Housing Affordability Part 1: Michael Daley, Asians with PhDs and the Sydney Housing Affordability Crisis
Here’s the original podcast I wrote back in 2019 - as its no longer available online I’ve made it a part of the show notes for this episode.
"The Australian dream is a dream because you truly need to be asleep to believe it." - inspired by George Carlin.
Which is exactly what the NSW labour opposition leader, Mr Michael Daley, seemed to be getting at this week with the media, much to his displeasure, releasing his comments regarding young people leaving Sydney and their jobs being taken over by 'Asians with PhDs'.
“Our young children will flee and who are they being replaced with? They are being replaced by young people from typically Asia with PhDs, So there’s a transformation happening in Sydney now where our kids are moving out and foreigners are moving in and taking their jobs." - Michael Daley, NSW Labour Opposition Leader.
Now Mr. Daley may indeed be concerned about migration and its impacts. Do the young of Sydney worry about their futures in a city where the median price of a detached home is hovering around $1 million? Absolutely! Does importing skilled migrants increase competition in the labour market for skilled jobs? Of course! Does population growth, due to migration or not, increase the burden on Sydney's infrastructure? Try taking a train during peak hour from the western suburbs to the city and back again! Are the demographics of Sydney changing? Undoubtably! However this wasn't Mr. Daley's primary reasoning for his comments as he mentions in what I infer was an half-hearted attempt at an apology nor is this what I have chosen to nitpick in this debacle.
“When I spoke at the Wentworth Falls function last year I was discussing housing affordability and in making these points I could have expressed myself better. I meant no offence. I hope none’s been taken. I apologise if any offence has been taken.” - Michael Daley, NSW Labour Opposition Leader.
Mr. Daley is of the opinion that immigration is a, or potentially the, major contributing factor to the price of houses in Sydney and just as well with all the aforementioned examples this seems to be a simple case of supply and demand. As the demand for housing increases due to population growth - housing prices must rise. Correct? Well its not that simple. When most people buy houses, especially in a city where median house hold income is 1/10th of the median detached home price, very few potential buyers use their own money for more than 10-20% of the asking price - they have to borrow the difference from financial institutions. Imagine if buyers had no access to credit. House prices wouldn't be able to rise above what an individual is able to pay being limited by their annual income and the length of time one has saved money for. However when a buyer does have access to credit they are then able to access money which they have not had the chance to earn yet. This allows them to purchase a property at a price which they would not have previously been able to afford.
When everyone has access to credit, the level of credit available, is what ultimately determines the significant portion of house prices. Hence when it comes to the case of Sydney house prices, and many other cities in Australia and around the world, the ultimate reason for a housing bubble is that credit has been too cheap for too long. Whilst migration is used as a tool by our politicians to keep consumption in the economy propped up (and to ensure there are more players to take out larger mortgages at the bottom of our ponzi scheme) it is not the sole or even the major contributing factor to our current housing affordability crisis. Evidence for this argument can be seen in the aftermath of the banking royal commission which has resulted in tighter lending standards. Surprise surprise when the credit dries up, and potential home owners abilities to pay higher prices drops, the price of housing in our capital cities is beginning to fall.
Whilst I'm in favour of temporarily reducing migration, and I say this as a migrant myself, to cities such as Sydney in order to allow our infrastructure and labour markets to catch up unfortunately for Mr Daley I am not naive enough to take his rhetoric at face value. As young people its easy to be mislead and take Mr. Daley's way out and scapegoat an entire ethnic group, or immigration in general, as the cause for Sydney's exorbitant house prices. However I implore you to look deeper. For too long politicians, from both sides of the political divide, have relied on our ignorance to guide us away from the root causes of this issue. It's simply because it's unpopular and more importantly incredibly unprofitable to have a sustainable residential property market. Ideally if you aspire to own a home, that is without becoming an indentured servant of the big 4 banks, you should be marching in the streets for a) tighter lending standards and b) higher interest rates for residential property. Even more draconian perhaps a government mandated income to maximum residential mortgage value ratio. We need to ask ourselves do we really want to turn our homes into an investment class moving forward? Perhaps it is just easier to blame the asians...
Note: Whilst I know that for many of us - in the lower house at least - we are choosing the lesser of two or perhaps three evils for the upcoming NSW state election on Saturday 23rd of March, 2019. Despite this take it seriously. It's your future. Vote below the line for the upper house. Take your smart phone into the booth and research parties on the spot if you must. The future lies in your hands. Quite literally.
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To get in touch and leave me your 2c or ideas you'd like me to discuss in a future episode email me at hasi@monologuesbyhasi.com.
My intro and outro music are courtesy of Max Maikon and the Youtube Audio Library. Full credits are as follows:
Track: Equilibrium — Max Maikon [Audio Library Release]
Music provided by Audio Library Plus
Watch:https://youtu.be/v2G8waOzPQA
Free Download / Stream:https://alplus.io/equilibrium
