Few things make me more cynical than the sound of a politician mouthing concern about housing affordability.
In my lifetime, there have been hordes of politicians and governments claiming to want to solve the problem, but none willing to take any real action.
When it comes to improving affordability, many politicians talk a good fight, but none is capable of delivering a knockout punch.
The latest masquerade in this regard is being led by MP Kelly O'Dwyer.
O'Dwyer has obviously watched a few episodes of Yes Minister before deciding on a course of action: bring on an inquiry, issue lots of press releases, target an unpopular minority and take "strong action" against these alleged perpetrators of the perceived problem – but essentially do nothing meaningful so that the status quo remains intact.
The truth is, 40% of the cost of a new house in Australia comprises government fees, charges and taxes. Remove those and the cost of a $400,000 house-and-land package would drop to $240,000.
In all the froth and bubble coming out of the federal inquiry, we haven't heard O'Dwyer or any other politician confront this reality. Why not? Because if they did, their advancement within the party would suffer a sharp U-turn.
Governments are addicted to the revenue they milk from their favourite cash cow, the real estate industry. That's sacred and the possibility of scraping stamp duty, for example, is not up for discussion.
So what to do? How to create the illusion of doing something while changing nothing?
The answer, as always, is this: target an unpopular minority, talk tough, issue lots of press releases, look strong, do nothing. Works a treat every time.
O'Dwyer has a bee in her bonnet about foreign investors. I'm not sure whether she truly believes that foreign investors are the cause of the perceived affordability problem. I seriously doubt that she does, because someone armed with all the relevant information, as she should be, must know that foreign investors are not impacting the price of suburban houses in Australia.
But foreign investors are a great scapegoat, particularly as this currently means Chinese investors. And many Australians have a big issue with Chinese investors, although they don't seem to mind American, British, Dutch, Italian or New Zealand investors.
So tough-talking Kelly is going a come down hard on Chinese investors. It'll be good for some media sound bytes and it'll help to advance the career of a politician no one had heard of until recently.
But will it make housing more affordable? No, it won't change a thing.
A quote from Shakespeare comes to mind: "It is a tale told by an idiot, full of sound and fury, signifying nothing."
Chinese investors are not impacting the price of houses in first-home buyer markets in Australian cities. Overwhelmingly, they are buying high-rise apartments in the CBDs of Melbourne and Sydney, as well as the Gold Coast, which is a perennial favourite for Asian investors who enjoy losing money.
If they're buying suburban houses, it's primarily top-end homes in the millionaire suburbs.
The Federal Government could pass a law tomorrow banning all foreign investment in Australian residential property – and the price of houses in the suburbs of Sydney and Melbourne would not change.
But if they removed the taxation component of a house-and-land package, that would make a dramatic difference.
Any chance of that happening? Not remotely.
This is a publicity exercise. Meaningful change is not on the agenda.
Worst arguement for property affordability I have ever seen.
Removing taxes will increase profits, nothing more and nothing less.
Most clueless bear post ever..... you haven't heard of competition? You don't think that there are enough builders / potential builders / developers out there that if the cost of producing new housing fell 40%, that prices to end purchasers would not also be inevitibly pushed down as well?
This is one of the fundamentals and why many "bulls" don't believe prices are in a bubble etc - the cost of new supply set's the baseline for the rest of the market. If you change this fundamental, and the cost baseline goes down significantly, then I would be the first to change my outlook for future house prices.
We all know that cheaper housing is possible, but it won't happen because governments want the income and they can't afford to promote a house price crash.
So we will continue to argue about peripheral issues that don't really matter much.
It keeps an army of people employed in journalism and the blogosphere.
Any expressed market opinion is my own and is not to be taken as financial advice
house prices may fall to some extent but not 40% and it would take a large shift in the way some infrastructure is financed to really get prices down...
infrastructure charges have always been there and they have been traditionally been financed through either state taxes, e.g. to pay for water/power, or paid for over time through local council rates, e.g. for parks/libraries/footpaths/roads... note that going back a half century a lot of new housing developments would have the situation where new house built in sticks with no water, no paved roads, footpaths... a lot of these items were sequenced and paid for over time and through different taxation bases
section 94 started being levied heavily around late '90s early 2000's which also coincided with the change of who paid for some infrastructure, e.g. water used to be paid for through state taxes and has now changed to developer paying for a development which gets slugged straight to end user
now it is a case of user pay and pay up front for everything
the only feasible workaround is going to be for people and government to come to a decision as to who is responsible for which charges and how they are paid
some things which may be important to consider is that if water/electricity/roads &c. are paid for by respective state/local governments then the general taxation base will need to be increased, but this would benefit individuals in that they would pay less up front, probably a good trade off in that government typically gets lower interest rates on debt, also some of this infrastructure is going to be intergenerational which could potentially mean that some person down the line gets access to infrastructure paid for by somebody else... again big decision as to how we as individuals and society want to
the headline also states in Australia, i think this is a good discussion point on how other countries deal with similar, as far as i am aware in the USA new housing developments see the developer pay up front and when a person buys into the new estate they then start paying 'home owner association' fees, they only pay the fees as long as they own that property, i am not sure about the time frame that home owner association fees are due for, i expect the developer takes a specific term loan and then the cost of principal+interest is shared amongst all owners in the development
Most clueless bear post ever..... you haven't heard of competition? You don't think that there are enough builders / potential builders / developers out there that if the cost of producing new housing fell 40%, that prices to end purchasers would not also be inevitibly pushed down as well?
This is one of the fundamentals and why many "bulls" don't believe prices are in a bubble etc - the cost of new supply set's the baseline for the rest of the market. If you change this fundamental, and the cost baseline goes down significantly, then I would be the first to change my outlook for future house prices.
Well put. Tbh, I didn't have the energy to point out the bleeding obvious to him. You are a very patient person.
Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.
Forum Rules:
The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.
Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.
Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.
This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.
Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ
Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy