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I had some mates over on Saturday night, and the topic of property came up. I was half pissed at the time and lost my cool at one of my mates who decided to antagonise me over my opinion about house prices and the oversupply of housing in Australia.

You know those debates that you just can’t win? I don’t cope when having them. It frustrates me how you just talk to a brick wall and there is no give in their argument whatsoever. This particular argument was with someone who has never taken an interest in property or economics, and bases all of his opinions off of what his family has done in the property world (another speculator family).

The issue is, people rely on statistics and charts and newspaper articles to believe everything nowadays. From a statistical point of view, in 2006 (the last Australian census) 10% of Australia’s dwellings were unoccupied. The stats prove my point in a very basic sense, but are they really unequivocal?

When I go anywhere I see for sale signs all over the place – houses, cars, even things like sofas sitting on the foot path! I think garage sales have gone through the roof, and on the whole people are trying to free up their cash. Times are tough for a lot of people. If you are one of the lucky ones who has escaped the bad times, good luck to you, but make no mistake that there are a lot of people are out there hurting very bad.

Talking to friends in real life, or reading forums – people ARE losing their jobs. Some are working part-time now instead of full time, others just suffered a few grand pay cut. Statistics don’t prove this that well, and when you need to take averages into account, it’s often very hard to prove a lot of the things that you argue for.

…in 2006, 10% of Australia’s dwellings were unoccupied.

When you suggest to someone that there is an oversupply of housing in Australia, they absolutely scoff at the idea. It’s hard to get your head around something that goes against everything that everyone had told you when it comes to investing.

The most direct situation is when a tenant loses their job, another tenant will move into their house. As far as the landlord is concerned, there couldn’t be an oversupply in the market, otherwise he wouldn’t be able to fill his property with another tenant. While this can be true for a lot of people, if you look at it from a “whole of Australia sense”, the number of tenants decrease, while the number of properties stay the same.

When in dire straits, people will lower their standards – maybe sleep two to a room. You might find a family home with 10 people living in it. They split the cost of the rent and in the mean time two other investment properties sit empty.

In a deflationary environment rents can back peddle. After all, if people cannot pay your price, they simply cannot pay your price. It’s not a decision, it’s just blatantly not possible. As rents re-adjust and come back down to a reasonable level, the oversupply problem eases and people start to rent on their own again rather than sharing. It’s a very similar situation with the house values themselves.

When faced with this oversupply argument, most people just say that it’s not possible. When you link it to a house price crash, it’s just disregarded as a conspiracy theory or something along those lines.

As always, I just ask for people to consider the fact that I (and the others hundreds of thousands of people), may be on to something here. I don’t have a crystal ball, and I don’t need people to take my word as gospel, I just want to see my friends and family consider it and do their own research, before committing to a rather large uneducated decision.

In layman’s terms, thermal mass is when a body of mass has an ability to store heat. Why am I writing about this? Well it’s hugely beneficial to build a house with a high amount of thermal mass.

Thermal mass helps a house to be comfortable – it regulates temperature. This is very helpful in climates where the temperature is hot during the day but cold during the night. Thermal mass also helps to minimise the amount of man made energy used to heat and cool a house.

Australia is very slow in the uptake of using thermal mass effectively. While many of our houses built are brick veneer on a concrete slab, most of our windows are located in the wrong places, and often walls and windows aren’t shaded properly during the warmer months. We end up with hot houses in the summer, and cold houses in the winter.

An interior wall made from rammed earth.

Building with quality materials and a good design means costs saved on thermal insulation and other materials during the building process, but also heating and cooling further down the track.

Common sources of thermal mass include water, bricks, earth (mud-brick, earthen render, etc), rocks/stones, rammed earth and concrete.

I have mentioned in the past that we would like to build with a concrete slab for the benefits of thermal mass. We also intend on building with two rammed earth walls, internal to the house with adequate windows to heat these walls during the summer, and blinds to shade the walls in the winter.

Rammed earth has a very high density, and as a result is a perfect material to use for thermal mass. Not only is it very effective in keeping a home warm in the winter and regulating heat in the summer, it looks great!

What is rammed earth made from? It is as it sounds really – a soil mix that is compacted. The mix is balanced between clay, sand and aggregate. The mix can change to suit the look that the builder is going for, sometimes with marbled effects throughout the wall. Some rammed earth builders add cement, but not all. Walls are compacted in layers usually around 15cm high.

To me, it’s just another example of how some “out of the box” thinking can make your home a lot more comfortable, and a lot cheaper to live in for the long haul, not to mention adding some unique, earthy design features that aren’t seen that often.

Out parents love us, right? Albeit frustrating to spend time with mine the majority of the time, I know they have the best of intentions. I’ve been reading a lot on the differences between the generations lately and it’s pretty interesting stuff.

To a lot of people, us Gen Y’s are just plain annoying. I’ve read about how Gen X’s are probably the most sour about everything. They are a generation with the biggest mortgages, transport and living costs. As it stands, they have the most to gain from Australia’s economic “slowdown”. (Makes me laugh when they use the term slowdown). Falling interest rates and petrol prices are set to benefit the Gen X’s the most. Essentially, they have had a “hard life”. They’ve worked hard to get nowhere in their eyes, while the Baby Boomers get rich from specufesting (speculation investing), and the Gen Y’s seem to get all of the good jobs while treating their employers terribly.

What the majorities don’t realise though, is that the Gen Y’s are both the Baby Boomers’ only hope to retire on a healthy sum of money, and the best way to keep the Gen X’s in a property that is actually worth something at the end of the day.

Unfortunately what most also don’t realise is that in Australia, the Gen Y’s are the equivalent to a subprime investment. The majority have a huge HECS debt, credit card debt, have little to no savings as they haven’t been earning for long at all (due to studying), are quick to sign any contract (car, laptop, mobile, internet, pay-tv) and so on. Financially… woeful!

Work is becoming harder and harder to find for a lot of Gen Y’s. I know very intelligent people who have attained high grades in university, and some two years after finishing uni are still working casual at a pub. If you’ve got a job, great, but if you don’t, times are already tough.

Now granted these are generalizations.. I also know a lot of Gen Y’s that are good savers, have very safe jobs, and are financially “on track” (whatever their path may be). I also know a lot aren’t though.

None of this really concerns me. What is the big deal about having a twenty grand debt? Sure, to me it seems like a waste of money to me, paying interest on that money, but it’s not a massive amount of money and it doesn’t affect me directly if someone else wants to do that.

What does concern me is this big juicy First Home Owners Scheme (I imagine they don’t call it a scheme for a reason). $7000 FHOG, $7000 “Boost”, $4000 from the SA Government (different schemes in different states), and an extra $7000 if you build. $25000 in free money!

“House and Land Packages from $300,000. Take advantage of the First Home Owners Grant and low interest rates. Rent money is dead money!”

Although loans are becoming harder to get, things haven’t hit home in Aus yet. Notice how there’s a for sale sign in just about every street of the country? They are the smart people. Well they are the people that are smarter than most. The really smart people sold up at the peak a while back, but these ones are happy to cut their losses and get out now before anything worse happens. The Baby Boomers are selling. The Gen Y’s are buying (and allowing the BB’s to retire early).

The FHOG is keeping the housing market afloat in Australia. Practically every Baby Boomer in the country is telling their kids to buy. Interest rates this, FHOG that. Despite their kids only having a few grand in savings, and a job that they have only worked for 8 months. “Get in before the next boom”. After all, “house prices don’t fall, they double every ten years in Australia”……

Now believe me or not, I’m going to say this. From an economic point of view, it is widely accepted that house prices will fall in Australia. It’s happened in history (as above), it’s happened all over the world, and it happens in any other investment market. A LOT of people have something to lose by this happening, hence the naysayers. I won’t go into the specifics because that is a massive rant in itself, but if you want to do some reading check out bubblepedia.net.au.

So we’re going on hypotheticals, because you’re probably skeptical that this will never happen, but lets just say it does…

The Gen Y’s all buy up on housing from the “smart” Baby Boomers. The BB’s are selling their investment properties due to a looming house price crash. First Home Owners Grant and all, Gen Y’s are buying up big, their parents are oh so proud, and celebrations are in order. Then as it happens, the “slowdown” that Australia was having turns out to be a “depression” after all. Whoops, who saw that coming? Unemployment is rife, with the Gen Y’s to go first since they have had no job loyalty in the past, and really they are just an annoying eccentric kid, right Gen X’s? They try to keep above the water for a while, try to keep paying off their loan. Maybe renegotiate with the bank and take an interest only loan for a few months while they find a new job. Rent out the house even? Unfortunately the rental market is at an all time low due to a housing surplus too (not a housing shortage as all of the developers will have you believe… coincidence?), plus all of the other unemployed people are moving back in with their parents or sharing with others.

Time for the subprime of Australia to start declaring bankruptcy. What a nice start to life Gen Y’s. Good luck getting a loan in the future with your credit status now.

But mum and dad love you, it’s a big mean world out there. It’s not your fault things didn’t go your way, nobody saw it coming. Nobody except all of the people that tried to tell you not to buy before you did.