The Pencil Guy: Hourann's illogical blog

A rant: housing, the market, and sustainability

Saturday 5 August 2006 at 7:48 pm

It is generally well known that although the Liberal Party extolls the virtues of free markets whenever they can, they only really believe in them when it won’t hurt at the ballot box.

For proof, consider the current reactions by our State opposition to Perth’s housing market, interest rates, stamp duty, and land availability. Much like petrol prices at the Federal level, there’s all sorts of talk about how government should Do Something ™ because, oh dear, the poor defenceless first homebuyers can’t afford the McMansions that have become so popular as of late. Never mind this one example of the free market moving in a good direction for the environment; our opposition friends have remembered the need to appease the election-deciding mortgage-belt folks.

So they want to interfere in the housing market … to “improve affordability”.

Thing is, the “great Aussie dream” of a huge quarter-acre block with a four bedroom house (or, lately, a six bedroom, home theatre with added games room and alfresco area, open-plan house) is ridiculously unsustainable. You cannot build an entire city out of houses like that — and economic forces are (slowly) starting to reflect this.

If people are priced out of buying massive homes that were probably beyond their means anyway, then that’s a good thing. If attitudes shift so that Australians no longer expect to always live in a huge house, that’s even better.

I don’t mean to go completely laissez-faire — there are plenty of cases of market failure, and government should intervene in those cases. But this, IMHO, is not one of them.