A very narrow gap between gross rental yields and mortgage interest rates is a buy signal for investors.
The land of avocado and expensive property
Richard Glover has just published The Land Before Avocado, a wonderful and witty journey back in time to life in the early 1970s. For a start, he deftly reclaims the book’s title fruit from those who have positioned it as a proxy for all that is wrong with today’s supposedly feckless and spendthrift young adults. Rather than maligning the avocado (and young people), he cleverly appropriates the fruit as an exemplar of how far we have come since the 1970s.
The book is both funny and forensic in the evidence he presents. He charts the shortcomings of 1970s life across a range of areas: crime, attitudes to and restrictions on women and minority groups, entertainment, health, safety, economic wellbeing and cuisine. I found his case against the food of the time especially hilarious having myself first landed in Australia in 1973. The place was not the land of abundance I was promised. Rather, too often mealtimes were dominated by processed meat: pies, pasties, Dagwood dogs and Pluto pups. And if you didn’t want to drink beer, then you were generally stuck with terribly sounding and tasting wine called Cold Duck or Asti Spumante.
Glover doesn’t pretend to suggest that today is perfect. Half-way through the book he lists the things he misses from the seventies. Most of his laments can be categorised under simplicity: the relief of less choice in the 70s, be it at the supermarket, the bar or deciding appetisers when cooking for guests.
He acknowledges early on in the book the change in housing costs since the 1970s. I quote: “Houses were cheaper. A lot cheaper. No really: a lot.” But, refreshingly, whilst he does not endorse high prices, he holds back from the usual knee-jerk critique that this is an awful state of affairs (conspicuously, cheap housing isn’t in his list of things he misses about the 70s).
You understand why Glover doesn’t romanticise the cheap housing of the time when you read the chapters focused on the economy, the workplace and on women. It becomes blindingly obvious why housing was so cheap. Longstanding protectionist economics had damaged productivity and incomes resulting in consumer staples and household appliances that were expensive and of poor quality. Total output was curtailed by the shocking restrictions on female participation, especially for mothers. Not only did the high cost of living make it hard to cope on the fortnightly pay packet, but a lack of consumer credit meant there were few financial options in an emergency. More generally, it was incredibly tough to borrow to buy a home.
While Glover is silent on the direct linkage between progress and high house prices today, I am not. The societal change I have witnessed in my 45 years here is simply astonishing. We are a nation transformed. But decisions that have pushed up houses prices – such as the rise of the double income household and easier access to credit – had to happen anyway to deliver the societal progress we enjoy today.
We are currently experiencing softer house prices. But unless we have reached the end of societal progress – which seems extremely unlikely – then history tells us that this will only be a short-term affair.