The invisible housing crisis
|
If you want evidence of how devoid of serious content this election is — as if we hadn’t had enough already — then look no further than the response to yesterday’s housing approval figures. They were simply awful. There’s no other way to describe them. Economists have repeatedly expected the housing sector to bounce back from the withdrawal of the first home owners’ boost stimulus component last year. The sector has repeatedly disappointed them. The trend in total dwelling units approved and private houses approved has been relentlessly downward since the end of year. The trend in building approval value is the same. There were particularly serious falls for total dwellings in NSW (3.9% in trend terms) and WA (nearly 6% in trend terms). South Australia saw a collapse in June, with total dwelling approvals falling more than one-quarter. The only good news is in the Territories, which recorded growth. It’s clear that, without artificial stimulus — and some construction groups are already calling for a return of the home owners’ boost (which was targeted at new homes) — the residential construction sector continues to suffer from a dearth of finance from the major banks to the residential construction sector, and continuing state and local governments impediments to housing supply responding to demand. Did any of this get a run yesterday in the election campaign? One journalist — I didn’t recognise the voice so I apologise for not identifying him — raised it with Julia Gillard. Joe Hockey mentioned it in passing in his comments on the RBA decision. Otherwise, despite the campaign notionally turning to the economy this week, it passed untroubled into the financial media pages. It’s particularly bizarre that Labor is avoiding the issue. After all, Labor has ramped up investment in social and defence housing. It has propped up the non-bank lending market through one of its most under-appreciated achievements, its support of the Residential Mortgage-Backed Securities market. It has set up a COAG process to deal with infrastructure planning and provision across governments, which is one of the biggest impediments to housing supply responding to demand. It has slung $200 million in the election campaign at that problem in regional towns. After years of governments neglecting the issue — or actually exacerbating the problem — Labor has shown evidence it understood the seriousness of the developing housing supply crisis. But why isn’t it focusing on strengthening competition for the big banks? Why isn’t it, for example, encouraging Australia Post to start competing with the Big Four in financial services, rather than cooperating with them and using post offices to further strengthen their grip on lending at the expense of smaller players? Maybe Labor has been scared by its experience with the mining companies. But does anyone seriously think some gutsy policies aimed at returning some serious competition to mortgage lending — thereby freeing up more finance for business lending — would see the banks running an effective propaganda campaign with voters? So far, though, it’s a non-issue for campaigning politicians and the media. |
|
|
|
43 Comments
I also wonder why this Government is so atrocious at telling the positive stories it has to tell. I just read a reader’s comments at the Fairfax site where one guy asserted that everything the Government tried was stuffed up. That’s what happens when you leave unfounded negative stories on the record.
Tanya Plibersek made a strong defence of the social housing just the other day.
Here is the thing though with this sort of crap. We can house over 500,000 foreign students, 500,000 kiwis, 5 million tourists and not have a crisis.
We need to stop pretending there is a shortage of houses and remember that there is a glut of people.
Damien - even more bizarre is that inability to sell positive stories was a major justification for getting rid of Rudd. Perhaps it’s more a problem with the Labor party organisation.
Malcolm
The reason Labor can not be positive about the governments past performance is because they have to justify the removal of a sitting PM. The only way to do that without admitting it was purely an internal power play is by making the case that the government had ‘lost its way’. They are trying to purge the memory of Kevin Rudd by telling everyone that his government - and thus his accomplishments - was bad, wrong, out of touch ect. In effect they have burned the advantage of incumbency because if they tout the apology to the stolen generations, the repeal of Work Choices or anything that people associate with Rudd they’ll be bringing peoples attention to that unpleasantness we all endured a few weeks ago. Its a catch 22, and they shot themselves in the foot the day they knifed Rudd.
Doesn’t the fall in house construction simply indicate that developers are responding to a reduction in demand for houses by building fewer new houses?
Exactly PETG.
If fans of real-estate are to be believed there is a housing shortage AND there is no demand for housing. Which really makes no sense, so perhaps there is no shortage of housing.
What we have is plenty of houses and falling demand. We have falling demand because no-one can afford to buy at the current prices and the usual market solution is for prices to fall until demand increases. Thats what is actually happening, but it hasn’t made it past the pay-wall of advertising based journalism yet. The only thing which will stop that is artificially supporting demand with a housing grant, but that means more government debt and it only delays the inevitable.
it should also be noted that in South Australia new green certifcation of Housing will add an estimated 15-40K to the price of small to medium sized home with the requirement for energy rated 6+ houses - add this to the drop of the new home owners subsidy and new home entrants in the SA market are looking at finding an additional $50,000 minimum to the same time last year
I agree with Bernard, the supply of new housing has been sluggish for quite some time now, resulting in upwards pressure on housing, property & rental prices. Yet somehow this important issue isn’t really discussed in politics.
Start by abolishing those insufferable green wedges (don’t know how prevalent they are outside of Victoria); that will go a long way in providing new housing and expanding growth corridors.
I also agree with your sentiments that, government intervention into the housing and property markets has been “exacerbating the problem”.
1gmd, do you care to provide a (reputable, non-biased) source for your claim? I haven’t heard anything approaching $40K cited for a “small to medium sized home”.
I watched an interview on ABC 24 last week where a senior player from one of the Big 4 business banking departments was busy highlighting how the big banks are all choosing to lend to the residential market rather than the business market because it’s perceived as less risky. He was banging on about the long term adverse economic issues this could generate. And now, Bernard, you’re suggesting that even residential lending is drying up enough to cause a economic major headache.
Now I’ve got two questions:
1. Is bank lending practices really the cause, or is it just another symptom? From where I sit there’s a fair suggestion that a deflationary sentiment is gaining a foothold amongst housing consumers
2. If bank lending practices really is the cause as you suggest and they really are withholding money from both the business and residential sectors then how are they expecting to meet their current earnings forecasts?
Yeah right firefly, let’s chop up all the trees and parks for more useless mcmansions.
Shepherd don’t be so naive, the green wedge is not about protecting trees and parks, but about maintaining the middle-class status quo in a particular area, i.e. Not In My Backward (NIMBYism). The effective result is higher housing prices, reduced supply & concentrated demand in a particular area, as well as interfering with competitive forces in general.
If you had travelled to any green wedge areas and actually observed the land covered, you’d know this.
Personal experience has told me that those advocating green wedge legislation are typically least affected by it, (kind of like how the Green’s support is scarcely concentrated in the country/rurals; areas heavily affected by Green policy).
Ironically green wedges actually exacerbate urban sprawl, with for example the Ottawa suburbs of Kanata & Orleans. Once the inner suburbs become too crowded, growth extends beyond the boundaries of green wedge zones, effectively bypassing an area closer to the city.
But the point still remains, green wedge legislation are a government intervention into the market and have distorted supply. We remove these green wedges and not only will we be respecting property rights of the individual, but also rectifying the shortage that has appeared in the housing market.
The Federal Election always puts a dampener on housing approval and investment decisions, so don’t read too much housing approval dropping in the few months before an election.
Banks prefer lending to residential housing rather than businesses for 2 reasons : 1) The demise of competition means fat profit margins and 2) residential housing loans have a lower reserve requirements. An economy however cannot function if all everyone just ‘buys a bigger house’, so the drop in home loan approval is actually positive.
While lack of funding and council approval are impediments to residential housing, the biggest issue is the lack of available land, and the community’s resistance to high density housing. You cannot conjure space from nowhere. Sooner of later, you have to make a choice between ‘smaller houses’ or ‘less people’.
Ronin, there are massive parcels of untouched land in the West of Melbourne, within an hour to the city. Much of this land is not being fully utilised, with most owners either hobbyist farmers or just really loaded. There is plenty of land to go around.
I know that the urban boundaries of the West have been relaxed recently, or are in the process of being relaxed, one can only hope this continues unfettered.
The additional benefits of once again being allowed to subdivide these lands are quite obvious, more people = more rate-payers & more infrastructure.
Can’t really speak for any other city, seeing as you need to know a bit about the local geography before making such arguements.
I get the impression Fireflying is advocating compulsory acquisition of freehold property to allow developers to subdivide it. That sounds reasonable.
No I never said that, you are wrong.
Allowing the market to take its course =/= more government intervention (i.e. compulsory acquisitions.)
With respect, you need to put on your reading glasses.
Straw-man arguement there Inglis.
Why is the government failng to sell its’ achievements? Maybe because all anybody wants to talk about is Rudd.
@Fireflying: “Ronin, there are massive parcels of untouched land in the West of Melbourne, within an hour to the city. Much of this land is not being fully utilised, with most owners either hobbyist farmers or just really loaded. There is plenty of land to go around.”
A simple fix to that should be a flat land value tax. This would make land banking - both inner city and fringe - significantly less attractive, and have the nice side-effect of dropping house prices in proportion to demand rather than inflating the market.
Sounds like an idea worthy of consideration Dave, flat taxes are especially good at constraining meddlesome bureaucrats and their populist proclivity to changing tax brackets. Importantly, like you reflected on in the last sentence, it’s a good way to prevent interference of the price mechanism and subsequent bubbles that occur in the market.
I would not have thought so many people are intentionally land banking in the West, seeing as many are prevented by law on improving the value of their land via sub-division. I would presume land banking is more popular in the Eastern suburbs, which have a far superior population density and levels of infrastructure, utilities, amenities etc. However the West is a growth corridor whereas parts of the East have probably plateaued.
Another consideration, is the inevitability that green wedge zones will, at some point in time, be lifted (one by one as the area surrounding said zone develops and fills up), and any investor with enough capital, smarts and sufficient time line will be able to benefit from the automatic price rises resulting once the green wedges are lifted.
This point illustrates the anticipation on the removal of green wedges zones will drive speculative activity in the property market; it is already happening to a degree as we speak.
So in conclusion, we have two viable options to consider in addressing the shortage in housing supply:
a) Removal and/or minimal rezoning of green wedge areas
b) Flat Land Value Tax
Any other constructive ideas to address the topic raised by the author?
Davidk is correct. The media rabble have driven the subjects of this campaign and it’s the worst I’ve ever witnessed. The garbage notion that the electorate still cares about Kevin Rudd no matter how he went is laughable. That we have a media that would actually could focus on a non-entity like the corpulent Oakes and his earth shattering ‘scoop’ says it all.
To make matters worse we have an ABC and Fairfax media (led by the increasingly awful Hartcher) who are in a race to the gutter and it’s depressing. All these clowns concentrate on the lowest bit of tawdry gossip and policy is relegated to the back burner. Everyone of these clowns concentrated on the tactics during the great mining offensive when corporations decided policy for the Australian electorate and not one actually pursued in depth the facts of the tax and what it means.
Someone said on these pages we get the media we deserve. I do not think Australia deserves this hopeless bunch of hacks who pass for political pundits. But we seem stuck with them. A pox on their houses.
Bernard Keane: “a return of the home owners’ boost (which was targeted at new homes) …”
You’re kidding, right? Are you referring to the $7,000 premium for new homes over second-hand homes? In the context of the stated purpose of the grant “to compensate for the effects of the GST on the prices of new homes,” that’s rather funny. Median GST on new homes is now close to $50,000 in capital cities.
What’s so difficult here? A crisis in housing construction as opposed to existing house price increases has been the bipartisan policy aim all along. It’s the ultimate pork barrel, to those voters who had the brilliant foresight to be born earlier than the stupid schmucks now looking for a home of their own.
The way to “compensate for the effects of the GST on the prices of new homes” — and, incidentally, the way to stimulate jobs efficiently during the financial crisis — would have been to rebate the GST on housing construction.
That’s a no-brainer. Why do all politicians and journalists keep playing blind-man’s-bluff with this?
FIREFLYING: “Any other constructive ideas to address the topic raised by the author?”
Yep: amend the Capital Gains Tax law - expand the definition of “capital gains event” to include borrowing against an increased valuation since purchase.
If you open up any mass-market book on how to invest in property in Australia, you will read this advice: “Do not ever sell a home if you can avoid it; borrow against its increase in value instead, and invest the borrowed money in another home.”
Pick a book, any book, and check it out. You will see that in fact capital gain can be realized without selling the asset, just by borrowing against it after it’s gone up in price. If capital gain is being realized, then it should be taxed as Capital Gains Tax.
Damon - Get a quote for double glazing and a solar hot water system - there goes 15k plus the the taking away of te 25k that was offered up until June 40 grand extra…..
Well I cetrtainly don’t prfess to know as much about real estate as you guys seem to, and your arguments seem sound and I won’t deny that you have a point, but, I can’t help feeling alarmed at the idea of doing away with green wedges. You may think I am a loony greeny (I’m not) but I think green wedges are incredibly important for a healthy community. I would like to see then better utilized as community gardens and meeting places, wet ol romatic that I am. But quite apart from my views, wouldnt this action increase density? prob good for business, more services etc. I suppose to get the best value from this land one would divide it up as small as possible to get the best possible return etc, further increasing density and the social problems that come with it. I suppose as people move away because it is not the nice quiet place they knew anymore, you could buy their land and split that up too. Well don’t underestimate the allure of the green wedge, I think people like green wedges and you will find that those areas will lose value because people don’t want to live in dense areas, properties lose value, services pull out, VOILA! instant ghetto!
I just wish more people could understand that there are more things in life than making money.
Developers have a running war with green-wedges, bureacracy, planning requirements etc because, they assert, it makes housing unaffordable. While it definitely increases the cost of a property, however, it only makes it unaffordable because of the ridiculously inflated prices produced by purely financial speculation. You are not paying top dollar because the windows have been glazed, you are paying top dollar because the big four have extended a massive amount of credit to competing purchasers and can’t loose no matter who ‘wins’ the auction.
Calls to abandon building codes just amount to a demand to build rubbish properties for maximal profit. A better solution would be to price houses at the actual price of building them, without the financial overhead. That would be considerably less than current prices even with a ‘normal’ rate of return for developers and all the green trimmings.
Why is this bad news?? This is the best news in ages! Maybe this soul crushing Property Madness will slow down a bit so working people such as myself might be able to afford a modest home and start a family.
Land Tax was proposed in Henry’s tax reform. It is fair, it discourages land speculation and increase housing supply. It is also impossible to implement politically. A tax on the family home? You got to be dreaming..
The ‘lack of land’ problem mainly applies to regions within 30 minutes travelling time to the CBD. When you move further, the problem becomes ‘lack of infrastructure’. A metro network remains the only efficient way to transport a large amount of people in a short period of time. However, it is not financially viable until you reach a certain population density. Unless and until the Australian population becomes willing to live in 50 floor apartments @ 40 square meters being crammed 8 to a floor, any ‘Metro Plans’ will simply be a waste of money. It is a sad state of affairs when the NSW Government’s decision to pay developers hundreds of millions to NOT build the metro is preferable to building a lemon for tens of billions of dollars..
If people are serious about land reform then we need a shift from viewing land as a purely speculative asset. An increase of capital gains tax on investment properties and abolition of negative gearing would see an immediate increase in housing affordability, a increase of $4b in tax revenues (just from the abolition of negative gearing, thats not taking into account capital gains tax increases), and a redirection of investment funds back into the stock and bond market.
@Dave Slutzkin: I thought Henry George was dead.
The work of Hernando De Soto has demonstrated the importance of land reform in raising people out of poverty. I think it is no coincidence that the dominance of the land market in developed economies by the wealthy has seen a shrinkage of the middle class (as in the US), or the lumbering of huge amounts of debt on the middle class (as in Australia). The poor just dont get a look in…
1GMD - the Housing Industry Association estimated that the cost would be an extra $2-3 000, not $40k.
The only major difference to current regulations is double glazing, which entails no extra labour.
You haven’t been able to install storage elemtn HW services for 10 years. A heat pump heater can be installed, you don’t have to have solar.
This article is a bit hysterical ; when prices were rising, they were rising in excess of 20% per quarter, the current sitaution is more a flatlining than a reduction.
For as long as the money supply grows, house prices will continue to rise.
We are in the middle of a property bubble. Australians pour all of their surplus capital into residential property. Luckily we have forced saving with super or all that capital would be being poured into unproductive domestic housing as well.
People are pausing at the moment as credit is not as easy to get because banks are watching the US, UK and Spanish property booms all fall into a crumpled heap.
So they are raising credit standards and people are missing out - hence the reduction in housing approvals.
Lack of supply isn’t the problem in Australia. If it was rents would be sky-rocketing. And they just aren’t. I have rented in Sydney for past 10 years. If there was a shortage of properties I would be putting all my income into rent. I’m not.
In a bubble most people just see rising prices and keep denying its a bubble. Its a charateristic of every boom in history. “This time its different”.
Oh and solar water heaters are pretty cheap - so shop around and don’t get ripped off.
RONIN, ASDUSTY, DAVE SLUTZKIN -
Yes, the Henry George land tax is politically untouchable, as RONIN says.
But take a look at the Capital Gains Tax amendment I suggested above. A modest-sized amendment to the Capital Gains Tax law, such that releveraging against an increased asset value since acquisition is defined as a capital gains event, subject to CGT.
It’s counter-intuitive, but …
1. Popular property investment books all advise not to sell property, to gain wealth by releveraging instead
2. If wealth can be acquired through releveraging without selling, then that is realization of capital gain
3. The act of borrowing against an asset based on a price increase since acquisition, is a discrete, easily trackable event to add to the list of “capital gain events”, so compliance cost would be low
4. Housing market turnover has been dropping since 2002 due to cumulative housing-stock capture by investors who will never sell
5. If releveraging no longer held such a great tax advantage over selling, then many investors would go back to selling as they used to in the 20th century, and the market would in time return to normal
6. This return to normal would be orderly over several years, rather than a disruptive systemic shock.
Sssshhhh… don’t talk about the housing crisis! I’m doing a renovation soon and I need the builders cheap and desperate!
Housing problems are a hugely complicated affair and it’s not as simple as “It’s the density, stupid!” I think it’s more a trending back to normal growth following the artificial boost delivered by the first home owner’s grant boost.
Housing speculation is bad, mmkay?
The general electorate continues to believe that they are winning with house price increases. Headlines and interviews repeatedly use the words “winning” and “winners”.
While this fallacy remains in place who cares about those numbers? How many average punters in the street even know what they mean?
There will be only one headline that garners attention: House Prices Plunge. Period.
Pretty much, PeteG. That, and the fact that land value speculation and vendor prices are so high that demand has all but petered out. But certainly a lot of int’l students and executives and the like are staying away from Oz in droves also.
There is a belief that housing approvals must always go up because there is a perpetual “need” for “economic growth”. Why not just match housing supply with demand, and make sure it is affordable while you are at it — which means basically regulating the banks a great deal more, making large pools of housing available outside of the ‘market economy’, etc.
It does sound very reasonable, up to a point. It is already happening in Campbelltown in NSW, in fact, under a resumption law for train lines.
However, any such land resumed should have land prices set to a minimum, and have ongoing covenants restricting the resale price of any house and land package built on it in perpetuity — that, and make the land under the properties leasehold from the govt. So, the properties can be purchased or leased — both with a firm cap well under today’s speculative ‘market’ prices, allowing people to either buy or rent depending on their preference. By setting rents low, the renters will have enough income left over to put into a first home savers account to buy elsewhere if they desire. The purchasers will only be able to resell at a price set by a formula adjusting for inflation and any capital improvements they may have made.
I think you’re assuming the land squeeze is an ill-effect of normal market forces, requiring intervention to set it to rights.
It’s the other way round; the residential land market is grossly distorted by taxation and other policy imbalances: capital gains tax, GST, first home grants, and to a lesser extent the negative gearing that attracts so much more attention than those. States also levy inefficient infrastructure charges and stamp duties which make it worse.
The result is, it’s cheaper to buy a second-hand home than to build a new one, so not enough new homes are built. And it’s much more tax-effective for investors to realize capital gain by reborrowing against accumulated equity than by selling a home, so less and less homes are going on the market since 2002. There are more buyers as pupulation increases, fighting over a diminishing pool of homes available for sale.
The solution to a distorted market is not to introduce more distortions in an attempt to compensate for them. The First Home Owners Grant was an example of this; it only made the problem worse. The solution to a distorted market is to remove the distortions.
Your analysis is quite wrong, James McDonald.
The transactions that dictate the cost of housing cannot conveniently be separated into ‘good, virtuous private sector amounts’ and ‘evil, interfering, market twisting and distorting goverment amounts’ quite so neatly, to fit an ideological position.
After all, who pays for the infrastructure — roads, schools, parks, sewers, power lines, water supply, street lights, etc etc? Many of these things are done mostly by the ‘natural monopolies’ run by government. Whereas developers are in it for the greatest margin they can get, which is hardly virtuous.
One of the major drivers of housing super-inflation in Australia since 1995 has simply been — liberalised credit from lending institutions, usually by borrowing cheap money from overseas from sources that are now proving to be some phantom-like — Wall St pooled funds based on subprime and Alt-A lending, for instance. You can’t blame govt for that, although some extreme market ideologists will find a way to blame the US Fed for printing too much money and setting interest rates too low, while Wall St is as pure as the driven snow and the temptation to print money there was thrust into their hands by ther govt of course.
Aussie Home Loans has done more harm than good in this particular case, as lower interest rates and higher credit ceilings has just lead to an explosion in house prices as people outbid each other and developers keep raising their margins and land vendors kept demanding more.
Certainly the cost-shifting by state utilities and councils directly onto new home purchasers instead of out of consolidated revenue has had a part to play in increasing new house costs also — they have been able to get away with this for the same reason — easy credit to home purchasers has concealed the cost-shifting as more and more money is borrowed.
The FHOG/B and baby bonuses and other so-called ‘market distortions’ are actually retrospective govt RESPONSES to this super-inflation in house prices — rather than try to put out the fire — causing a downturn in inflated house prices, something that would in their minds be anathema to a large slice of the electorate — they instead think of a small grant to get people introduced into the inflated market instead and then throw them to the wolves with the lifelong crippling repayments after that. In other words, they are aiding and abetting the banks and vendors rather than the first home buyers. But, as I say, that is a retroactive response to already nflated prices in the market, where cost-shifting by utilities is also a piggyback effect. Similarly, the baby bonus popped up because no-one could afford to have kids anymore due to their perilous housing costs — a small bribe to convince people that they could, indeed, afford to have some extra offspring after all.
Finally, negative gearing on IPs has been around for decades now, and the amounts are inflating through the roof these days due to mass-marketed seminar courses and property marketeers promoting it as a tax dodge — as though an an ongoing loss forever is a good thing for anyone to carry — mainly in the belief that (guaranteed!) capital gains much later wll far outstrip the annual losses being made — which is a somewhat unlikely scenario in the long term price picture for housing. Last year ATO neg gearing claims on loss-making properties set a new record of about $11bn — in other words, hardy, hairy-chested ‘property investors’ operating in the ‘free market’ required heavily on government handouts and subsidies to fund their speculative (ad)ventures which revolve around exploiting ordinary wage workers like a parasite for rents.
SEAN - Your first two paragraphs are ideological, I won’t get into a discussion of good versus evil with you. If you put down your weapons, we can discuss cause and effect rather than try to identify the evil capitalists to line up and shoot.
Your third paragraph, about easy credit, is pertinent. But the credit markets have also been available to business finance leading to general economic growth and in particular wages growth. All things being equal, and without land being in physically in short supply, prices of goods such as homes should have risen in concert with wages, which is what was happening up until the turn of the century. All things are not equal: easy credit has interacted with another tax distortion — evolving into a loophole to accelerate price growth faster than wage growth (see below).
The FHOG “was introduced on 1 July 2000 to offset the effect of the GST on home ownership.” Please explain to me how a grant which applies equally, or at times almost equally, both for new homes and secondhand homes, can offset the effects of the GST? The median house price in Sydney is now $600,000, and if that’s a new home then the GST payable is over $54,000. If it’s a secondhand home the GST is zero.
Negative gearing is a huge subsidy, but politically impossible to change, so it’s almost a waste of time talking about it. It’s also been in use through much of the 20th century, without causing land prices to rise above inflation
Capital Gains Tax is another matter. Here’s where the easy credit you mentioned comes in. By reborrowing against an investment property once it’s doubled in value, a speculator is able to realize capital gain and invest it in another property — without paying any Capital Gains Tax. Because the leverage ratio available on homes is so much higher than that on shares or any other asset, this gives property investors a way to avoid Capital Gains Tax which is not available to investors in any other asset class.
The result is twofold. First, it causes a lot of capital to prefer real estate over shares and bonds, which is unfortunate because it reduces the capital available for the productive economy and also reduces growth of everyone’s superannuation wealth. And second, it’s causing a slow accumulation of homes in the hands of buy-hold-and-borrow investors who will never sell them. So while home buyers grow in number, they are fighting over a diminishing number of homes which actually get released back onto the market for sale.
Sorry, James McDonald, but EVERYTHING you have written is ideological — the ‘free market’ ideology that supposedly guarantees a wonderful quality of life to everyone, where everything is for the best in this best of all possible worlds. By definition.
The taxes and grants you are talking about are fairly minor in the scheme of things, so are not CAUSING housing problems but are derivative of them and often compounding the problems rather than alleviating them, but the point you seem to be missing is that govt intervention INTERACTS with the private sector, often on the behest of moneyed vested interest groups like the HIA, the REIA and various other developers lobbies. While you go off criticising the govt for everything that goes wrong in what must be the greatest ill-informed, unthoughtful and vacuous red herring of all time, these lobby groups are busy twisting public policy and handouts in order to maximise profits to THEMSELVES. It is the big business groups which are determining the shape of these govt interventions with a healthy dash of populism in the case of CGT exemptions and neg gearing breaks. Big business is so often the prime beneficiary of government policy, and indeed often authors it, as we traditionally have seen with the mining sector, immigration policy, housing handouts that reward developers and vendors, and so on. It’s not for nothing that Steve Keen calls the FHOG the ‘first home vendor’s grant’. In light of this, it makes your American-style ‘deluded libertarian masking big business Republican interests’ protestations and assertions rather silly and pointless. It amazes me how many Aussies have been brainwashed by osmotic proxy of the US Republican trick of making the working class act against themselves by the use of cunning rhetoric and diversionary arguments around irrelevant issues and masking their real motives. The fact that the Republican Murdoch owns most of the working class papers in the US and Oz and regularly deludes the public probably doesn’t help.
I’ll address your often quite economically incorrect views about the various taxes individually and in detail in a moment when I’ve calmed down.
Oh, grow up Sean. I didn’t even say whether growth was good, I just said wages would grow with prices. I’m not going to have a class-warfare discussion with you. As it happens, you’re right about the damaging effects and scale of big-business rentseeking, but the property developers are not the winners, they are the losers (which is why corruption is so rife in the developer sector). The banks, which you mentioned earlier, are the winners (which is why they can afford to be lilly-white with legal compliance, which they are).
A mature person would have held off replying until he’d calmed down, then re-read it, then analyzed it, and only then replied. I think you’re on an anti-capitalist rant, so it’s been nice talking to you, goodbye.
Oh right, James McDonald, when you’re getting trounced in an argument with still more pain promised to come, it’s “grow up” to your opponent as the defence of choice. Is that akin to begging for mercy or something when the invading army is twice the size? Or kind of rolling on your back and paddling the air with your paws?
And it’s not entirely an ‘anti-capitalist’ rant, more disgust at the way the banks and Wall St work as supposed beneficial stores and allocators of this capital — which is of course the original definition and meaning of the term ‘capitalism’. I have no objection to businesses selling me goods and meeting the needs and wants of society, it’s just that I don’t see the banks, which have willingly morphed into giant building societies for easy money at low risk NOT putting any money into productive businesses and preying instead on ordinary homebuyers, and the billionaire developers and their ‘institutes’ and ‘research’ false fronts lobbying govt and even the general public through the bought papers with fake stats and ‘lifestyle’ pieces to influence the sheeple as really contributing much of worth to society.
So which definition of capitalism are you referencing?
But back to your claims about the evils of various minor taxes and grants after dinner…
OK Sean, so you say:
So you acknowledge that many government interventions in this area have been designed to serve particular influential companies rather than the public. I agree with you. (A small detail: I claim that the developers are on the losing side of this game and the banks are on the winning side, but let’s just say “certain big businesses”.)
And your solution to this is to support more government intervention in the housing market. Somehow, magically, the next round of policy interventions will not be driven by rentseeking like all the previous rounds; this time it will be driven purely by honest economic analysis for the public good. Is that what you think?
The reason why “neoliberals” advocate the minimum government intervention in markets — just enough to keep markets honest, protect public safety, and apply price signals to externalities, and no more — the reason for this is not because they think markets are beatiful perfect divine things which always lead to the best outcome.
The reason is because government interventions are almost never as honest or rational as they should be in a perfect world. There is always a difference of opinions in analysis, and rentseekers are always able to hire very credible-sounding, highly qualified, full time lobbyists to make their case sound very convincing for the public good. And they have a lot more campaign funds to offer than you or I can match.
Quite simply, most government interventions in markets are rentseeker-driven. That’s why I want government to get out of the housing market apart from just cleaning up the tax distortions. This would not lead to perfect outcomes, nor would it suddenly convert market participants into saints. But it would reduce the scope for the rentseeking which is doing so much damage to the Australian economy and to Australian politics, and homebuyers would be able to afford a home once again.