, "Yeah, it's supply and demand," they're just saying the buyers and sellers cause the market price, right? And that's obvious and it's not insightful and it's not helping us. You know, you may as well say, "Oh, the lawyer who puts the price on the contract sets the market price star." Like, "Yeah, okay, they do, but you're not telling us about the economic forces here." All right, supply and demand is kind of a tutology. It's kind of just a different set of words to say market prices, right? It's not saying why things happen. It's not saying anything causal. It's not about quantities of housing,ities of people, which is a big mistake, people go, "Oh, it's the wrong number of houses, wrong number of people don't get it, supply and demand." I'm like, "Yeah, no, I don't because supply and demand doesn't mean that." It means the willingness of active buyers to pay and the willingness of active sellers to sell. But why? Why are they willing to sell at that price? You know, the price was low. Why would I sell at that price? Right? And if the price was too high, why would I buy at that price? That's what we need to understand about housing. Like, okay, why would politicians bring in something that significantly personally reduces, you know, their earning potential over 50 years? And, you know, there are some great politicians out there that actually try, but it was kind of understanding that why would anyone bring in policy that would potentially make 67% of the population against them? And then top of that also make them significantly poorer. So, what you're talking about is that 67% of households are homeowners and they like the price going up, right? I think for politicians it's something like 99.0% of homeowners and the majority on average have three points, something dwelling, right? So, but that's sort of, you know, not misrepresentative too much, right? So, yes, almost all politicians are homeowners, but most households are as well. And out of that 30% left, most of them will be fine and become homeowners and like rising prices. In fact, what we see in the data is when prices are rising, people bring their first home buying forward so they don't have to pay a higher price in the future. So, rising prices sort of attract small first home buying, would you believe? So, yeah, you're totally right. And, of course, Australia's housing stock is worth $11 trillion, not billion, trillion, which is about a million dollars per household on average. And now, out there promising, hey guys, you know, that $11 trillion of assets you have, I'm going to promise to make it worth $8 trillion, and why $3 trillion from your balance sheets, I mean, it doesn't make sense. And that's why, you know, my book's called The Great Housing Hijack because the debate is completely hijacked by vested interests who want to avoid these core political conflicts at the heart of the housing market, which is why we sort of never really do much and we're just subject to the normal market cycles again and again and have the same debates again and again. So, that's the context. You spoke about these, like, there's a lot of distraction and the pretty much every single five years or so ever and quicker, there would be some sort of report or some sort of a thousand studies, but there still is an issue. How does it go for 200 years? Yeah, so Charles Darwin, he arrived in Sydney in 1836, right? The population of New South Wales, this is pre-Federation, right? So, it was just New South Wales. 19,000 people. So, he couldn't fill a stadium with the whole population and he wrote on his first day's diary entry. He didn't observe the koalas and the kangaroos and whatever he said, "Oh, the number of houses recently built is truly surprising. Nevertheless, everyone complains of the high rents and difficulty in procuring a house." So, he didn't notice the animals. He noticed the people in Sydney and you know what they did? They complained about housing at the same time as building lavish mansions, of course, which is sort of this, you know, the coexistence of progress and poverty as Henry George would say. So, 1879, the best-selling book was called Progress and Poverty and by Henry George, the American politician, and he was, again, dealing with this enigma, he called it, of having a rapid periods of economic and urban growth in the 1800s that coincided with all these people being left behind and homeless. It's like, what's the deal with this coexistence of progress, but also rising poverty? And so, we're seeing that again, right? It's supposed to cover boom. Lots of economic disruption and change. Oh, and guess what? More homelessness and people falling off the bottom. So, this is an age old, pretty normal thing. I mean, the 1870s, the Marxists were all on about the housing question, you know, why is it that in the industrial cities of Europe, all these workers seem to be getting left behind when it comes to housing? Yeah, it's an age old thing. And as you say, there's been a report every year, a New South Wales had their first inquiry into rising rents in Sydney in 1911, right? And they've had one every five years, as you say, since that time. Now, what's unusual is not that when there's a period of economic growth, some people get left behind in the housing market. That's the normal part. What's unusual is the post-war effort to change that dynamic through large-scale public housing, Commonwealth State housing agreements that actually boosted home ownership in Australia. So, prior to the Second World War, home ownership in Australian cities was higher in the countryside, right? Where land was cheap and many people were farmers living on the land. But in the cities, it was only a touch above 40%. Right? So, most people were renters in the cities in the interwar period. And after the Second World War, we changed that. We got up from 40.2 or 42 or 43% to 71% in 20 years. We did that by subsidising people into their houses. That was a nation-building policy of home ownership. By partisans and men'sies was bragging about how liberal it was to make little capitalists and subsidise people into their own home and the Labour Party was also bragging about how much they would sort of build subsidised homes and give them to people at a discount. And that's what changed sort of Australia, right? The great Australian dream was created by essentially socialist public policy, right? Because before that, the only dream was go west, find some countryside and try and farm it. Which was very difficult, right? Before the major public works of dams and whatnot and irrigation. So, I think we've got to always zoom out and go, "What should we expect markets to do in housing?" And we can't go, "Oh, look, the market's in the 60s. All the boomers, parents got all these houses." That wasn't the market of the 60s. That was essential control. And we can certainly do that if you want. But the dynamic is very different now because we only had 40% homeowners there and sort of the post-war halo of cooperation. Now we have 70% and out of that 30% a lot of people expecting to get in the market. I think the political dynamic is different. If we said we're going to start building houses and subsidising people into your street that you paid a million dollars to live on, but I'm going to build a house and let this other schmo live there for half a million. You'd be like, "What? Hey, hang on a minute. I had to pay a million dollars to live here. Now you're just subsidising someone else to have my lifestyle." So there's a real genuine political tension to return to that sort of approach. And so we just talk around instead, "Oh, no, let's upzone here. Let's tweak a tax rule here." There were none of those planning rules and tax rules in 1836 when we had the same, if not worse, housing problems for the bottom half of the distribution. You spoke about Singapore having a no-homelessness in the book. We moved to Melbourne in March-ish. And it's probably something more apparent here than Perth and that might be just a density thing of it being more visible. Are you saying that's the major driver for why something like that can't happen again? It's basically just people worried about the value of their homes and also placing people in their street. That's one of them. And actually, in the Great Depression, after the Second World War in the United States, some of the Great Depression housing policies exactly as you describe exactly what I would say is similar to Singapore. The federal government just funding lots of housing and allocating them to the poor. There was a huge pushback against that from landlords who said, "Oh, not only is there the cultural thing, I don't like poor people with bad behavior in my street, there's literally that also you're stealing my customer, right? If you build houses and put these people in it, I can't sell it to them later at a high price, right?" Some of that was shot down on these US political rules about the federal government not being allowed to compete in markets, certain markets, right? They said, "No, you can't just go and subsidize housing and compete with us for our customers." So there's a bit of that too. I mean, the Greens announced the public housing developer a couple of years ago and all everyone just sort of laughed and said, "That's silly." But at the end of the day, they're like, "No, that would steal all our customers." You know, we couldn't do that, which is really funny in a way, right? I'll give you an interesting example, or a few. A lot of people think, "Well, your government's can't do anything fine." Sometimes they can, sometimes they can. Look at the roads. I mean, the roads are subsidized for everyone. We could privatize them and have a toll on every single road. Every time you turn left, you've got to click your toll again. And I reckon, yeah, the roads might be really nice, but the access to them would be very controversial. We might have a road's crisis, right, instead of a housing crisis. But it's worth thinking about governments and housing because we have this amazing build to rent project on the Gold Coast. One of my favorite examples called the Smith Collective and it was the Athletes Village for the Commonwealth Games in 2018. And what's really interesting is the Queensland government said, "Oh, we don't know how to build houses. It's silly, but we really want this Athletes Village to be a private built to rent project." So they sold it off as a package to the private sector to build supply for the Commonwealth Games and then use it as built to rent. And the funny thing is, who actually was the private entity? Was the Abu Dhabi Investment Council, which is essentially a foreign government? So that government, for building houses at the Gold Coast, was a good investment. And our government, the Queensland government, for building houses was a bad investment. Which one is it? Right? We've got this, I call it the Magic Suit, right? The guys at Treasury in the government, they put on their suit and they go to work and they go housing. Oh, that's a bad investment for the government. Oh, we couldn't do that. You know, what a waste of money to own houses in Melbourne and Sydney, stupid. They take their suit off, they get home. They get on the phone to their morbid growth and go, "Hey mate, can I have another million bucks?" Because do you know what the best investment is, owning a bloody house in Sydney or Melbourne? Right? Nothing beats it. I'm like, hang on a minute. When you had your suit on, it was a huge cost that was, it's stupid thing to own. And when you take it off, apparently it's the best investment ever. So sort of, that's what I would say. The tricky part is not, government's being involved in housing. The tricky part is having a fair way to get people into housing at a non-market price that we can all agree on. And that's why I go for the Singapore approach where everyone can get access to this non-market one, once they're age 21 or they're married, it has to be older if you're a single. It's essentially, you know, it's fair because everyone knows they've got a chance to access it. So I guess what my point is, if you're going to address housing with some kind of public approach, the broader you provide accessibility, not only do you solve a lot of these cultural behavioral clashes because the middle class gets access to it. The fairness problem, the political fairness problem is minimized as well. Yeah, you speak about class a lot in the start, like the, it's not necessarily malicious, but they're like, I only ripped off after I worked so hard to do this or like, how does it work? So here's the thing, right? If property prices fell on average, would homeownership an access to housing be a big issue, or would we go, who would want to own that? Well, silly thing, right? The debate would be completely different if house prices, if housing was a generally a bad investment because people wouldn't feel like they're missing out, oh, I can't afford a house in here. Why would you want that? It's about, it's just going to go down in value, right? Go on, rent it for a while, then move somewhere else. So you can't escape that reality of the asset nature of housing in the conversation. Like just on that, I wanted to talk about the immigration thing because it's been, since the release of your book, it's been sort of used a lot in the last six months in the media a lot. A lot of the marches, there was a white supremacist infiltration, a small portion, but a lot of people there were also talking about are the narrative they've been sold, that immigration was the sole reason for their housing prices being high. What did you make of all that? It's very hard to cut through in a public conversation with the more subtle, more real story, especially in economics. So that's why we always say supply and demand, that's it, right? And I'm like, well, that doesn't mean anything. The same thing, you know, it's all immigration. I'll cast your mind back, I'll try and give you the subtle story then. In 2006, right, we had surprise boost in immigration, unexpectedly. And what happened? Well, rents, rose, prices didn't rise too much. And back then, I was saying, hey, this is kind of a weird thing, unexpected boom in migration. But what happened is, during the 2010s, we had a big construction boom and an actual fact, by 2016-17, rents and prices pretty much had peaked and were falling in the major cities. And in a lot of places like in South East Queensland where I live, prices didn't go anywhere. I sold a house in 2009 that got resold in 2019 for the same price, dollar for dollar. So there was that period where yes, there was a short-term effect on rents and prices in certain locations. And then all those other market forces or equilibrium interactions happened to stimulate extra construction, to stimulate people relocating and filling up all the other houses. And then by 2019, right, rents and prices were probably cheaper than they were in 2006-07 in income-adjusting terms. So the point here is that yes, unexpected immigration must have an effect on rents and prices in certain areas, but that effect on rents and prices stimulates relocations and additional housing such that it can't sort of have a permanent effect, it can only have an adjustment effect on prices and rents. And only when it's unanticipated, if we had just the same immigration at this level, everyone would know, oh, well, this is the rate at which we need to build houses and it would be very different. It's this surprise, you know, reopen the borders, didn't expect that. And also since people had moved into all the vacant homes for a couple of years, right, when immigration was low, they've got to then relocate. So the example I use in the book is, well, a surprise change in immigration is essentially one of those temporary mismatches between the number of people and number of houses. That also happens if the number of houses suddenly went down like in a flood in Lisbon, for example. And do we say, well, you know, that's going to permanently keep the price of houses up because we've got this mismatch? No, we know that people will build more houses, people will move and build houses elsewhere. And it's the same when the mismatch is the other way, temporarily. So in actual fact, right, we've pretty much still got most biggest best houses per capita than any point in history, right, so it's not a quantity issue. But Australia is obsessed with housing, and I noticed probably, I don't know, five years ago, that in the same week from the same outlet, you would have people predicting that housing prices will go up or housing prices would go down. My conclusion is they really don't care. It's just about anything, right, like they can put anything in the paper. So you're 100% right, Josh. And I think I wrote about the media in the book that it doesn't, it doesn't matter what's happening, it's a crisis for someone, right, so if prices are going up, you'd be like, you know, Northern Sydney crisis for first home buyers, okay, and then flick the page and it goes, where investors are shopping next for housing, Northern Sydney on the rise, okay, same thing, different angle. And then you'll have whichever place has the lowest rent and price. Oh, be surprised at which town sees rents falling the most. Well, of course, every month one town has rents falling the most, right, because every month when the data comes out, someone on the bottom. And then you, you know, the next page, it's like, oh, you know, renters get in here where rents are falling. And I'm like, okay, so this is just literally one month of data of which suburbs had the highest rent or price growth and which had the lowest. And you've got two angles on each and they're all a crisis for someone. And this is why I think the public, people in general, even quite interested people in the market simply are confused about what's going on. So when I tell people, for example, that apartments in Sydney adjusted for inflation, achieved it today and 10 years ago, people think I'm making it up, that I'm just an idiot, that it can't possibly be true, because haven't I seen the media hype about the price of Sydney houses but they're. just can't look at the data and go, hey, apartments, guess what? That's two thirds of houses in Sydney, not detached houses. And since COVID, yes, detached houses, people are paying a bigger premium. But actually, if you buy an apartment in Paramount, the person selling it to you most likely lost a heap of money, and you're all going to be ahead, right? Because, you know, adjusted for inflation, you can get them at 2013-14 prices today, right? And it's just invisible because, I mean, maybe you could come up with a headline crisis for Paramount or whatever. I know in the Canada right now, people are failing to complete their contracts for off-the-plan apartments in Toronto, and they're getting headlines. Like, oh, this guy paid a million dollars for his off-the-plan contract, and now he has to settle this contract, but his apartment's only worth 800,000. What should he do? So everything gets a headline, and I think it's important for, as a media consumer, to say, the media does not care about giving you a representative view of the world. They're not the statistical agency. They care about you clicking on the headline, right? So if you're interested in property, they're going to just tell you the most extreme thing that they can find that possibly happened in property. Where should they go for their outlook or like, what do you think they should do as far as? Because it isn't as simple as like, is I'm going to buy this from the book you're basically talking about. Okay, is this right now beneficial for me based on a heap of reasons, which again is hard for people to summarise in three paragraphs? I guess the message for young people who don't own property and really want to own their own place is to firstly be patient. Secondly, know if you're good at saving money or not, because buying property is almost a compulsory savings scheme that you buy into, right? Because your mortgage is going to make you pay off that house. So if you're bad with money and you sort of need to commit to something like that, then maybe that's the more important factor for you. But what we need to recognise is that property market goes in cycles, right? 2019 was actually the cheapest time to buy house in Australia this century, right? Yeah, because interest rates, you can get a 3.0% interest rate. Property had been falling in Sydney and Brisbane, not so much in Melbourne at that time. And that was the time to buy. And then we had COVID and everyone panicked and thought prices would come down more. I'm like, but they're the cheapest that've been for so long they can't go down. And we've also reduced interest rates. So lower interest rates make it cheaper to rent money and be your own landlord on a home than rent a house from a landlord, right? And that's why we use monetary policy, which is tweaking the interest rate to stabilise the economy, because if no one wants to buy and build houses, we lower it down, makes it cheaper for people to switch from renting to buying. And when people buy houses, they get built and they get new furniture and they spend up bunnings and stimulates the economy. So we did that when prices were relatively affordable. And you know, I got, I did a podcast in 2020 in May and I said, look guys, prices are more likely to rise 20% and fall 20% nationally, right? Look at all these factors. This is when everyone was panicking. And people would say, where'd you get your economics degree? Back at the cornflakes packet. And you know, it went up 40%, right? And they were all worried because they didn't kind of weren't able to zoom out and look at that. And so I guess the last two years with rising interest rates have made buying a house more expensive. Intentionally, because we want people to stop buying houses and building houses. So we never have this conversation of, because of inflation, if everyone kept buying and building houses, right? We'd have even more people try to employ the same builders. And their prices will go up. And so we actually have intended postcode. So I'll give you the monetary policy story. We panicked about COVID and then we intended to make houses more expensive and get people to spend money on houses. And they did. And then we said, geez, we don't like that that's happening. Let's put the interest rate up so that people can't buy houses because we don't want them to spend money on building houses. And then we did that. And that was all intentional. And yet we're here going, oh, you know, this is a weird thing. I wonder why this is happening. I'm like, because we don't want people to build houses. I actually spoke to some politicians when the housing affordability, future fund or whatever it's called, the half was proposed. So this was a policy to take $10 billion, stick it in a bank account, earn interest, and with that interest subsidized community housing providers who do subsidized housing. And I said, this is really weird, right? Because houses are investments as well. Why would you buy $10 billion of non-housing assets and use the income to build housing assets? Why don't you just buy houses, right? And I was told by politicians, we don't want to overheat the market. The last thing we want to do right now is build houses and get people buying houses. So we want to appear to be doing something big about housing by putting money in this investment fund. But we don't want to build houses right now. Look, we're putting interest rates up to stop people building houses. It would be counterproductive for us to go and try and do that at the same time. And that's sort of honest truth that we can't sort of talk about. So some of our brains are a bit hurting right now, but like, um, so you're saying that by increasing interest rates, people, the politicians or people, like lobby groups or whatever, they want to stop the housing because they don't want too many houses in the market because it'll reduce price or because it will just clog up everything construction-wise. Correct. Yeah, yeah. So it's more the central bank, right? So it's treasury, central bank that the government's economic managers, right? And there's an array of departments and, you know, the RBA is sort of independent and that's their objective, right? Like, don't create inflation. And so their objective is to stop people being able to buy and build new houses by putting that interest rate up because that will take the heat out of that market. We'll take the heat out of related markets. That's very intentional. So it's kind of weird to go, oh, you know, fewer people can buy houses now. Yeah, that's right. We tried to stop you buying houses. But the reverse is also true, right? So in 2021, financial year, we had twice the normal amount of first-time buying. So in the five years part of that, so 2015 to 19 sort of period, we had something like 90,000 first-time buyers a year, maybe a little bit less. We had over 180,000 that one year in 2021. So we actually brought forward out of the next couple of years, a whole extra years worth of first-time buyers. And remember, that was the intention. Lower interest rates make renting money cheaper than renting a house while people switched to renting money instead of renting a house. Now, after that, we've made renting money more expensive so people switch back. And also, there's not that meant, you know, the cashed up first-time buyers of 2023 and four and five, they already bought in 2021 and 22, right? Because they brought forward their decision with those low interest rates. So who's left the people who were not really ready to buy quite yet? So that's why it feels in this part of the cycle a little bit more extreme than usual because we actually had all this first-time buying brought forward. But you look at Canada and New Zealand, interest rates are coming down again in New Zealand, housing constructions compressed, there's a bit of a recession, so actually a lot of Kiwis moving to Australia. But it's actually a better time to buy a New Zealand now than in Australia, right? So anyone keeping an eye on things, just remember, things are getting better in New Zealand. The catch, of course, with properties, when it's a good time to buy, you might not have a job. This is because it's so closely tied with the the macro economy crisis fall. We try and avoid this, you know, we try and lower interest rates to get people to buy houses and employ builders and stuff. But that might be you not, you know, getting downsized and not getting a pay rise or whatever the case may be. And it's this interaction that leads to these cycles. So we're in a cycle. It's kind of a unique and unusual period. And if you've waited a couple of years, that's probably been good, but it won't be like this forever, right? And so when interest rates fall a little bit, you might find it's a lot more reasonable to jump in. Yeah, selfishly, I'm from Perth and obviously I went through that period where there were a lot of jobs mining boom. There were a lot of high paid jobs in WA and all the sun were at the same level as Sydney for a very, very brief period of time before it sort of collapsed a bit. But now I'm in Melbourne and it's been interesting trying to look at potentially buying our first home here. But you talk about cycles and not being that it well explained of these sort of cycles in the market and everyone's talking about how Melbourne's gone through the biggest drop in pricing. So is it inevitable then based on your own prediction for a rise in pricing then because it's just the cycle? Yeah. Basically, if I was to buy, I'm not giving anyone financial advice, but if I felt like buying a house in Australia, I would not buy it in Brisbane. If I look historically, probably not Perth, not Adelaide, not Brisbane, these regional cities that really boom to post-COVID, Sydney is a maybe and Melbourne is the most likely place I would look now because Melbourne's had quite a big correction the last few years, hasn't had a big boom. Melbourne are now returning to Melbourne from South East Queensland, who left during COVID, because the price differential is so high, so for your million dollars or your two million dollars, you can't really get much in South East Queensland, but actually you can get one of those nice suburbs in Melbourne, where your family still lives, for example. And so if I compare price levels, Brisbane vs Sydney, Sydney vs Melbourne etc, Melbourne's historically cheap, Brisbane and South East Queensland's historically expensive, and what you find is people respond to that by relocating and those sort of even up over time. So, yeah, that is also a factor to consider that, you know, probably don't buy in the city where it's prices are historically high relative to other cities, try and do the reverse, but like any investment, right? Investing at the bottom and catching that is difficult and, you know, being off by a few years is still bad, right? So, sometimes you've got to take a long-term view, especially in property where it's costly to transact often. When can we expect the collapse, the overall collapse armageddon, because it's been predicted every year for 50 years? We forget the second half of the 2010s correction, interest rates came down, prices came down, that made buying houses a lot more affordable. Sydney had a big correction 2003 to 2007 when the rest of the country boomed. A lot of the rest of the country had a big correction in the 2010s, just a period of declining interest rates, rising rents, no price movement. New Zealand's having one now, Canada's having one now. I don't expect, you know, next year a huge sudden surprise 25% decline. That's not really been what's happened in Australia, even though it could, but here's the thing, the collapse only comes when everyone's given up waiting for the collapse. So, the fact that you're asking the question suggests to me that it's not yet. We might have a bit of a slow burn adjustment, but there's a market psychology to all this as well, right? So, I wish I could, I wish I could get my crystal ball out and give you something better. Mate, you've helped so much and also selfishly made trying to buy an apartment or a house anyway. The great housing hijack, I really liked it, camera mate. Thank you so much for joining us on the pod, like most of the guys listen to Brain, Rotten, Fart, jokes and AFL content, so I'm sure someone will value this very much. All right, thanks for having me Josh. I want to date with Rawls, Carty says. Rawls, Ruffer, Us. This is the love story of real hench couple Carty and Rocker. Written and read by me, Nicola Dynan. Listen to the free audio book now.