Buying real estate is the ultimate in consumerism
I’m a big believer in looking at macroeconomic trends.
For example: there will be more mobile computers (smartphones) than PCs sold. Mobile phones are also more ‘convenient’ as they are always on our person and generally more simple to use.
Another macroeconomic trend is the printing of funny money. Pioneered by the US, much of this non-asset backed government cash is funnelled into real estate. This was most evident with the recent Quantitative Easing programmes in the USA and UK, where central banks printed money to save banks who had lent more money than they should have. Most of this lending was mortgages for real estate.
Why are governments so intent on propping up the property market? Consumerism. The public want more. Living in a home isn’t enough, owning a home is a goal in life for many.
Even worse, many people aspire to be landlords, to profit off the ‘poorness’ of others. The UK government used to be responsible for housing people. However, the past few decades have unearthed a new trend: privatisation.
Governments don’t answer to voters, but are more keen to please people and companies with money. Money buys attention, and attention sways voters. And what is the biggest desire of those with money? Yup, ‘mo money’.
So the easiest way to ‘make’ money is to lobby/bribe politicians to sell public assets. All the richest people in Russia and the Middle East visibly bought public assets for cheap and are now admirably wealthy.
It’s a less visible process in the UK and US, but the greatest example is the UK’s Right-to-buy scheme. In a vote-winning move, the UK government fed the public’s property lust by allowing residents to buy their publicly owned home. To sweeten the deal, buyers would get a discount to market price.
Yup, this isn’t some fantasy: taxpayers have been robbed of their collective assets by the few who have capital. But wait, you say, people living in public property are poor, so no harm, no foul, right?
Well, who owns all these ‘former-council homes’? Certainly not the people living in them. The vast majority are owned by landlords.
There’s a knock-on effect: As landlords are unlikely to ever sell, the supply of property on the open market has drastically reduced. This causes prices to artificially inflate, and those who hold real estate benefit from ‘rising house prices’ without having to lift a finger to work.
What has any of this got to do with the greater trend of privatisation? The UK government has sold much available public land. So those with capital need something else to purchase. Who sits on lots of land and is seen as ‘needing the efficiencies of private market economics’? The Royal Mail. The former public service, which sits on over £10bn of land, was sold for £3bn. Immediately after, Royal Mail sites across London closed to be sold to property developers.
And no one blinked. The world went on.
‘Why’ would be be the wrong question. ‘Why not’ is far more pertinent. We have a shortage of homes, so freeing up land makes sense. Except when that land is held in land banks by a few wealthy, earning more from land price appreciation than could possibly be realised by building homes.
There’s no law compelling owners of real estate to put their property into use, even in light of a ‘housing shortage crisis’.
As big as the world is, people make decisions in their own micro-cosm. Never have you ever seen a less informed purchase than that of a home buyer. It is a purchase of passion. A dream of home ownership that drives the lust in each of us. And the result is bidding up the value of homes, always setting new local records with each buy.
House prices just don’t go down. Safe as houses isn’t a hot air myth. It is fact. And because everyone wants a piece of this gold rush, it self-perpetuates. Sure, there’s a recession for 4 years out of every 18, but the macroeconomic trend is to infinity and beyond.
The most profitable product isn’t the Apple iPhone. It’s real estate. And everyone wants an unquenchable amount more for themselves. Welcome to the ultimate in consumerism. Welcome to the never bursting bubble of property prices.
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