Tuesday, July 26, 2005

Housing Woes in Australia? There’s Always the Beach

This may seem far flung for a blog about New York and Its Environs, but this is definitely relevant. According to the Sydney Morning Herald (Australia’s New York Times), “The value of home renovations in [Sydney] has plunged $120 million in just three months, or more than 20 per cent - the largest fall in dollar terms since … 1974.” Why? “Analysts say … it became clear that Sydney's house prices were falling.” Of course, we all know real estate markets are regional, right? Yes, they are. I bought a duplex in Cleveland at the beginning of the real estate boom, sold it three years later after making improvements and narrowly escaped losing money. So, yes, real estate is regional, but it’s also global. The same global financial market forces have fueled the real estate boom from Sydney to New York City. Those market forces are having an entirely different effect in Cleveland. A good primer on what is being called The Big Sort can be found in Richard Florida’s book The Flight of the Creative Class (an otherwise ill-conceived follow-up to his best seller The Rise of the Creative Class). He makes two convincing points about the real estate boom: 1) it’s regional AND global, and 2) it’s also an unfortunate waste of investment money. What used to fund start-ups, high-tech R&D, and other creative pursuits is now going towards luxury condos, monstrous "hearth rooms" and other bourgeois absurdities that make for a nice lifestyle, but don’t contribute much to the long-term advancement of civilization.