ON THE WALLABY- 26th July 2007

”If ambition doesn't hurt you, you haven't got it.” ~ Kathleen Norris

A REAL ESTATE AUCTIONEERS VIEWS ON THE HOUSING AFFORDABILITY QUESTION?

To some, in view of this OTW’s subject, the quotation I have used to head it may seem cynical but it is, I believe, one of the root causes of the housing affordability crisis.

Judging by television reports from Kevin Rudd’s “Housing Summit” today in Canberra, there were a host of reasons given, much warm air and no doubt bonhomie given off and I think, most probably, more “sizzle” than “steak” emanating fro the day.

In a career that has seen me conduct over 26,000 real estate auctions, principally in the Sydney area, I have seen markets rise and fall; I have seen fortunes made and fortunes lost; I have seen much happiness created through sales and likewise, much despair caused as well.

What I am about to write is not a cure. It is simply my observations made of people and markets and where I think “we” have got out of kilter. They appear in no particular order of importance and with some, it will make changing the circumstances very much akin to unscrambling the egg.

These factors then include:-

AMBITION -

This is especially prevalent amongst younger people and whilst perhaps it is a characteristic of Generation Y people that they are fearless in accumulating debt to “have what they want”, it nonetheless both frightens and saddens me when I see young people, up to and around the 30’s, acquiring in some cases nearly $400,000 worth of debt, with very little, if any, equity to purchase a home.

When you are young, you are by nature fearless and old age and health risks are way, way “out there” but with that level of debt, there is no room to move (excuse the pun) should ill health, pregnancies or job loss or reversal strike.

I am all for ambition and, indeed, I know only too well the truth in those words I have quoted for my ambition has certainly at various times in my life cost me much in terms of money and personal feelings and circumstances.

However, that old adage of ”cutting the cloth to suit the purse” has much truth about it and with many people, certainly the younger generation, given a choice of living where they want and wracking up a big debt or moving further out and having less debt, the former option wins virtually hands down.

Where my generation, the getting much aligned “baby boomers”, opted in the main to start small and build up over time, I see time and time again in front of my rostrum as I auction, young people who’s start in life is the McMansion with 4 bedrooms, 2 bathrooms, double lock up garage, plenty of room to sit the plasma TV and other goodies they have also purchased “on the tick” – AND a massive millstone around their neck with the loan.

Which brings me to factor two, that of

EASY FINANCE

I am stunned that a bank or financial institution will loan anyone 100% of the purchase price on a house or unit!

When I first left school, I wanted to join the Royal Australian Navy and attend HMAS Creswell at Jervis Bay and become a Naval officer.

Lamentably, at that time, I had not gained a high enough pass in my Leaving Certificate to qualify for induction so, instead of choosing to ”work through the ranks”, I opted to join our family stock and station agency.

Dad, for some reason, and I am sure scars from the Great Depression were behind it, instead suggested that I get a job “with security” and hence I joined the CBC Bank (Commercial Banking Company of Sydney).

I managed to last nearly a day before I threw in the towel but because I was “contracted” in some way, I had to do 6 months and by which time I well and truly knew I was not a Banker!

However, and here is the part that relates to this OTW, I was speaking to one of Dad’s clients in the street in Grenfell and he knew, as it seems all of Grenfell did also, that I was Bank bound.

When he asked me which Bank, I told him “The CBC”.

He said “good Bank that, you’ll never go broke with them” and when I asked him why, he answered “because they’ll never loan you enough money”.

I wonder how many defaulters today would see the wisdom in his words and logic!

Should someone not make the payments, invariably about six months later the property is put up for auction and I, or another auctioneer, will have the sad task of trying to get as much as we can so that the “vendor” can maybe emerge with some funds intact.

INFRASTRUCTURE – OR LACK OF IT

In this bracket I am referring especially to NSW where the State government, for over a decade, has absolutely blown the infrastructure issue.

Sydney can grow only in three ways due to the Tasman Sea on the east, the Blue Mountains in the west and National Parks on the north and south.

These ways are:-

• Up

• To the south west and/or

• To the north west

In the case of the former, plans are already in place to jam, with jam being the operative word, more and more people and units into the already crowded eastern and inner west suburbs.

With the NW and SW sections, infrastructure is either creaking or non-existent.

The M5 from Cambelltown and the SW into the city is a car park in morning and afternoon peak hour and out to the NW, you travel the M2 then, whammo, you are down to a one lane road all the way to Windsor virtually.

Surely someone, even with a modicum of vision or common sense, could have seen where the population was going to have to be directed, even 20 years ago, and built the rail and road structure necessary (then through principally rural paddocks) and had it awaiting the people.

We urge people to “move out” to areas like The Hills but boy, when it costs you over $100 a week in road tolls alone to go from Baulkham Hills to the CBD and back, it gets a pretty hard case to argue.

We then moan that so many are trying to live close to the city, demand increases as does the price level and a’hoy, here we go again.

It would seem to me that if the State government were fair dinkum about this, they would be encouraging more developments such as the Norwest Business Park which create jobs in the area and reduce choking traffic to and from the CBD, then they may actually be helping, instead of hindering, the reduction in the home affordability problem.

NEGATIVE GEARING

Whoa, I hear you say!

Here the genie is well and truly out of the bottle and courageous indeed will be the government that turns the clock back here but, I fear someone must.

I realise that when I think it was Paul Keating tried to, housing construction ground down, rents rose and voices of alarm bellowed but it seems to me to be a big part of the problem.

Demand created by a tax driven system of acquiring property must of its own accord create an artificial demand but just how you reverse that is for someone smarter than me.

In closing, I wish more young people would look beyond the boundaries of their suburbs, indeed Sydney itself, and see what provincial and rural NSW has to offer by way of both lifestyle and jobs.

Sure, I am a country lad, having been raised in a small central western town of 2800 people and can I say, and Sam says it constantly as we are both of the same generation, with her being Melbourne city raised, we as “bush kids” got so much more in life grounding experiences than she and her friends did.

There is so much to offer “out there” and you can actually buy a home without selling your soul and I can assure you, with roads and flight paths what they are today, you will never be far from your kin.

As Stewart Grainger wrote in his great book “Wanderer” (admittingly referring to living aboard a yacht):-

The years thunder by, The dreams of youth grow dim where they lie caked in dust on the shelves of patience. Before we know it, the tomb is sealed. Where, then, lies the answer?

In choice.

Which shall it be: bankruptcy of purse or bankruptcy of life?"

Carpe diem

Tony

Tony Fountain

Professional Speaker, auctioneer and author

tony@fountainandco.com

Bowral NSW Australia

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