The Game is Rigged
Email came through from Donald this week, alerting me to last week’s Media Watch – aptly titled “The Housing Game.”
The episode leads with “Up? Down? Flat? Don’t believe the media or the forecasters when it comes to real estate prediction” and how true is that little statement!
You can watch it or read the transcript here.
All the MSM networks are busy pumping the property boom.
They’re highlighting the sensational and driving the fear of FOMO.
NATALIE YOANNIDIS: Melbourne property prices have gone through the roof.
EMILY WALLACE: People are crying at auctions. It’s a very emotional time for buyers, feeling like they can’t get into this market.
- Ten News First (Melbourne), 16 April, 2021
TRISTAN MACMANUS: Eddie Dilleen is just 29 years old and owns 29 properties. He joins us now to share his secrets.
- Studio 10, Ten Network, 15 March, 2021
Couple reveal ‘light bulb’ moment that helped them net $1m a year in rents and retire in their 20s - The Daily Telegraph, 20 March, 2021
Aussie couple who turned $60,000 house deposit into $20 million property portfolio
- News.com.au, 22 April, 2021
They’re feeding off predictions by MSM economists.
ALEX CULLEN: Despite the pandemic house prices are expected to skyrocket. The Commonwealth Bank predicts home prices in Sydney will rise by more than 13 per cent over the next two years.
- Today, Nine Network, 16 February, 2021
However, these are economists that last year were forecasting a crash.
DAVID KOCH: The country’s biggest lender is warning house prices could plummet by almost a third because of the coronavirus pandemic. Commonwealth Bank’s worst-case scenario sees an average 32 per cent drop by March 2023.
- Sunrise, Seven Network, 14 May, 2020
SHANE OLIVER: … the unemployment rate is at least going to get to 10 per cent. And that opens up the possibility that property prices could fall as much as 20 per cent.
- The Business, ABC, 25 March, 2020
SHANE OLIVER: … I think we’re going to see more gains. I wouldn’t be at all surprised if prices go up by another 15 to 20 per cent over the next 18 months to two years.
- News Breakfast, ABC, 4 March, 2021
ALLISON LANGDON: … you’re looking at that, falling by 32 per cent by the end of 2022, that’s really suggesting there’s no V-shaped recovery in all of this, is there?
EFFIE ZAHOS: It will take a while. I mean, it means a million-dollar property you can pick up for $700,000 and that’s what I guess Sydneysiders are looking at.
- Today, Nine Network, 14 May, 2020
EFFIE ZAHOS: … this is the median price now and the far right — assuming, let’s say, this is a scenario, that the RBA, you know, does say that it increases by 30 per cent — you could pocket $300,000 over the next three years if you jump in now. It seems like a sure thing.
- Today, Nine Network, 2 March, 2021
“Up down. Up down” says media watch.
To be fair – if you were peering in from the sidelines last year, then yes, it did look dire for the real estate market.
But the above is just one example of many failed forecasts over the years.
All from economists given a front seat in the mainstream.
How can they be so wrong?
The travesty here is their failure to study the land cycle.
The motivation - if they acknowledged the land cycle existed, they would have to accept the cure.
That cure of course, was put forward by Henry George in his book Progress & Poverty.
Tax land and un-tax income and productivity.
Taxing earned income is robbery.
Taxes on capital reduce its supply and destroy economic activity.
And in our economy today, taxes are certainly not needed for government spending.
For every dollar of income tax collected, we lose around $2 in productive activity (deadweight losses of taxation).
You may as well flush your tax dollars down the toilet.
Land taxes on the other hand, cannot reduce land’s supply. And they do not destroy productive activity.
Land tax reduces land’s value (discouraging hording land for gain) and encourages construction, thereby increasing supply and reducing rents.
We’re a long way from seeing the system change here. The current regime will never allow it.
Instead, we encourage real estate speculation and allowing owners to “grow richer, as it were in their sleep, without working, risking, or economising.” (john Steward Mill)
You don’t have to like it – but you do have to understand it.
Especially if you want to advantage from it.
The economy is rigged in favour of landowners.
Keep that in mind when you invest your dollars, and you too can “grow richer as it were” in your sleep.