Australia is suffering a different but similar issue. Where people like to focus on the price of the home it is not like that in Australia, it is the land that is getting over valued.
Yes homes are bigger now and I'm building a big one.
I'm having this discussion with some friends currently. They bought their home in an outskirts working class suburb at the time. Sounds far but everything is close in Australia about 10min drive down the road. It cost $24,000 same house today worth $2 million.
Australia used to do quater acher blocks but now don't because home purchases through the purchase of land also have included infrastructure costs such as roads, paths, gardens, services, etc. Ontop of that once completed rates (annual council levy) is applied. That money is then used to upgrade existing areas that don't have that same infrastructure.
The disparity is someone buying today pays for their own infrastructure and then through rates pays for the person who paid $24,000 for house and land. They too get the same infrastructure but without the initial outlay.
In turn the new home builders home costs $860,000 on average to build. This then props up the entire area as the new person who builds pays more than the other person because the land price was more (rates are a % of the house and land combined value usually about 0.5% annually) I believe mine will be 0.06% per year.
The older home owner has now gotten a windfall and it is all untaxed. They are effectively profiting off new builders whom cover the cost of the upgrades which inturn creates value and the next person pays for the upgrades in the uogradded house cost. But the community do not receive the money back on the initial investment. The bank and the seller do.
I can not think of a better scam where I can get someone to give me something for free that they pay for that I can then sell for a profit and pocket the cash and not give it back or provide a % back to the initial investor.
Housing in Australia is a Ponzi scheme and as boomers control both policy and housing and have the greatest voting strength to tackle it is political suicide.
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