Developers actually have been squeezed for excessive infrastructure levies, political donations, and quite frankly bribes, by state and local governments who know that most people think developers are evil and don’t care about flogging them. This is stupid: the more you shake down developers, the more shoddy you force them to become as the more conscientious ones simply leave the business.

And all these costs get passed on to the end buyer. That’s along with GST (which FHOG only slightly offsets, and it gives second-hand homes almost the same boost anyway). In NSW, what do you get for all those infrastructure levies? In public transport terms, you get the honour of contributing to an inner-west Metro, and that’s about it.

By the way Sean many of your good points are made with reference to neo-liberal price drivers. I could also argue that most of these price-drivers are market distortion policies which go against the theories of free-marketeers such as Friedrich Hayek (if Hayek is what you mean by neo-liberal). So we come from opposite sides but we agree on the result and the folly of it.

Kris Sayce of the Daily Reckoning has pointed out recently that Tanya Plibersek’s ‘National Supply Council’ did another 3rd grader job estimating the size of the shortage — by adding up the homeless population — not people known for bidding on houses — and adding a couple of percent to the rental vacancy figure to make a comfortable allowance. Quite an astonishing methodology, and yet another demonstration that the Labor Party (the one that’s been betraying its origins and constituency since the 80s) is simply not taking housing affordability or supply and demand figures seriously.

The reason housing is unaffordable and new building work has slowed down is essentially twofold: liberalised credit from the banks globally, finally culminating in the GFC, has caused people to bid up housing prices exorbitantly — it’s basically land value speculation, nothing to do with the cost of construction or the historical value of housing or even longterm ability to retire the debt. Inheritances are keeping the Ponzi scheme going a bit longer, then after that wages and salaries of the next generation simply aren’t going to cover the asking prices. We should therefore see a long, steady deflation as the speculative fervour and easy credit start to evaporate. The second reason is that neoliberal state governments, utilities and councils have taken the opportunity over the last decade of increasingly shifting new infrastructure costs directly to developers and therefore home buyers in new subdivisions, costs once borne by the entire community through taxation. This in conjunction with easy credit and chicken farmers asking more and more for their land in the boom has lead to an escalation of prices on the fringe and in large scale infill developments. And, somehow or other, people borrowed the amount. Steve Keen’s argument of course is that the chickens (metaphorical this time) will inevitably come home to roost in the form of massive debt repayments on the borrowed money causing household insolvency, much as we’ve seen with ABC Childcare, Centro and so on in the GFC. Some might even say the entire capitalist system is rotten to the core, an abysmal social failure, and is really screwing over the ordinary working man this time.

The role of government over the past decade should have been to do what Whitlam did in Victoria in the 1970s, with the VicUrban initiative — hold down the price of land by fiat in new development corridors and shepherd thousands of families into affordable dwellings. Affordable land means builders will build more and consumers will buy more. I would also control speculative investment in property in such developments much as the FHOB is audited for legitimate owner-occupiers, but without the ‘I lived in it for 6 months but couldn’t afford the mortgage any more so I had to rent it out’ excuse that the Fed govt is accepting these days. Infringers would be shot at dawn.

For accurate and comprehensive analysis of Australian housing news and all related national and international feeders into house prices, visit Global House Price Crash, Australian chapter.

I have been arguing for some time that public housing has been outsourced to the private sector by stealth. It seems no one remembered to put out a media release announcing this measure back in 1985.

If we had known we are all supposed to house people on low fixed incomes, and build houses they can afford to rent, we might have asked a few more dangewous questions about this unannounced policy?

On the supply side, one statistical series I have never seen but would very much like to see is the number of dwellings listed for sale at any one time. I suspect this has dropped markedly in recent years, independent of the total number of dwellings in existence. That’s because a few years after the introduction of Capital Gains Tax, investors stopped trading homes and started holding them indefinitely, realizing profits by leveraging increased equity rather than selling homes for cash and paying CGT. (Banks lend based on the value they could confidently recover in a repossession, and they do not incur tax on the defaulter’s capital gain when they do so. Perhaps they should.)

After all the number of homes that buyers have to fight over is not the total number of homes on the ground; it’s the number that are on the market at any one time.

The GFC just added more urgency to a long-term, bipartisan, state and federal, policy of inflating house prices. Swan even admitted this (http://www.crikey.com.au/2009/08/06/housing-is-overpriced-swan-is-making-it-so/ ). There never was any agenda for “housing affordability”.

That’s because (a) more voters own homes than want a first home, (b) banks are are considered more important than builders, and (c) politicians own investment houses too.

The winding back of FHOG will make no difference. If the real purpose of the Grant was what it was claimed to be — to offset the GST effect on the housing market — then a third grader could have designed it better. The winding down of the scheme just makes new homes even more expensive relative to existing homes — and that’s if you can get approval to build it at all.

Housing in Australia is a form of Tulip-Mania. I’d be interested in finding out what Bernard Keane thinks will happen to housing prices when the first home owners grant is wound back at the end of the year. If his theory of it all being driven by a shortage is correct, we should still see a continued rise right - and should continue to see a rise until housing construction accelerates or immigration levels plummet.

At least Steve Keen is willing to put some predictions out there. What are your predictions Bernard?

Just look at that immigration spike..wowzerz, and a the decline in public housing..terrible.

Things make more sense now.

Australia’s low-density car dependent settlement patters have been possible due to huge natural resource consumption rates per capita and externalisation of environmental and social impacts. Just because we have lived like that in the past, does not mean we can live like that in the future.

Yet the reaction of Government is still to throw around land release on the urban fringe for more low density development without public transport. This in turn creates huge costs for servicing these communities.