The housing market seems out of control. But there are lots of things we could do

I am dumber than our house.

In the past 10 years I have risen before dawn to produce early-morning radio, sliding outside in the darkness while trying not to wake our sleeping children.

As they’ve grown, I’ve kept working, juggling the rhythms of family life with the demands of live television, often only returning in the dark in time to help with bath time and bed.

My house isn’t that stupid. It just sits there.

Houses in Canberra, where I don’t live.(ACT government)

Recent sales of similar properties in our area have added weight to what the data was telling me already.

In the decade we’ve lived here, our house has likely increased as much or more in value than I have earned in income.

I’m not poorly paid, but I am out-earned, consistently, by a construction of brick and wood — and, more importantly, the land it sits on — that just keeps getting more valuable as it ages and Melbourne’s population grows.

Some people will think this is wonderful, that my house has achieved such insane capital growth.

But is it? I’m not so sure.

Feel-good factor

A key element of what rising house prices do is what’s called the “wealth effect”.

A hand holds various denominations of Australian banknotes.
If you own a house, higher property prices may make you feel richer even though it’s difficult to “realize” that profit.(ABC: Simon Leo Brown)

It’s where you feel you’re richer so you’re looser with spending. That boosts company earnings, profits, investment and should lead to inflation and higher wages.

It’s one of the reasons economists worry about falling house prices. They create a “negative wealth effect” and people close their wallets even though their financial position has essentially not changed.

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