Thursday, October 26, 2006
My fist day at work at the Canberra Times itself (instead of writing for them from home in Sydney) was Wednesday. A great crew. I feel part of an institution with great people.
And I got Page One with news of the CPI. I wrote an analysis piece for Page 2 which, saying that an interest rate hike would be no bad thing. I feel like I made the right decision moving to Canberra and the Canberra Times.
The page 2 piece finishes over the fold.
If, as now seems likely, Australia’s Reserve Bank pushes up mortgage rates in November and then again in February it will be doing many of us a favour.
Not, I hasten to add, Australians such as myself who bought our houses before 1999 and enjoyed the fifty per cent plus increase in prices that followed.
Seven increases in interest rates in the years since 2002, with the prospect of two more to come, are making it hard to meet the repayments.
But people such as myself are much better off than those Australians a bit younger, or perhaps a bit less lucky, who failed to get on the house price boat before it sailed.
Many of those people have seen the buying power of their lifetime earnings slashed as house prices moved beyond their reach.
Whether knowingly or not, the Howard government triggered the house price explosion in September 1999 when it decided to roughly halve Australia’s rate of capital gains tax.
From that time it on owning an investment property there became just about the best game in town when it came to making money without effort.
As the new investors pushed up prices, those of us who had already bought were (sometimes secretly) delighted. Our paper wealth had climbed beyond what we had thought possible. We rewarded the government in the 2004 election.
The Australians who were locked out of home ownership by the price explosion were in many cases too young to vote.
They have been cheering the recent decline in house prices in NSW as many of the new ‘investors’ have been forced out of the market. They would love that to happen in the high priced states of the ACT and WA as well.
Two more hikes in mortgage rates might just do it.
If they are painful for you, think of your children. The lower house prices those rate rises will bring about might help them afford somewhere in which to live.