Property investor Nathan Birch says inflation is the real reason behind soaring property prices
With house prices soaring to never before seen levels, a prominent investor who owns 200 properties believes a troubling factor is behind the rise and warns it could get messy.
Government’s decision to print more money and drop interest rates has been the real driver of the latest boom in property prices, according to a Sydney property investor with over 200 houses in his portfolio.
Binvested buyer’s agency founder Nathan Birch said it was a myth that prices were skyrocketing because homes were becoming more valuable and recent price rises were instead the result of money simply losing it’s value.
“People think I am crazy, but the money is loosing value because the RBA keeps printing lots of it for people to spend,” he said.
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As Sydney home values reached an all-time high today after growing at the fastest rate in 17 years, Mr Birch said the Reserve Bank of Australia’s money policy along with government incentives was driving inflation levels up.
The latest inflation figures from the RBA show in the past six months to December the consumer price index (CPI) has gone from minus 0.3 to plus 0.9 — the fastest increase in several years.
Mr Birch said the rate of inflation was going to rapidly increase in the coming years as a result of the additional stimulus injected into the economy during the pandemic.
“We are about to see 50 years worth of inflation happen in the next five years,” he said.
“This will see people not be able to afford food as everything will have become way too expensive.”
The property investor said inflation had been affecting the property market for the past several decades. He added his parents paid $13,000 for a house in Western Sydney 50 years ago, which was now worth about $1.5m.
“The margin in getting a loan was thin back then, but they made it work with my father’s $2000 salary,” he said.
“Inflation has gone up so much we now need both parents to work to afford a home when previously you could live off one income.”
Mr Birch said as the RBA printed more money to stimulate the economy it may have increased salaries, but it also sent the price of everything through the roof.
But not everyone has agreed with Mr Birch’s take on the market.
Housing Industry Association (HIA) economist Angela Lillicrap said inflation did play a role in the home value growth but it was not the primary factor.
Ms Lillicap said supply and demand was having a more pronounced impact. “At the moment we are seeing a shortage of stock not able to meet all the buyers out there,” she said.
Ms Lillicrap added it was difficult to predict at the moment whether inflation would continue to increase or stabilise this year.
“The last few quarters there has been a number of strong pulls that have affected inflation rates such as the government’s childcare incentive during the pandemic,” Ms Lillicrap said.
“Strong house prices will have an impact on inflation levels, but it is anyone guess as to how much we will see inflation increase.”
Originally published as Property investor Nathan Birch says inflation is the real reason behind soaring property prices