Overpriced Overton Window Shift

 So first up, I don't see the Overton window as one that can be manipulated or gamed, I think the Overton window is descriptive. Okay in 1997 if you told people you believe the Earth is flat you probably couldn't get a discussion going. The Overton window shifted sufficiently by 2014 that people could get discussions going on flat-earth theories because the internet facilitates user groups forming communities so conversion becomes possible based on a critical mass.

In the early 2000s when I first entered the professional world, the Australian housing market was heating up. One of the best selling books was "From 0 to 130 properties in 3.5 years" and the mood was feverish, within the first month of starting this blog, I wrote my first piece on how property was mishandled by Australian tax codes, from memory only a day or two after my first exposure to the ideas of Henry George who's book "Progress & Poverty" I have never to this day read.

Back in 2006 I would say to question the Australian obsession with property investment was fringe. I mean I literally was going into this dank office of an NGO where there were like all 14 people in a city of 5 million or so who were enthusiastic about discussing land speculation. 

The thing was, Australia would declare from time to time a number of housing affordability crises and for a change of pace rental vacancy crises. However, the Overton window was tight, the situation was always caused because population was growing faster than the supply of housing. There were two clear solutions - cutting back on immigration and removing red tape on new housing construction. 

"It's simple" declared red faced politicians on ABC S&M programming Q&A "Supply and demand. If prices are going up it's because demand exceeds supply, therefore..." and I have no strong association with any side of politics, "...we need more houses/less people."

For a frustrating period of my life, I had a reductive view. Early on I assumed that the end of the situation must be imminent, the overton window didn't matter, I could just conclude from the facts that the Australian property market was going to collapse. It never did, and I was confronted with what I could not understand.

Certainly by 2008~2009 I gave up on trying to predict the catastrophic deflation of the Australian Housing Bubble. I saw the Rudd government pull out all the stops to prevent any loss of enthusiasm for property investment in Australia, such that when the pandemic came in 2019 I was actually interim manager of the organization that introduced me to Henry George and none of us expected the Melbourne or Australian housing market to crash.

I can only speak for myself, but by 2009 I had changed my model to one in which I hold that Australian's simply lack the imagination and enterprising spirit to invest in anything but property. Personally I was convinced, and to a degree still am though for different reasons that all focus and energy should be expended on getting average Australian's to think about property investment at all.

Something I left out of my post on culture shock, coming back from 3 straight years living in Mexico, because I didn't notice it in my early months of return is that the Overton window has dramatically shifted. In Australia people will discuss on forums like Q&A even posing questions to the federal treasurer about curbing property investment as a return to the housing market.

Yesterday morning I watched a bit of a video of some guys just walking through empty houses in the Melbourne suburb of Naarm. I bought an indy game pokemon rip-off called "Cassette Beasts" and was surprised to discover one of the antagonistic groups were property investors, confused by locals as vampires and zombies.

Part of the shift is definitely global, Georgists are popping up everywhere and will even call themselves such. There's been networking by housing advocates in the US, Canada and UK at the least that have got their ideas into the heads of podcast guests who comment on the economy.

Australia does seem fairly isolated however, I base this on the Median house price in San Francisco as of July 2024 being 1.2M USD now roughly 1.77M AUD just an hours drive from the San Jose headquarters of NVidia and Apple, Google etc. The median house price in Sydney Australia is $1.1M AUD just a short drive from...Commonwealth Bank of Australia, Australia's highest cap company whose primary business is lending money for property investment. Then there's BHP at number two cap, a mining company.

House prices in SF are crazy, but they could be seen as a function of the high wages paid by the world's most valuable companies. The desire of young STEM graduates all over the world to go there and get rich by 25. 

Prices in Australia are so bananas they are practically pineapples. Youtube news-explainer channel TLDR did a story on Australia's economy that speaks so candidly about the Australian property market that it likely would come as news to many Australians.

Do I expect anything to change? Not dramatically, but what I'm saying is, that it has already dramatically shifted just for anyone to be saying that the housing market's problems might be caused by housing "investment" which to me indicates not that I am some uncredited profit, but that likely it is symptomatic of greater numbers of people finding the Australian social contract unfeasible. 

Which is to say, I suspect post-Covid inflation shifted the window, more so than 16 years of reporting on housing vacancy by Prosper though I do think the speculative Vacancy report provided important scenery out the Overton Window for discussing, particularly with high profile youtubers like Friendly Jordies.doing good explainers that maybe the common sense story of supply-demand that assumes away market inefficiency helps a lot too.

That said, I don't think humans anywhere are naturally cut out to understand concepts like paper-wealth such that the idea that assets you think you have could be revalued in a way that wealth simply vanishes just isn't going to be intuited. 

I think most people if the only difference between having $10M in the bank as cash and $10M in investment property is that next year $10M cash would be worth $9M because inflation and the houses will be worth $11.4M because magic.

Shove in the "Bezzle" from "embezzlement" which unwilling to go find the relevant explainer video from Patrick Boyle whose channel is excellent, so I'll just make a third-hand hash of it. You think your business has $2000 in the cash register, unbeknownst to you your employee has embezzled $1000 over the weekend since you last balanced the books. As such, that employee has $1000 that they know they can spend, and you believe yourself to have $2000 creating a $1000 bezzle of money people treat as if it exists. At some point, say Monday evening when you count up the money in the register after COB the disparity is discovered, at which point you have to say "oh fuck I can't pay back that short term loan." 

Now I don't know what the bezzle created by Australian banks creating money to loan to people to buy Australian housing is. The Australian property market was valued at $10 trillion dollars, 3~4x times more valuable than the entirety of Australian publicly listed companies, and 3~4x times more valuable than a years worth of finished goods produced by the country.

My position for 14 years has more or less been, if there's no good reason for property to be worth $10 trillion, then there's no good reason it can't be worth $5 trillion or $20 trillion. We are simply observing behaviour. Again, I would rest upon the general observation that despite the shift in the Overton window, Australia's obsession with property could be considered an analogue to religiosity. Most Australians cannot imagine investing in something other than property. They will refer to owning a piece of a business that generates profits as "gambling" (the stock market) and given the rational case against theology has been overdetermined for centuries, I doubt Australian attitudes will significantly budge soon. 

Furthermore, while it is distasteful to live in a society were rentiers are so esteemed and watching them populate the proliferating wine bars to celebrate their unearned wealth, people who own multiple properties aka "property investors" are likely a small minority. The worst thing is that they have meant people who buy homes to live in and raise children and be families are forced to speculate on their own homes through artificially restricted supply and artificially inflated prices. 

A housing crash will devestate good and honest people. Probably for a decade or so, I have come to realize there would be no Schadenfreude for me if the Australian property market were to rationalize or correct. The sooner it does, the least apocalyptic it would be, but we have long passed the point where deleveraging could be described as a bump in the road.