Reality is proving an inconvenience across markets, from housing to electric vehicles, clean energy and retail.
IF you believe the state government, a crack team of Treasury officials will find a way to solve Western Australia’s housing crisis by getting more homes built, even as building companies continue to collapse.
Not quite mission impossible, perhaps, but something like that because the fundamentals of the housing market have become disconnected from reality, thanks to demand overwhelming supply.
A massive post-COVID influx of migrants and foreign students has swollen the ranks of people looking for somewhere to live, just as high inflation and shortages of skilled labour and equipment drive builders out of business.
Even a slice of a promised special federal funding package will do little to increase the number of rental properties from September’s record low housing vacancy rate of 0.7 per cent.
On top of the rental crisis is the curious sight of house prices rising at a time of increasing interest rates; an event that defies logic unless buyers are desperate or believe there’s an economic boom around the corner (which there isn’t).
Housing isn’t the only case of a market doing one thing as experts insist it ought to be doing something else, with other examples demonstrating a phenomenon that might be called ‘the inconvenience of reality’.
Electric vehicle (EV) sales are another example of reality biting, with demand proving to be slower than expected. Renewable energy is not (yet) driving coal and gas out of business, and smaller shopping centres are staging a convenience comeback.
Like housing, a key factor in people putting off an EV purchase is the high cost of a bank loan and a growing awareness that an EV can be an awkward asset when it comes to charging.
And that’s before getting to the damage done by WA’s biggest and most popular car dealer, John Hughes, who criticised EVs in a recent interview with The West Australian newspaper.
A legend in the car industry, Mr Hughes stated emphatically that he was not interested in EVs because of their questionable resale value.
The focus of his criticism of EVs was the battery, and specifically problems that might develop when its warranty expires after about eight years.
“I buy outright from the public between 600 and 700 pre-owned cars every month, both in WA and interstate,” Mr Hughes said.
“I would not buy a Tesla; they’re too hard to sell pre-owned.”
The issue of resale value has not yet become a talking point among car buyers, but it will after those comments from WA’s best-known dealer.
There’s more, because even as governments enact laws aimed at forcing petrol and diesel cars out of the market, new EVs are proving harder to sell.
This was acknowledged in a recent research note from ANZ Bank, which said “The honeymoon period of the EV market appears to be over”.
The US in particular is refusing to fully embrace EVs, with the ANZ reporting that dealers are taking 88 days to turn over their entire supply of new electric cars and trucks, compared with 39 days last year. The stock of petrol engine vehicles turns over in 60 days.
Renewable energy is the third example of inconvenient reality, as the enormous challenge of building a vast array of wind turbines and solar farms dawns on governments and starts to annoy people whose lives are being affected.
Those convenience concerns have emerged even before considering the potential for gaps in the switchover from installed electricity systems to something new and not yet proved reliable.
What’s happening in Europe and the US could be a forerunner for this country, with the wind power industry struggling to grow, battered by the same problems as housing and EVs: high interest rates and shortages of material and skills.
Government red tape is also hampering wind power.
In a story earlier this month, Bloomberg columnist David Fickling warned that “An entire industry is in danger of dying from neglect unless government simplifies rules for [wind power] developers and slashes red tape.”
The aftershocks of COVID are a factor in the struggle over wind power. So, too, are power supply contracts signed with governments before lockdowns, and the dawning of the post-lockdown reality that an explosion of costs rendered new wind farms uneconomic.
Australia can learn from the overseas experience, but it is sobering to discover that the wind turbine industry has effectively been becalmed as the pace of installations falls, rather than rises.
A solution is available, but it’s not one governments or consumers will like: higher power prices to provide the funds to build more turbines in order to harness a source of power once marketed as free.
The final example of reality biting is in retail, where a remarkable recovery is under way in strip malls, as they’re known in the US (a small shopping centre, here), especially those with an easily accessible car park.
Giant malls, which have grown to dominate the shopping experience, have become too big and too difficult to navigate, particularly for those wanting to buy a single item. They are losing the convenience factor.
A prime example of the convenience factor at work is in the shopping ‘squares’ along Scarborough Beach Road, where it’s possible to park outside an Officeworks for that emergency printer cartridge, or House for a pair of kitchen tongs, or The Good Guys for an iron for the one that just broke.
Surveys in the US show that strip malls are outperforming their bigger cousins in terms of shopper traffic and rent increases.
David Lukes from Site Centers, which manages a number of strip malls, said the driving factor was convenience.
“The faster you can get in and get out, that’s what the American customer wants,” he said.
Out there then some
ON a more complex, perhaps even indecipherable note, there’s the spread of technobabble in the world of computers and other technologies, as shown in an essay by US venture capitalist Marc Andreesen.
Samples include: “We believe in the romance of money”, and “there’s no material problem that cannot be solved with more technology”, or “we believe any deceleration of AI (artificial intelligence) will cost lives. Deaths that were preventable by AI that was prevented from existing is a form of murder”.
Some people really do come from another planet.