Beware the mother of all housing booms

Australians are rushing for bricks and mortar as they've always done in times like this. With interest rates low but banks wary, the market is set to blow up.

If we are not very careful Australia is going to have the mother of all dwelling booms. What we are seeing is a three-pronged boost to prices. First is a dramatic push to lift the demand for dwellings by banks offering cut mortgage rates thanks to Reserve Bank Governor Glenn Stevens. But second, and just as importantly, there is reluctance by banks to fund new supply.

In any commodity if you inflate demand and squeeze supply, prices go through the roof.

Thirdly taxpayers will subsidise the boom via a massive increase in the use of negative gearing via both personal and superannuation tax breaks.

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