Down and Out

They used to tell me I was selling a dream, and so I followed the mob,
When there was a home to show, or contracts to sign, I was always there right on the job.
They used to tell me I was selling a dream, with riches and glory ahead,
Why should I be standing in line, just waiting for bread?
Brother, can you spare a dime?

This morning, on the way to work, some guy sporting a bluetooth ear piece and a sharp suit was hassling me for spare change. Confused, I tossed him a coin and thought nothing more of it.

By mid-afternoon I knew what was up and I wanted my coin back.

Apparently there is a real estate Hindenburg going down in Tasmania (who knew), which some real estate agents finally admitted to this morning. You probably already know about this because it was featured on bubblepedia and delusional economics this afternoon. And right now the web nerds at The Advocate are busy scratching their heads, wondering where all those hits came from.

Online, our old buddy, Deanne ' severe shortage' Lamprey, quickly capitulated, admitting "Tasmania's real estate industry is at it's lowest ebb since the economic doldrums of the late 1990's."

Admitting you have a problem is the first step and slightly unexpected for the real estate industry, where everything is fine - until you realise the buyers aren't responding to your "everything is fine" routine any more.  So I ran out and grabbed this souvenir edition, finding it wasn't just one article of woe, it was a two page spread of real estate snuff porn. 

It wasn't long before the game was obvious. If admitting you have a problem is the first step, the next steps for the real estate industry read something like this:

2. Sense an opportunity;
3. Simultaneously cry to government and blame government for woe;
4. ???
5. Profit.

In addition to the Deanne Lamprey story, we heard from Betty Kay who suggested "someone has to take a stand," before detailing the litany of costs that are holding up speculators in their quest to buy a $200,000 rental property - all told, about $9100 on purchase. She also raised the scandalous problem that speculators have have ongoing costs - like rates, land tax and bank interest to pay.

I mean somebody should subsidise these people!

Oh wait...

Such hardships were now having an effect on the mainland sharks who were coming to Tasmania, devouring properties, doing little in maintenance, while reaping huge capital gains as the ponzi scheme grew ever bigger.

Typically, when the river of money runs dry, when there’s not another sucker to be had, it’s never a case of reaching the peak of common sense, as buyers begin to recoil - it now becomes an argument of “someone’s shackling us.” So the real estate industry response is a series of freakazoid suggestions that can push more money into housing - like tapping into superannuation, which was one of Betty Kay's fantastic ideas.

If the market continues to crumble, superannuation will be the next thing the real estate industry will be falling over themselves to get their hands on, you can bet on that. Why not hold your retirement at gun point, to push up house prices and go further into debt? 

"People wouldn't be losing like they did when the share market crash came."

Ah yes, endless rivers of gold, flowing into real estate.  

One glaring oversight across the two pages was the failure of anyone to acknowledge the first home buyer's boost and the effect it's had on this market. You don't make anything cheaper by giving people access to free money, it just means they will spend more. And you've artificially removed buyers from the future, if you're wondering where a certain number of your buyers are, they're already inside their houses - or from what I'm seeing - they're working on a quick turnaround flip before the interest payments send them broke.

The facile arguments continued to add up, mostly attacks on stamp duty, which is one of the lowest in the country, with Ellis suggesting $10,000 to $20,000 was keeping potential buyers out of the market. In the spirit of the great Enzo Raimondo, the REIT CEO, Martin Harris chimed in with similar claims of stamp duty keeping people out of the market.

Conveniently, I have a stamp duty calculator on hand. Even at $550,000 you can't crack $20,000 in stamp duty. Is there any logic to suggest that the guy who can rustle up $550,000 will bench himself over an extra $20k? Not even willing to toss a low ball in a market that agents describe as being at the "lowest ebb" in years? Not even willing to consider the $530,000 house down the road - that just won't do? Which I can calculate the stamp duty on, add to the purchase price and come up with... WHOA! $548,750. 

It's time to wind this unwieldy mess up, but before I go, I pondered how a real estate crash could possible be bad for The Advocate? Local listings are up 30% which equals a big fat Domain lift out, and Sean Ford's articles are generating national page clicks as bubblemaniacs, like me, rush to prove themselves right.

I can only assume we're on again for next Friday, Sean? And if you're getting Deanne back for the next article, could you ask her - were all those investors circling Burnie just prank callers?