Headline in The Australian today: “RENTS TO RISE BY 30%”.
If you looked more closely – which is hard to do when you’re reading a neighbour’s newpaper which is wrapped in plastic while walking the dog – you’d discover that this is the prediction of the NAB… allegedly.
Now, I don’t want to disparage those with more expertise than me. I’m not Dav…
Look, I’ve got a bit of a dilemma here. If I refer to Dave Hughes by name, I’m playing into his trap which is to get as much attention as possible. But if I don’t call out his misinformation, then there’s a danger that people might think that he actually knows what he’s talking about. Like when he praised the Howard government for setting up the Future Fund and how they put aside this money through fiscal savings and no government has added to it since. That sounds impressive but if you have a memory of the circumstances, the Future Fund was set up by Costello when it became difficult to finish off the sale of Telstra, owing to the fact that the “mums and dads” who’d bought the second round of shares discovered that they were overpriced and nobody was keen to buy into the third and final round of sales. Consequently, the Future Fund was set up with the remaining Telstra shares and its stated function was to pay the superannuation of public servants into the future. Probably a good idea, but certainly not the result of good financial management, any more than Costello’s sale of our gold reserves because gold wasn’t likely to increase much in value. Shortly after, gold started increasing significantly in value.
Perhaps, I should just use his initials and not give him any publicity. If I refer to Dave Hughes as DH, will people know who I mean. It’s not like he’s not the only DH in the world but he’s certainly getting more attention than most of the DHs around.
Whatever, back to the rent prediction…
The thing about predictions is that they rely on a number of assumptions. This is probably not news to anyone. And something else that shouldn’t be news to anyone is that the accuracy of the prediction depends largely on the accuracy of the assumptions. For example, I presume that, while the share market will have it’s ups and downs, over the long term, it’ll grow at a faster rate than most other investments. Therefore I presume that I’ll be better off if I buy shares rather than put the money in the bank. As I don’t have enough to buy a lot of shares, I presume that it’d be a good idea to borrow money and put that into the share market because the head of the Reserve Bank told us that interest rates were unlikely to rise before 2024, so… Oh, I shouldn’t have presumed that he was right just because he was in such an important position.
And so with any prediction.
According to the NAB guy, gross rentals need to rise in order to “compensate landlords for their loss of tax benefits”… which is sort of strange because weren’t a lot of them making a loss in order to reduce their overall tax but now they’ll increase the rent in order to make a larger amount?
And if they put up rents by so much, won’t that mean that – with the predicted crash of house prices – that real estate suddenly becomes a good investment again? If you can buy a house for considerably less than it is now and rent it for considerably more, won’t that lead to more houses being available for rent? Which in turn will bring the prices of rents down, leading to a crash which will… Et cetera.
Isn’t this how capitalism is meant to work?
We got a pamphlet through the letterbox a week or so ago, that on one side informed us that the housing maket was collapsing, and on the other side, which just happened to also have the contact details for one of our local realtors, had the prices for some of the dwellings that they had managed to sell post auction over the last months.
The family up the court, really decent folk with two little kids, had to move because their landlord put the rent up. Again.
So.
Based on all of the latest kerfuffles about housing prices, interest rates, rentals and superannuation, I have decided that I am going to un-invest both of the dollars that I have in super, currently earning about 5%, and buy a house instead.
It will be a timing thing, so I am waiting for the precise moment that rents go so high that houses are worth nothing and then I will swoop in and make my killing.
PS. In regards to the dh known as DH “It’s not like he’s not the only DH in the world but he’s certainly getting more attention than most of the DH’s around.”
A certain phON DH who goes by the alternative initials MR has just announced “That’s not true dickhead. Hold my Beer”