Myself and Jacqui are doing the responsible thing and saving for a house deposit, so we’ve started paying a bit of attention to the goings on in the property market. Property crashes in the US, UK, Ireland and throughout the world gave a glimmer of hope that Australia’s over-priced property market would also deflate a little, but it hasn’t happened.

To ease their entry into the market, the Federal Government started offering between $7000 and $14000 to first home buyers, on top of the $7000 plus stamp duty concessions which have been offered by the State Governments for years. Most people think this is a great idea, but a moment’s thought shows that it’s completely stupid, as all it does is push up house prices by the amount of the handout. Sure enough, first home buyers now make up almost 30% of the market and prices in the cheaper suburbs have increased by up to $40000, so there are quite a few idiots out there paying $40000 more for a house in order to ensure they get a free $14000 from the Government!

Interest rates have been at historic lows, further encouraging first home buyers, and now that the economy looks to be on the mend, we’re being told that now is a great time to buy a house and that the main reason Australian property will never fall in price is that there’s a huge housing shortage. This adage has been repeated so often over the last few years that it’s accepted as gospel, but no-one ever provides any evidence for the claim. A financial site that I keep an eye on finally had enough, and in their daily mailout on Monday asked anyone for evidence supporting the property shortage claim.

The responses were forthcoming, and it appears that the evidence for the claim originates in the National Housing Supply Council’s State of Supply Report 2008, which claims a shortage of 85,000 houses in 2008. The funny part is when you delve into the report to find out how they came to that figure and learn that it’s based on the numbers of homeless!! They’ve added up the numbers of homeless sleeping rough, homeless sleeping with relatives or friends and unemployed people living in caravans. Then they’ve decided that the rental vacancy rate should be 3%, so have increased the ‘shortage’ to allow for it.

So there you have it. The reason Australian property prices won’t fall is because there are homeless people. Priceless!