Price Hikes and Rachel Cuts

As a reader who prefers to encounter sentences made from actual words, pharmacy thoughts made from actual thinking, and publications made of actually endurable writing instead of Satan’s nut-sweat, I generally avoid the Herald Sun. But, there are times when this, and other News Corp titles, emit the hellish nut stink of a filth so pure I cannot resist a sniff. It’s not a defensible instinct to draw your nostrils to the wet, tan spot on the month-old cauliflower your flatmate holds with the warning, “you’d better not put your nose near this stinker”. But, it’s an instinct nonetheless.

the-rachel-haircutAnd, so it was that I encountered today the “writing” of one Susie O’Brien. I know nothing of Susie O’Brien save for the fact that she is the last woman alive to ask a hairdresser for a modified “Rachel”. I am not myself a very fashionable lady and I am certainly not as photogenic as the blonde and winsome Susie. But, I know what’s right and I know what’s good and asking for a layered, high-maintenance simulation of the Friends second season ain’t it.

Second only to crimes against hair, of course, are crimes against fact. And O’Brien’s refusal to engage with easily accessed fact has produced a brassica of such extreme decay, I find myself unable to let this day pass without publicly scrunching my nose at its moralising rot.

Perhaps O’Brien doesn’t know how silly her hair has made her when she makes the claim that the “Chinese” are inflating our housing market. But, she makes it nonetheless. Chinese investment in housing, writes Rachel, is the “reality that is making housing unaffordable”.

The thing is, though, it’s really not.

I know this because my hair, which is much more like Phoebe’s, was having an argument with its mother. It was mother’s view that my hair had failed to acquire a residence due to financial irresponsibility. It was the, then-unproven, view of my hair that the chasm between the average Australian house price and the average Australian wage had increased over time. As things turned out, Phoebe was right and this was a fact confirmed by the very on-point hair of Christine Lagarde, or at least of the organisation of which her marvelous steely ‘do is managing director. The IMF reports that Australia’s housing price-to-wage ratio is now the world’s third worst. And so, despite the attempts by the Coalition’s Kelly O’Dwyer to prove a connection via the Inquiry Into Foreign Investment In Residential Real Estate between Chinese ownership and housing affordability, it seemed silly to conclude that Australia was being impacted by investment at a rate unseen in the rest of the Western world. Where, in many cases, Chinese persons are free, if not freer, to buy.

Rachel O’Brien Green is a putative journalist and could have always made a call or visited the RBA website or asked Monica for help in understanding the emerging crisis of housing affordability. Instead, she swallowed the reeking fiction served up so regularly by her publishers and elected not to look at the reasons for this local inflationary bias. None of which, to the best of my knowledge stubbornly acquired over several days to prove a point, have anything to do with The Chinese. Whose selfish hegemonic audacity, says O’Brien, is reflected in the fact of them putting up signs in shops in Chinese!!!!! (Note to News: hànzì is not a hot new haircut.)

“The facts speak for themselves,” says Rachel before pausing to offer no facts of consequence. The “facts” of inflationary momentum have even been recently discussed by Federal politicians with the Coalition mentioning, correctly, the impact of state planning controls and the Greens mentioning, correctly, the impact of negative gearing. Tax and asset test concessions have served over time to concentrate property in the hands of a few. Australians, that is.

“Auctions,” says Rachel, “are packed with foreign buyers with cheque books”. Actually, what they are packed with is Australians who have tax benefits of such significance, no first home buyers’ grant can compete.  And these bidders, like all bidders including those who may dare to read Chinese signage in public, don’t squeeze others out of the market because they’re arseholes. They do it just because they can. Policy allows it.

The “people” responsible for inflationary bias are not, as Rachel Green-Hayek suggests, acting against the law to diminish affordable housing. They are working absolutely within it.

It’s been a while since anyone in the ALP has dared talk openly about the consequences of these tax concessions just as it’s been a while since well-to-do Australians stopped thinking of property as something to live in rather than something that lives in an investment portfolio. But, this doesn’t mean that the “facts” about inflation in the sector have changed nor does it mean that a journalist of modest skill can’t locate them. And the “facts” are not that limited affordability is the work of The Chinese, even if Rachel does find it difficult that her “beloved” upscale suburbs are now polluted with the Chinese characters and architecture she sees as testament to “overseas wealth and power”. I mean, can’t These People learn to decorate their gardens with tasteful yucca plants and perhaps get a nice layered crop?

If there is anything polluting our “beloved” suburbs, aside from stupid fucking cafes that serve paleo omelettes on tables upcycled from “retro” (i.e. de-funded) government school desks, it is idiocy. Idiocy of a sort that says Facts Are Facts and not, after all, “racist scaremongering”.

Frankly, I plan never to read Rachel O’Hair again and I don’t give a shit if she’s a racist or not. Perhaps she even travels regularly to Bali where she is “inspired” by the “simple wisdom” of ”local artisans” and is very careful to stay in luxury villas whose construction did not create an inflationary bias for residents. But, I do give a shit that this cauliflower stench is given free license to stand in for the facts of the market.

The thing about capital and the conditions that permit its very uneven distribution is that it does not have a race. It does not have a particular taste in architecture. It does not have morality. This is not to say that people are immoral, although I would argue that to make a statement about the poor taste and greed of a particular ethnic group is immoral. It is, rather, to say that crying for “morality” when what you need to cry out for is a suite of policies to increase housing affordability is bollocks.

Look. Don’t trust me on this. Trust an economic forecaster or an academic whose scholarship is based in urban or housing research. The “facts” can “speak for themselves” if one chooses to allow them oxygen. And to do this, we must remove the cruciferous stench of the rotten cauliflower. You know, the one with the haircut that takes a tiny bit of evil and infects the entire household with it.

Inflationary bias doesn’t just happen because people are Chinese. Or because they are greedy or because they have no taste. It happens because there are no fucking controls on the fucking market—save for those, like negative gearing, which advantage persons already rich in property. And, to a lesser degree, because there are no fucking controls on basic fucking journalism.

I mean. Fuck. I hate numbers and markets bore the blind shit out of me. Even more than season two of Friends. But you just can’t make shit up, lob a few volleys about mock French provincial design and cry about “foreigners” taking control. At least, not without me making fun of your haircut.

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12 comments for “Price Hikes and Rachel Cuts

  1. Tony
    June 11, 2015 at 9:52 pm

    I can remember suzie as one of the independents faction in student politics from the university if Adelaide – rich kids like Natasha soul destroyer who thought that the truth or greater good was independent of ideology – flogs one and all

  2. Soula P
    June 11, 2015 at 10:45 pm

    Wow. I needed to read that.

    How is it that people can get paid to write things like that?

    In my job, I am held to account for every single word that I write. I research everything. And then I double-check that I got it right. And I’m a friggin public servant (and not even a particularly good one), not a journalist.

    I read someone else’s blog, a Chinese person’s (https://agitateeducateopine.wordpress.com/) and it broke my heart that a child and now a man/woman can be made to feel he/she does not belong here.

    Thanks for expressing what I was thinking, in better English than mine.

    Also, the baby on Rachel’s twitter page does not look 100% pure-bred Skip to me. It’s not racist to point that out, is it? I hope that having a raging racist for a mother works out well for the poor little thing.

  3. quasimodo
    June 11, 2015 at 11:25 pm

    Platinum! You are a national treasure.

  4. June 12, 2015 at 5:18 pm

    I’m agnostic on this subject of whether Chinese investment has contributed to their own house being unaffordable for my kids – as it is.

    But I would like to know the answer.

    I can well believe that our housing-to-wage ratio is a bigger factor, itself fed by negative gearing. But I’ve also been told by a foreign friend who did a bus tour of Victoria’s south coast that she found herself part of a convoy of a dozen buses filled with Chinese visitors. (She was the sole non-Chinese.) Along the way, real estate agents accompanying them shouted out values and estimated returns in the towns they passed through. Such stories have an impact when you have kids facing the prospect of being renters for life.

    To prove them wrong (or insignificant), you citing some sources on the contribution (or not) of the Chinese to the present high prices would be a great help.

    • June 12, 2015 at 5:43 pm

      Better to ask the author of the piece to do the same.
      While your friend’s story is compelling, it’s not evidence and it doesn’t match the majority of academic or even political opinion on the matter. Read the paper. It is currently full of respectable opinion on inflation bias in housing. The figures on “Chinese” are hard to source but I suggest you contact Kelly O’Dwyer who is in the business of trying to prove foreign impact on residential property. Meanwhile, there’s little political interest in examining the other factors I mentioned. Because they don’t make as much emotional sense as “the Chinese are robbing my kids.”
      Current economic policy is robbing your kids. Not nasty foreigners. This is basic economics. Government gears can shift a national economy much more effectively than a few busloads of “Chinese”.
      If you’re fretting about foreign investment generally, I suggest you look to US and UK interests which have long dominated. I suggest you think about whether foreign investment is ipso factp a bad thing. (Dominant opinion is that it is a necessity.) I’d also suggest that you think about how wealth inequality has been on the rise in AU for some time and quit demanding figures from a personal blog when you should be demanding them from a News Corp journalist. (Despite this, I can guarantee that I have done much more reading and primary research on the matter than O’Brien.) And just think that maybe wealth inequality is result of domestic policy and not evil foreigners.
      It is so frigging easy to blame the Others. And we have been doing it to Chinese people in particular for nearly two centuries in Australia. Of course, Jews have borne the brunt of this bollocks of blaming a small ethnic group for large problems of economic control in the west most often. I guess it’s nice that Susie is giving them a break.
      Oh. And “stories” have an impact. Much more than facts. They really do. I suggest you read my book written with Bernard Keane where we talk precisely about how “stories” are useless as fonts of data. As emotional and comforting as they are.
      Man I am fucking sick of “stories” and how they have taken a primary position over data.

  5. John Macgregor
    June 13, 2015 at 2:45 am

    Your original point is taken: the main issue is our macroeconomics generally, and not foreign investment in real estate in particular. However the latter can validly be looked at too.

    My friend’s story is evidence; just not enough to base a view on. (Same can be said of the Chinese one commonly sees at capital city house auctions.) As I suggested, I cited it not as proof of anything except that stories can evoke feelings in people – not necessarily rational ones – and that it would therefore be good to have the data.

    I won’t ask Ms O’Brien to back up her claims: soliciting evidence from News journalists has previously yielded me a one hundred percent failure rate.

    But in relation to her assertion that ‘Chinese investment in housing…is the “reality that is making housing unaffordable”’, you did describe the contrary evidence as “easily accessed fact”. Which is why I asked if you wouldn’t mind showing me it.

    I live in SE Asia, and have seen the Chinese buy up large swathes of northern Burma, and Vietnamese plantation owners all but buy up two eastern provinces of Cambodia. So for me this is a valid subject of inquiry in our neck of the woods. In Australia, I’m not concerned whether it’s Chinese, Americans or Brits doing it.

    The macroeconomic policies you mention are the primary issue, as you say. But this doesn’t yet prove that Chinese or other foreign investment isn’t contributing to high Australian housing prices.

    • June 13, 2015 at 5:22 pm

      How does one find a data set to prove your friend’s suspicion derived over a single short vacation? How does one “prove” that your children’s future is being impeded because of the Chinese?
      It’s difficult to falsify these assertions just as it was difficult to falsify, pre Apollo, the claim “the moon is made of cheese”.
      As I said, these are assumptions. They are not proven. There is a single government inquiry striving to make the link between foreign residential investment and local housing market inflation. That’s where you look for evidence to support your hypothesis. Contact the member for Higgins or simply look at her website.
      But even so, remember the very basic differences in economic understanding that someone like me would have and someone like Susie O’Brien, or perhaps yourself, would have and think about how lies, damn lies and statistics can be used to prove (but probably not falsify) each case.
      I believe that economic systems are complex and are most influenced by large trends. Susie believes economic systems are simple enough to exclude most influences and are influenced by small groups. This is the neocon perspective: morality impacts the market. Good people make good markets and bad people make bad ones. I think this is tosh. Happily, so do most economists.
      Not to be rude but I would say you are arguing before thinking here. You are saying “show me the evidence this is not the case” which is impossible because most things in the social world, including claims like “Jews control the finances”, are really difficult to disprove. I know they are bullshit because I believe the widespread view that markets have their own momentum which exceed the character of the individuals involved in them. I do not believe this anti-Semitism not just because I despise racism but because I know that racist assertions about money betray a very poor understanding of economics. The market exceeds individual or cultural character. The market has a shape of its own as game theorists, even the right wing ones, might tell us.
      How can I disprove your personal emotional story with facts when that data is still being formed into sets from a Coalition standpoint that is informed by the will to maintain negative gearing? I can’t. This doesn’t mean that I am wrong. It just means you are proposing a hypothesis and saying that it is proven theory because I can;t disprove it. Which is not, as you may recall, how science, even the dismal science of economics, proceeds. This is the same argument someone might use for the existence of God. “You can’t prove He doesn’t exist therefore He does”.
      All housing academics of note agree that there is a series of factors impacting the bias that led to us having the third crappiest wage to housing price ration in the world. Try the RMIT dept or any major university.

  6. John Macgregor
    June 14, 2015 at 12:54 am

    I don’t have an hypothesis, let alone a proven theory: I’m asking a question.

    I don’t want to ask Ms O’Brien, the Member for Higgins, RMIT or a major university that question because it relates to an assertion made by you, not by them.

    If the influence of foreign investment is not disproveable, why did you say Ms O’Brien’s claim of Chinese influence on the market results from her “refusal to engage with easily accessed fact”, and that none of the reasons for the crisis in housing affordability “have anything to do with The Chinese”?

    • June 14, 2015 at 1:53 pm

      O’Brien asserts the chief reason there is an inflationary bias in the local housing market is Chinese investment. She has done this without research.
      Facts are easily accessed by journalists. One can call RMIT, Uni of Melb or the RBA. These are the organisations that provided me with explanations of the Australian market. The RBA has published regularly on the factors that have lead to diminished affordability.
      My answer is do as I did. Ask any economist worth the title. I do not cite them here because this is a personal blog and it would not be ethical to quote my sources somewhere they’ve not agreed to appear. I have written about the factors impacting housing affordability before. Then again, so have literal hundreds of Australian journalists. For you to claim that there is not sufficient proof of the factors that influence house price is proof only of your unwillingness to read.
      My claim is that O’Brien’s claim that the Chinese are driving up prices is wrong. There are a number of well-documented and modelled factors.
      The evidence you need here lies with the majority of published analysis.

  7. Will
    June 14, 2015 at 11:02 pm

    I’m sure Rachel’s eyes were following me when I read this, but that could’ve just been my being tired as shit!

  8. CAP
    June 15, 2015 at 12:46 am

    Data is only as good as it’s validity/efficacy. True story

    I mostly agreed though so I’m just being cheeky for fun. Sorry. The Chinese are definitely not to blame because A) They are not buying first home owner type properties generally but ones worth considerably more; and B) by and large they are actually being held to the law and buying new, those handful of cases that haven’t are the exceptions not the rule.

    I had to skim some bits though because they seemed so sitcom oriented I started to question whether reading a blog could make you stoned and put you on a couch in the 90’s. Turns out there is no data to prove it can’t or can, so it could have been the curry I’d eaten giving me flashbacks, that didn’t help with my concentration. I think the real culprit is I found the article you were referencing by Rachel Hair so etched in one eyed dullard, that I couldn’t actually get through it. So with no point of reference to what you were arguing about I just had to imagine Suzie as bratz doll, without the tree change, saying ‘like’ a lot in a valley girl voice, and complaining about how the poor were gross. I was probably pretty close to the money so I feel no reason to go forth and read her article, in the same way that she felt no need to go forth and find out about how negative gearing increases economic disparity and disadvantage, and is currently driving a market bubble where people are encouraged to buy more than they can afford while interest is so low it can pretty much only go up. And when interest inevitably does rise, that will then result in debt laden negative gearers defaulting on their loans and also push rent up even higher as they scramble to accommodate loss, trapping the renters even harder by making it even more impossible for them to save for a loan.

    A smart model wouldn’t have people extended to the limit while interest rates were low, as they’d future proof themselves against the obvious and imminent interest rises that could make repayments impossible. Having a mechanism encouraging debt is ludicrous in any market, but it is devastatingly dangerous in a soft one. Rent prices are high and have risen continually despite low interest, so pretending it’s trickling down in benefit to renters is preposterous. House prices are high due to more investors in the market who are more cashed up than first home buyers, and these speculative property investors are debted to the hilt meaning – POP – because renters are already stretched. Renters are being forced to eat into savings to keep up with cost of living and rising rent. They will share house, live out of cars and be forced onto streets by reckless debt expansion causing further rent increases when rates rise, but meanwhile they are supposed to feel sorry for the investors locking renters out of the market, and stupidly investing in a debt encouraging model, built by design to break. It can surely only have ever been meant as a short term policy at best, negative gearing shouldn’t still be in place.

    It’s a mess Helen, a mess. There is no getting out of it people will get hurt. I rather think removing negative gearing now is the only chance to help deflate the bubble gently, as it would encourage investors to sell, and that way they should be less stung and get some money back, and the housing market would naturally level out more gently. Some might lose some money, but not their life’s savings, and if the government leaves the capital gains discounts on and the investors have made improvements on the properties, perhaps they would even get out of it a little in front. In fact, I’d be kind enough to say reduce capital gains tax on houses even more, because that would encourage people to sell, but do not allow negative gearing. Having capital gains tax reduced without negative gearing in place would actually stimulate the property market as was desired, because builders/developers could easily build a house for less than it’s completed value and then sell it on for a profit worth their time without capital gains making it untenable, and then they could start another. That encourages growth. With negative gearing all you encourage is people to stay in debt and sit on all the houses they can, not letting anyone else have any, and if you’re about to get out of debt, re-mortgage and get more debt/houses without actually building more or improving anything. If they do not remove negative gearing, when the interest rises as it has to, this bubble is going to burst even more painfully on negative gearers than removing negative gearing will now, and the ripple through to renters will create homelessness and crime and real housing problems on a large scale. Then banks will be hit by defaulters in the thousands, and since Joe Hockey is encouraging people to go into more debt saying debt is the most affordable ever; it will be huge. That will suck pretty bad for those renters trying to save for a house who lose all their savings in bank collapses, not just landlords who are recklessly taking on too much debt; but if you’re wife is a banker I’m sure you’ll have that all sorted in advance. The government needs to take this seriously and stop trying to justify it while they still can or it will cripple housing for decades. Their smug attitudes at their relative financial security wont be worth having in a society where everyones on the streets and too poor to create an economy worth living in.

    Negative gearing is fun while it lasts but when the economy is soft as it is now, it’s true danger is at it’s peak visibility. It is not a stable mechanism and people’s homes should never have become speculative investments, but that is what happens when extreme capitalists get greedy beyond common sense and self preservation. They actually screw themselves as well with their own cleverness at times. Now that we have hinged homes into a speculative investment market we are in for a world of pain as rates rise, and none of Hockey’s and Abbott’s weasels words about how awesome and unbubbly this bubble is will save them or anyone else. It will be the recession we were too fucking greedy and arrogant not to have if they do not scrap negative gearing and actually stimulate housing production and improvement, either through capital gains tax breaks on newly built homes, or something else.

    Negative gearing is counter intuitive legislation in a society that prides itself on everyone having the chance at their own castle. Negative gearing stimulates landlord ownership not personal housing. It’s that fucking simple and that fucking obvious that if you have a system designed to give people discounts on tax for becoming landlords, that you are obviously not encouraging conditions for people to have their own homes.

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