Housing isn’t the concept that we thought it was… have you caught up?
What is a house?
If like most people you said something like, “a place where people live”, then you’d be right, but you’re missing a big part of the story.
Even if you put on your investor hat and said, “a place where people live, that you can also own and earn a rental income from,” again, you’d be technically right. Full marks from Investopedia for you.
But again, this is only part of the story.
Housing, as a concept, is changing.
And if you’re not watching this space, then you’re going to miss the biggest opportunities on offer over the next twenty years.
For a long while, you’re “a place where people live” definition would have served you well. Up until about the late 1980s, that was pretty much right.
But then ordinary Australians started cottoning on to the investment potential in property. They realised that housing was a place where people lived, but it was also something you could invest in.
The game changed, and a big part of the story behind the ongoing boom we’re living through is that more and more people are making property part of their portfolio.
But now the game is changing again.
Some of those changes are easy to identify.
Take the evolution of AirBnB for example. That has surged in recent years, and it’s a whole new way of thinking about housing.
Now a house is somewhere that people live, that can be invested in, and can give you access to the Tourism dollar if you fancy being a hotelier.
The latest stats show there are 115,000 listings on Air BnB right now.
And a study from the University of New South Wales shows that in Sydney, 60% of Sydney’s 20,000 listings are for entire homes.
That means there are 12,000 homes in Sydney, that used to just be a place where people lived, but are now a sort of quasi-hotel.
And if we extend Sydney’s experience around the country, that means we’re talking about something like 60,0000 to 70,000 homes, across the country, now dedicated solely to the short-term accommodation market.
This is a real shift.
I mean, we’re talking about almost a full year’s worth of housing supply, just never making it to market. That’s got to have an impact on prices.
Or take the way housing has become a ‘store of wealth’ for rich globalists.
Rich people (even aspiring rich people!) from China to the US, from the UK to Russia, are looking to Australian property, not because it earns an investment return, but because it gives them a way of storing their wealth…
(… and possibly hiding it from the authorities back home.)
There were almost a million empty homes on Census night. We don’t know how many are due to investors deciding that they’re better off leaving their investment empty, but we hear stories of entire apartment blocks in inner-city Melbourne and Sydney being used for just this purpose.
Again, this has got to have an impact on the market.
And again, we need a new framework for thinking about housing. This isn’t just “a place to live” or a place to invest in.
This is something different.
So what is it?
This is important. The people who made money in the early days of the internet were the ones who saw what the paradigm shift was really about. It wasn’t just a way to connect a bunch of boffins at elite universities.
(It was an unprecedented vehicle for porn!)
Same story with the blockchain technologies. The ones to make money will be the ones who see the full promise of the technology on offer – a promise that may take years to realise.
So how should we think about housing?
Well, at the risk of drifting off into abstract space, I would say this:
Property is the gateway between the real and the unreal worlds.
I don’t mean that if you set up your Ouija board in the right way, property becomes a portal for communicating with the dead.
I mean that there are fundamentally two types of economic activity. There’s real world activity – making cars, growing fruit, building stuff. And there’s unreal economic activity – writing blogs, marketing, mining for bitcoins.
No one is any better than the other, but at some point, all economic activity needs to be made real. We work so that we can ultimately buy real things – food, housing, clothing etc. You can’t live on blogs.
And while you can have a real economy without any unreal elements, you can’t have an unreal economy without any real elements.
So the unreal rests upon the real.
Property – and land in particular – are unique then because all real activity must be grounded in the earth. The minerals that make up your IPhone have to come from somewhere. Your factory has to be located somewhere. Your zucchinis have to be grown somewhere.
And so property is the place where all the unreal economic activity – the vast billions and billions of dollars that rush about producing nothing anyone can touch or see – it is the place where all this activity grounds.
It’s the way that lightning needs to ground to exist. A lot like that.
The great colossus of human economy must at some point pass through the gates of property.
And the bigger the economy becomes, the bigger those gates have to be. The more value they hold.
And so as our economies continue to expand rapidly, and as the balance continues to shift from the real to unreal, as it has done for the past 50 years, the relative value of property increases.
And so we digitised hotels – that revolution grounds out in property values. We digitalised taxi’s. Now everyday parking spaces are factor of production.
China produces a thousand billionaires. They want to ground their wealth into something real before it is taken away from them.
So this is what I’m suggesting. Over the long, long run, I’m thinking about property this way – it is the gateway between the unreal and the real worlds.
No modern economy can do with out it.
And once you have that level of necessity, its potential long run value becomes limitless.
What’s your framework for thinking about property?
Dan says
Interesting read
ron goddard says
golly jonno,
where did you get that from? is anything tangible anymore? are we at last drifting into cyberspace and mocking the angels at hell’s gate? mate, with all of the gobbledegook about assets, cryprocurrencies, bitcoins rocketing to over US$4,250!!! and etc. where are headed, really?
up until 1971 we had a money supply tied to the gold standard. then pres. nixon (august1971) decided(under instruction of course) to abandon the ‘gold standard’, then ‘we’, governments, flooded the world with fiat money. the result we have is a ‘rebellion’ against ‘normal’ currency in the form of cryptocurrencies: bitcoin etc. but, heck,the measure of value of cryprocurrencies is still termed in US$. so how does one establish the value of cryptocurrencies away from the establishment, or do we always value against the US$ forevermore?. its a puzzle, for me anyway. you mentioned wankcoin. imagine going into ‘coles’ with a bunch of ‘wankers’ and buying up stuff. how much is a wankcoin worth? would the checkout chicks be offended by this bunch of wankers?
my framework for thinking about property? nothing will ever replace property, but i don’t need to have more than one ‘home’ to be happy. you mention over 1m. properties vacant in oz. well thats just wonderful. so thousands of fellow australians are sleeping out in all sorts of weather and you think that is the way to go. there is a saying: ‘oh how the mighty have fallen’, and as mighty as you may appear to be, one day you may join the many thousands of dispossessed, but then you are writing from a pragmatic point of view, in that it is happening and little we can do stop the flow of things, so i should not take you to task.
with all the drivel about property investment have we lost our way as a civilisation? i have always thought that it is better to give a little than to take a lot.
cheers,
from ron in west oz
KiwiAl says
Hi Ron,
He got the seed of the idea from a link I posted a week or two back about the number of empty houses on Census night!
Alan odwell says
Ron … we are still bound to gaming on the fabled stories of the Sheriff of Nottingham and the tax collectors and as the tragic saying still goes – ‘if you cant beat them join them’ – nothing in my view about that old stuck in pigs dung way will ever be changed until every human being recognises a dark force compels the unjust ownership of any more than one person truly needs is an absolute plain simple living fact that every person has a birth right to their own home and it is not deniable and is not at the exorbitant expense of having to put up with modern times of people whom have a life of leisure living of the low wage earners that just buy the wine for the investors of the corrupt world that we all put up with … equality is a life that does not have people that live homeless on the streets – in the real world of a country that is supposed to be the ‘lucky country’ – (that was stolen off the traditional owners while just accepting they were not worth thinking about – let alone all the other humble folk across this Earth – that are still being shoved around by a ‘mighty dollar’ – greed is greed and not a mode of intelligence that serves anyone in the LONG RUN – time as tide enough should have made it plain – right now again – what is a bank all about – Commonwealth? of Australia ?? – yeh ! ? I also spotted 6 white pigs with blue spots fly past my window today 🙂 ?
Al says
… one of the 4 in series … https://goldsilver.com/hidden-secrets/episode-4/ _ its a point.
Simon Andrew Richard Long says
The top half of the market should be for investors to play pyramid schemes with.
And the bottom half should be for people to live cheaply in.
Councils were never legitimized, yet they control and artificially restrict the supply of land for housing, we seem to need about 20,000 people homeless across melbourne to keep house prices in the big empty land on par with Hong Kong, where land really is in short supply.
KiwiAl says
Another interesting teaser!
Regarding AirBnB….
As someone who spent 6 months running a city motel, I have now “seen it all” – up to a point anyway.
As a result of that experience, I would NEVER, NEVER, NEVER put up any of my property for unsupervised short-term rental on AirBnB or anything similar. I know what goes on in motels. We had the Police there every couple of days. With no one to watch over what they are up to, AirBNB is just a GOLDEN opportunity for lowlifes and criminals. The reality is, motels are magnets for scum. Try to avoid staying in them.
I can tell you that one night in the motel, we even had “Meth” , you know, “P”, “Ice”, methamphetamine, being “cooked” in one of the rooms. In and out, in one night! We had no idea, but when we studied the surveillance videos, we saw them lugging big duffle bags of gear into the room late at night. And out early the next morning. The only sign of anything untoward was the towels, which had soaked up some “brown substance”. This is one of the common signs. Another sign is a pockmarked, acne-ravaged face. Probably driving a respectable rental car… Very hard to trace.
That stuff can render your property uninhabitable. If you do rent to a Drug Gang and they “bake” in your property, cross your fingers that they are good, and don’t have a fire or an explosion! But if you want to try to protect yourself, you’ll need to spend money for real-time detectors, and you have to ask, is it worth it?
And if it’s not drug-making residues, it’s cockroaches, or worse, bed bugs. They (bed bugs) are now, thanks, I believe to Immigration (much more than Tourism), becoming a major problem. They are hard to detect, and very hard to get rid of. Most people will bring in the Exterminators, which means the room will be highly dosed with Toxic Chemicals. Maybe that morning…
Sleep easy in your fresh smelling motel room bed, while the drug cooks “bake” in the room next door on one side, and the bed bugs are trekking from the guy on the other side’s backpack to your nice, cosy dressing gown, hanging on the back of the door. Not to mention the gay guy upstairs, who runs the shower the whole night long (use your imagination why), or the one downstairs with the lady of the night… Never mind the couple with the screaming kids! They are the nicest ones there.
Kathy says
Housing, essentially a non productive consumption item, has become commoditised thanks to generous tax breaks given to people who make losses on their “investment”.
At the end of the day, all housing is and should ever be is shelter. It isn’t any more thanks to government meddling, endless tinkering with the system, unintended consequences and just out and out blatant pandering to greedy donor developers by even more greedy state governments and illegal (as noted in another post, as they have never been recognised in the Constitution) Councils. Read Game of Mates by Cameron Murray and Paul Frijters to see just how blatant this is.
There is something very wrong when people buy housing just as somewhere to park their money rather than use this housing for it’s intended purpose.