Ben's Blog

Supply and Demand

Here in Australia we always try to satisfy the demand for housing by increasing the supply of houses. But we already have plenty of houses, very big houses. We actually have more space per head than anywhere else in the world, as well as bigger backyards, and bigger parks and millions of square kilometres to roam around in our enormous SUVs. Rather than increasing the number of houses, we should decrease demand by reducing the number of buyers. When house prices slump, house owners counter this by keeping houses off the market, thus reducing the supply of houses. So obviously buyers should counter this move by staying out of the market, thus reducing the supply of buyers. So why don’t buyers do that? Buyers tend to keep in the market because they fear that houses will just get more unaffordable, yet ironically, it is that very fear that drives prices up. Buyers competing with each other drives prices up, when they actually want prices to fall. So maybe they should stop competing with each other and start working together. They should go on strike! They should take a note of the current prices on the market and state that they will not buy one single house until the price of that house drops 10%. Then they must sit and wait it out, just like any other strike. When the house owner capitulates, the buyers have to figure out who gets to buy the house. If at this point they revert to competing with each other, the price will go back to where it was, or higher still. So they must figure out a fairer way. I imagine a ballot system might work. Each buyer chooses say, their three favourites. Their names go into a hat, so they have 3 chances of getting a very cheap house. If they miss out, they can have another crack, or they can break the strike and pay an exorbitant price for a house and pay the exorbitant mortgage for the rest of their working lives. But here in Australia we take a dim view of  strike breakers. We call them ‘scabs,’ they cover the wound temporarily, while it festers away underneath.

For more sage advice on the housing crisis go to HOUSING