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Australia is having a housing shortage in the wake of housing prices lowering and home sales market stagnating. People are not buying homes, so they are faced with the prospect of additional renters flooding the market. And guess what is happening? You got it, rental prices are increasing rapidly as demand for rental units is outstripping supply. What a surprise, huh. So to manage the process, landlords have come up with an auction system that is helping to determine the price of rentals and get the best return for their money. Another big surprise. Well the housing advocates are all up in arms, they think that by creating auctions, it will hurt the poor. As if the poor ever win when their is a shortage and prices increase. That is the way of markets folks… And guess what will happen when the rental prices increase? You are so smart, you guessed that housing prices will not seem out of whack and there will be a surge into home ownership as what was once way to high is now comparible to rent.

Within the next month, real-estate agents plan to begin the auction process on popular rental properties, by which prospective tenants will be required to bid against each other for the opportunity to lease a home. ACT Real Estate Institute president Peter Blackshaw is hoping the system will bring a better return for property owners. “We are here to represent their interests and try to get them a bit of a return, as much as we can, more than the meagre return they’re getting at the moment because of the tax take,” Mr Blackshaw said. But the executive officer of the ACT Tenants Union, Deborah Pippen, said the proposal was unfair. “It leads to an uneven playing field for tenants. It artificially drives up rent prices,” she said.

 Living in a market economy is the most effective way for assets to allocate and find their fair market value. There will be periods where the assets will over appreciate as we have seen in the housing market the past couple of years in some regions of the country. However, in the long term as Australia is finding out, equillibrium comes quickly and effectively.

• Housing prices are too high, market slows.
• Rental prices increase as there are more renters instead of homebuyers.
• High rental prices make homeownership more logical.
• People buy homes instead of renting.

We are in a flux period as the rental market is cheaper than owning. But this will even out quickly as long as the market is allowed to work.

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