You have a silent investing partner, they won’t let house prices fall

Australians have been obsessed with real estate. 

It’s almost like our national pastime. 

Nothing gets us excited more than talking about the latest growth numbers, or simply how much a house in someone’s street just sold for on the weekend. 

Of course, property owes a lot of its popularity to how stable the market is. 

And one of the key reasons for this is that one of the major players behind it is the government. 

Of course, put your cynicism aside for the moment and forget that Anthony Albanese has a $5 million property portfolio, along with 143 other investment property-owning MPs, including several Greens. 

The reality is that, despite all the calls to get house prices down for first homeowners, the government can’t afford to see house prices fall. 

Why?

There are several important reasons. 

1. Construction would stop. 

If construction dried up, which would happen if prices fell and it was no longer profitable to build, one of our largest industries would grind to a halt, and workers would head to the dole queue. 

Instead of collecting a king’s ransom in taxes from tradies, the government would be dishing it out instead in the form of unemployment payments. 

2. Skyrocketing homelessness

We’re already miles behind on having enough houses for everyone. And we’re still bringing more here. 

If house prices fell, building activity would dry up, and we’d quickly be overwhelmed.

3. No more borrowing

I’m not saying it’s a good idea. However, the reality is people will borrow money against their homes for lifestyle spending. 

A new caravan, an extension or a renovation, starting a new business. 

We need new money flowing into the economy to keep it ticking over, and one of the top sources is borrowing against the good old family home. 

4. Votes

Yes, you have to consider that if people get poorer (even on paper) during your time in government, they’re not going to be happy. 

It’s certainly not a vote-winner. 

And since governments are in the business of winning elections, they can’t afford any sudden falls in house prices if they want victory. 

Proof the Government isn’t serious about lowering house prices

So, instead of trying to force house prices down (which they wouldn’t be able to do anyway, given the drastic supply shortage we’re suffering), the government has taken another route. 

They’re letting house prices soar.

And they’re just giving certain groups of people, particularly first-home buyers, a leg-up into the market to even it out. 

If they didn’t do this, we’d quickly have a market where a smaller group of people own all the property, and the rest don’t have a hope of ever getting in. 

It’s certainly not the society anyone wants. 

This is why they’re helping first-home buyers crack the market. 

Think of schemes like First Home Owners Grants and building grants to help people get into their first homes. 

Many State governments have also implemented co-ownership schemes to help people into their first homes with a smaller deposit. 

And they’re also encouraging investors to build houses specifically for low to medium households with the National Rental Affordability Scheme. 

They’re also regulating the banks to help people who need it. 

APRA, the Australian Prudential Regulation Authority, keeps the banks on a tight leash by forcing them to ‘act responsibly’.

Their oversight is one of the reasons the banks work so hard with borrowers to help them if they get into financial trouble, instead of kicking them out and putting their house back on the market. 

The Government needs investors to help them

The government is helping investors like us too, knowing the vital role we play in adding supply to the market, as well as encouraging us to take responsibility for our financial futures. 

The multitude of tax breaks for investors makes it easier for us to create wealth without being punished with excessive payments. 

Negative gearing and capital gains concessions are the big ones that spring to mind.

There’s also the Residential Tenancies Act which gives clarity to both investors and tenants,

making the rules clear and encouraging us to get active in the market. 

See why the government is your secret investing partner?

They can’t afford for house prices to go down. 

And they win when prices go up. 

With major backers like them, with all policy-making capacity and financial firepower at their disposal, you can be very confident that the property market is highly unlikely to drop.