Pretending to care about The Houseless Generation

Even politicians have noticed that there’s a bit of disquiet about the ongoing transfer of the nation’s wealth from the young to the old, the poor to the rich, that is the “housing market”. But they don’t want to piss off the boomers who’ve spent a decade and a half addicted to the sweet sweet heroin of low-taxed investment properties, paid for by ever greater numbers of struggling young people locked into permanent renter status. But you can’t take baby’s toy away – he’ll scream and scream until he’s sick. So, try to undo the damage – reduce the huge CGT incentives for those with equity in an existing home to use the housing market as an investment tool, the costs of inflated prices being passed on to the generation who can’t possibly hope to beat them at auction? We can’t do that! That would make a lot of greedy boomers – those who can’t see past their own unearned property-based wealth – very angry.

So this is what we get instead of real change:

Crackdown to help first-home buyers

THE federal government has admitted its new crackdown on foreign investors is an acknowledgement that Australian first-home buyers are being priced out of the market.

The tightening of foreign investment rules require temporary residents to be screened and get permission from the Foreign Investment Review Board to buy a property, sell their property when they leave Australia and build on vacant land within 24 months or sell.

There have been anecdotal claims of foreign investors – especially wealthy Chinese families – ‘stockpiling’ Australian houses and leaving them idle, and of outbidding young people at auctions.

Easy politics: look like you’re doing something by bashing those who can’t vote. (Although not all that helpful, because the Liberals can for once honestly say “that was our policy in the first place”.)

But let’s be clear: foreign investment is not the reason why the market has got so out of control. (That’s why they can only mention “anecdotal claims”.) Rather, the other way around: with Australian city house prices inflating well ahead of any other investment, no wonder investors from everywhere have rushed to get a piece of that action. And those prices have been inflating ever since Howard’s late nineties bribes to the building industry to make up for the GST: halving CGT and the first home buyer’s grant.

So, a couple of points:

  • As long as capital gains tax – tax on income that you don’t actually do anything to earn other than sit on something of value, like a property – is less than income tax, investors will push the prices of houses up beyond what actual new home-buyers can afford. CGT needs to be comparable with income tax, so that ordinary workers are not further subsidising the lucky people with property.

  • The first home buyer’s grant needs to disappear completely – it only inflates prices beyond its value. It was always a very poor piece of policy that transferred public money away from the young and to those who already owned investment properties;
  • Increasing land availability won’t solve the problem while investors still flood the market – they’ve still got a disproportionate amount of money to spend, and will;
  • We do need to encourage the building of new homes, rather than the fighting over existing ones – but this will not solve the problem by itself. Population growth, which has been gradual over the period, did not propel this boom – flooding the market with investors did.
  • If we don’t somehow burst the bubble, we will have a generation that simply cannot buy a home, unless they’re in the very top tier of earners or they inherit property. We will have an unprecedented divide between the rich and the poor in this country;
  • Crime rates will rise – owning property is one thing that greatly reduces a person’s propensity to engage in crime. It gives a person something to lose. It gives a person respect for the value of property. It is a massively stabilising effect on a population. Take that away, leave increasing numbers of people in homes they don’t own, over which they have no control, that they can’t upgrade, out of which they could be kicked with three month’s notice, with ever increasing rents, and what do you think will happen?
  • Homelessness will also rise. The increased rents also mean that, without dramatically increased welfare payments, we’re going to have an ever-growing homeless problem. Centrelink payments simply won’t cover renting anywhere near a city – expect crimes of desperation to get out of hand. Law And Order politicians will respond by locking them up – we’ll have to build more prisons, at great public expense and injustice, and it will become ever more dangerous to walk the streets of our cities.
  • The inflated property market might make homeowners think they’re wealthier, but it’s not money they can use (except to take out another loan) – in fact, they’re punished with higher rates. The only people who really benefit are those with more than one property, and those inheriting property. And they do so at the expense of everyone else.
  • The more out of hand the problem gets, the harder it will be to solve: you can’t push prices back without really screwing over those young people who just took out enormous mortgages to buy a small shack in a swamp in remotest Cranbourne – and it’s not like all that pretend money that’s floating around on people’s rate certificates is actually available to them to use. And of course, the financial industry has locked itself in, to great advantage, but if prices were to fall they’d immediately call it a financial crisis and demand that we, the public, bail them out again. It’s going to be a long, slow road fixing this mess. And the first step is raising CGT, so that it’s not less than income tax: the existing system penalises those who work for a living as against those who sit back and just sit on property. It should be the other way around.
  • Australia’s birth rate will decline, as the Houseless Generation finds itself in increased poverty, unable to find any security in housing and unable to find housing adequate for raising a family. Couples will put off having kids till even later, and will consequently have fewer of them.
  • Existing home-owners who got themselves on the ladder in time and don’t care about anyone else’s family should consider this: do you want your kids living with you ’till they’re 40? They’re not going to have much choice.

I think this is one of the most critical issues facing Australia today. And none of the major parties have the slightest interest in doing anything about it – they’re too busy pandering to boomers’ fears about SCARY IMMIGRANTS. The Liberals under Howard gave us the problem in the first place – and the ALP is too gutless to actually tackle it in any meaningful way. My fear is that by the time the Houseless Generation becomes a powerful enough voting force to be listened to, it will have absorbed the status quo as The Way It Is, and be so resentful that it will resist giving the next generation any easier a time than it had. And we’ll be stuck with this fundamentally broken model, and poisoned society, forever.

It’s a crisis, no doubt about it.

UPDATE 27/4: Tim Colebatch in Tuesday’s Age:

the Rudd government last week reversed its 2008 liberalisation of foreign investment rules on real estate, and set up a unit to ensure the rules are obeyed. It also set up a joint working party with the states to ask why housing prices have soared out of reach. But that will work only if it tackles the single biggest cause: the tax-driven growth of rental investors, whose borrowing has grown 30-fold in 20 years, squeezing out home owners.

Exactly.

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33 responses to “Pretending to care about The Houseless Generation

  1. Jeremy
    why do you continually ignore the real cause of outrageous house prices in cities like Melbourne Sydney or Brisbane which is that demand hugely outstrips supply?
    Its the same story everywhere that that has large growing populations housing becomes more expensive where the majority desire to live. Perhaps you need to consider advocating for less growth in our population and that 35 million is too many people for this country…

  2. You’re quite wrong, Iain. The population of Melbourne hasn’t doubled in the time it’s taken for property prices to double. There wasn’t an immigration bubble to match the housing bubble.

    The house price boom was caused by the market flooding with investors when Howard halved CGT, and inflated further by the FHOG.

    You just want everything to be the fault of immigrants. (Except the ones from England like you.)

  3. Jeremy
    I did not mention immigration, I speak of population here You seem very keen to suggest some dark motive in my argument frankly it is a line of argument that should be beneath you, but it isn’t .
    Secondly there is no reason at all to believe that the increase in house prices will be of the same proportion as increases in population.
    Thirdly you seem to be arguing about the increase of house prices in pure dollar terms over time when doing so ignores inflation and increases in peoples incomes over that period.

    If you want price for housing to become more reasonable then the answer lies in encouraging people to settle outside the “real estate hot zones”. into the regional towns and cities.

  4. There wasn’t a population bubble. Look at a graph of house prices over the last fifty years – they rocketed beyond all recognition when Howard filled the market with investors.

    The problem isn’t inflation, it’s house prices increasing well ahead of inflation.

    And the regional towns and cities have even less of the necessary infrastructure for population growth than the major cities.

  5. Thirdly you seem to be arguing about the increase of house prices in pure dollar terms over time when doing so ignores inflation and increases in peoples incomes over that period.

    My house has quadrupled in value in fifteen years… Inflation hasn’t, my salary hasn’t.

  6. “Thirdly you seem to be arguing about the increase of house prices in pure dollar terms over time when doing so ignores inflation and increases in peoples incomes over that period.”

    Jesus Christ, Iain. Inflation two years ago was 0.5%, last year it was a touch over 1%.

    Melbourne’s housing market continues to go up $700 a day. Anyone here have an income that went up that much? No?

    That’s called a disparity, Iain. Look it up. It’s what we’re talking about when we’re saying that the housing market is going up out of all proportion with CPI or wage increases.

  7. {No, Iain, this post is not an opportunity for you to speculate about my private circumstances. Also, if you wish to comment further on it, please address the actual arguments made in the post rather than completely ignoring them. – Jeremy}

  8. Just to add my 2c Iain: there certainly was no population bubble in Melbourne in the period from 1996 to 2001, in fact there was net migration out of Melbourne at the start of that period. But that’s when the biggest inflation in Melbourne house prices occurred.

    It seems pretty obvious from the evidence that the inflation in house prices was driven primarily by investor-friendly tax policy combined with the big new fashion starting in the 1990s to get rich quick via investment property.

  9. The problem is that Iain’s world view is so small; he has a house, therefore everyone can afford a house!

    He’s also presumably clueless to the fact that CGT was halved in 2000.

  10. Keri
    I own a house simply because I decided to prioritize security of tenure ahead of buying a new Harley when I had a wad of cash in hand. That was ten years ago and now my wife and I own the place outright. and I am actually well aware of the rate of the CGT and that it changed a decade ago , I just don’t think that it is as significant as you and Jeremy claim it is.

  11. You own a house because you decided to buy one ten years ago, when it was still possible. The generation coming up did not have that choice.

    Your post indicates that you have no idea what you’re talking about with CGT. Here’s your summary on your site of my point above:

    “Somebody should explain to our learned friend that Capital Gains Tax is only avoided if the property that is being sold is the owners residence for at least a year. Investment properties do attract the tax. so It would seem that our learned friend would penalize anyone who sells their residence to buy another place to live with a large tax bill.”

    I originally said in this post (although it seems to have got lost by WordPress during editing) that I’m perfectly happy with primary residences being excluded from CGT. (Although ONLY for as long as they’re primary residences – once someone’s living somewhere else, and it’s an investment, CGT should apply from then on. This idea that people could get the “primary residence” advantage for a whole lot of properties at once is absurd.) CGT should apply to investments. The problem is that Howard halved CGT for investments, and consequently – when combined with other advantages like negative gearing – the housing market flooded with investors.

    Are you seriously denying that the proportion of investors in the market as opposed to owner-occupied homes has not increased dramatically since Howard halved CGT?

    This problem of housing unaffordability is real, and the fact that you were lucky enough to buy a house before the market ran away from ordinary people is quite besides the point. I suspect that when your children reach their twenties you’ll become more aware of the problem, but I also suspect you’ll find someone else to blame – immigrants, population growth, all factors which have been ongoing since the second world war and which did not suddenly spike just before the boom.

  12. Jeremy

    Jeremy

    You own a house because you decided to buy one ten years ago, when it was still possible. The generation coming up did not have that choice.

    Bollocks! The upcoming generation may not be in a position to buy a fashionable inner city address But then ten years ago I wasn’t either when I bought my place so I bought in a place that was more affordable. Its about choices and priorities.

    Your post indicates that you have no idea what you’re talking about with CGT. Here’s your summary on your site of my point above:

    “Somebody should explain to our learned friend that Capital Gains Tax is only avoided if the property that is being sold is the owners residence for at least a year. Investment properties do attract the tax. so It would seem that our learned friend would penalize anyone who sells their residence to buy another place to live with a large tax bill.”

    I originally said in this post (although it seems to have got lost by WordPress during editing) that I’m perfectly happy with primary residences being excluded from CGT. (Although ONLY for as long as they’re primary residences – once someone’s living somewhere else, and it’s an investment, CGT should apply from then on. This idea that people could get the “primary residence” advantage for a whole lot of properties at once is absurd.) CGT should apply to investments. The problem is that Howard halved CGT for investments, and consequently – when combined with other advantages like negative gearing – the housing market flooded with investors.

    Lost during editing? Pull the other one Jeremy! I know how WordPress platform works and it only loses text if the author wishes it lost. :roll:
    For negative gearing to have any value the investor actually has to have a high tax liability and interest rates have to be high I think that you will find that most investors in housing are just happy to have the rents they collect be sufficient to cover the mortgage. Do you have any figures to back up your argument? (cue back up from Keri ;) )

    Are you seriously denying that the proportion of investors in the market as opposed to owner-occupied homes has not increased dramatically since Howard halved CGT?

    Don’t know do you have any figures to back up your claims?

    This problem of housing unaffordability is real, and the fact that you were lucky enough to buy a house before the market ran away from ordinary people is quite besides the point.

    Err no it isn’t I had a very modest wad of cash in my hand and instead of indulgent consumption ( that Harley) I invested in secure tenure for my family in a location that I could afford But I agree that buying a house is hard if you have modest means and impossible if you want to live in a trendy location. It has always been so.

    I suspect that when your children reach their twenties you’ll become more aware of the problem,

    My children will have help from their parents when they need that is what families do.

    but I also suspect you’ll find someone else to blame – immigrants, population growth, all factors which have been ongoing since the second world war and which did not suddenly spike just before the boom.

    I have been an enthusiast for sustainable living since you were still in short trousers Jeremy and I have long argued that unrestrained growth is very bad for the environment. That goes for the urban environment as much as it does for the rural where I live so of course I consider that population growth is something that should be modest either from making children or from immigration. I can’t understand how on one hand you can complain about the cost of housing and in the same breath deny having more people seeking those same number of houses will not be the major driver of rising prices. That is basic economics.

    This comment will be cross posted at the post of mine that you quote above but so rudely fail to link to, Just in case you peevishly hold this comment in moderation or edit it.

  13. “Bollocks! The upcoming generation may not be in a position to buy a fashionable inner city address But then ten years ago I wasn’t either when I bought my place so I bought in a place that was more affordable. Its about choices and priorities.”

    Iain, we’re not talking about “fashionable inner city addresses”. We’re talking about shacks and units in outer suburbs.

    And not everyone has a job (or a partner’s job) that is so portable.

    “For negative gearing to have any value the investor actually has to have a high tax liability”

    Well, quite – negative gearing is a way to help the rich get richer. It doesn’t help the poor.

    “I think that you will find that most investors in housing are just happy to have the rents they collect be sufficient to cover the mortgage.”

    They sure are, when the price of their property is skyrocketing! All they have to do is sit back and get a huge return – rather than investing in something constructive. Those who bought investment properties before the boom are set with a massively advantageous form of investment not available to anyone else.

    “Don’t know do you have any figures to back up your claims?”

    I’ll find ‘em for you if there’d be a point. Would you concede anything if I presented you with figures demonstrating the increase in percentage of investors to owner-occupiers in the housing market over the last twenty years?

    “Err no it isn’t I had a very modest wad of cash in my hand and instead of indulgent consumption ( that Harley) I invested in secure tenure for my family in a location that I could afford”

    Which part of “that wouldn’t get you a house now” do you not understand? You WOULD NOT be able to do that today.

    “My children will have help from their parents when they need that is what families do.”

    Lucky them. I wonder if you realise just how much and for how long you’re going to have to help them at this rate if you want to see them in their own home. They’d better be captains of industry or you might eat those words.

    “I can’t understand how on one hand you can complain about the cost of housing and in the same breath deny having more people seeking those same number of houses will not be the major driver of rising prices.”

    It’s not, and the evidence for that is that if you look at a graph of population increases over the last sixty years as opposed to housing prices, you’ll find that there was no population spike just before the market exploded. It therefore could not be the cause. QED.

    And I didn’t link to your post because I don’t link to your blog. You know, the one that just last week published my private correspondence with a third party out of spite. And long time readers know that that’s neither the first, nor the worst, instance of your reprehensible conduct.


  14. Jeremy

    Iain, we’re not talking about “fashionable inner city addresses”. We’re talking about shacks and units in outer suburbs.

    Australia does not end at the Melbourne city limits

    And not everyone has a job (or a partner’s job) that is so portable.

    We have lived in the same place for the last decade, that is hardly a portable job, But people change their jobs all the time.

    Well, quite – negative gearing is a way to help the rich get richer. It doesn’t help the poor.

    No it does not make them richer it just stops the government taking more of their money in tax.

    They sure are, when the price of their property is skyrocketing! All they have to do is sit back and get a huge return – rather than investing in something constructive. Those who bought investment properties before the boom are set with a massively advantageous form of investment not available to anyone else.

    That sounds like Envy to me Jeremy :roll: define constructive? and if there were fewer people investing in housing for rental where pray tell would the country’s rental stocks come from?

    I’ll find ‘em for you if there’d be a point. Would you concede anything if I presented you with figures demonstrating the increase in percentage of investors to owner-occupiers in the housing market over the last twenty years?

    Produce the figures if you can find them and I will honestly respond this sort of line from you is really weak.

    Which part of “that wouldn’t get you a house now” do you not understand? You WOULD NOT be able to do that today.

    Maybe not in this precise location ( my place is now “worth” 5 or 6 times what I paid for it) But there are places in this country with the same level of amenity that this place had a decade ago at equivalent prices.

    Lucky them. I wonder if you realise just how much and for how long you’re going to have to help them at this rate if you want to see them in their own home. They’d better be captains of industry or you might eat those words.

    I will help them for as long as it takes and then some, but then as a socialist you object to inheritance don’t you?

    It’s not, and the evidence for that is that if you look at a graph of population increases over the last sixty years as opposed to housing prices, you’ll find that there was no population spike just before the market exploded. It therefore could not be the cause. QED.

    But its not just the sheer numbers of a population that drives the housing market it is how wealth those new comers are that matters. Thus if you have 1000 poor people move into Melbourne they will not be competing with you at real estate auctions but if you import 1000 professionals with some capital brought from their home country they will be. That seems pretty obvious to me QED ;)

    And I didn’t link to your post because I don’t link to your blog. You know, the one that just last week published my private correspondence with a third party out of spite. And long time readers know that that’s neither the first, nor the worst, instance of your reprehensible conduct.

    Yawn! You were debating the issue with Leon and you made no claims that the conversation was privileged (except in retrospect) so you are gilding the Lilly to suggest that any of the emails that I published were private. If you want to claim the moral high ground behave as if you deserve it.

  15. Wisdom Like Silence

    Iain:

    1/ No, it doesnt. Good point. Jeremy’s point was that urban shacks and units being just as unobtainable as inner city ones.

    2/ So everytime we find a decent house on the other side of the country for an affordable price we should give up the job we have? Have you seen the job market out there?

    3/ Right, negative gearing helps people wealthy enough to have investments hang on to tax money. Adding to their wealth. Making them richer.

    4/ WE DONT NEED MORE RENTAL STOCK WE NEED MORE OWNING STOCK

    5/ Jeremy is just drawing on years of experience when he is a bit doubtful of your ability to read figures that are accurate and then admit how wrong you are.

    6/ Where? I’ll move there tomorrow.

    7/ Good on you for wanting to help your kids. As a socialist, I wish all parents could help their kids the way you will be able to.

    8/ Post hoc ergo propter hoc arguments are so stupid, especially when it comes to economies.

  16. Splatterbottom

    If tax is such a big driver, then housing must have been really unaffordable when there was no CGT at all!

    And if you were worried about intergenerational theft, you would be really steamed up about the Whitlamesque debt Rudd is racking up. Who do you think will pay for that?

    Ian is right. Buying a home has never been easy, particularly without family support. One of the consequences of the two-income family is that prices have been bid up by the additional purchasing power of those families.

  17. You make a very good point about two income families increasing the competition for the housing that is available for sale SB
    Thanks for that :)

  18. That’s a reason why you needed two incomes to buy a house between say the early eighties and the end of the nineties.

    It’s not the reason why prices skyrocketed in 2000.

    As for your other points – WLS has responded to them pretty well, but I’d add:
    1. it will be difficult to source the precise figures particularly as to the increasing percentage of investors – there’s no real doubt that investors have swarmed into the market, but I’d have to do some work to get you a graph. It’s not worth it if it’d make no difference. Would you concede anything if I showed you figures proving that since the CGT reduction, the number of investment properties (and remember, every investment property is one that an owner-occupier isn’t living in, by definition) compared with first home purchases (those entering the market) has risen dramatically? Would you concede that investors and the advantages they now have are a major part of the problem? Or would it be a complete waste of my time even bothering?

    2. Leon asked me to continue a blog debate by email. I repeatedly told him I wasn’t having the debate via email – I was not actually engaging with him in a forum where it wasn’t going to be public – and then you published it as if I had been having a proper debate with him. Without my permission. Contemptible.

  19. Jeremy

    1. it will be difficult to source the precise figures particularly as to the increasing percentage of investors – there’s no real doubt that investors have swarmed into the market, but I’d have to do some work to get you a graph.

    So what you are doing here is admitting that you have no empirical data to back up your often made assertion about investors “swarming” the market. I am hardly surprised

    It’s not worth it if it’d make no difference. Would you concede anything if I showed you figures proving that since the CGT reduction, the number of investment properties (and remember, every investment property is one that an owner-occupier isn’t living in, by definition) compared with first home purchases (those entering the market) has risen dramatically? Would you concede that investors and the advantages they now have are a major part of the problem? Or would it be a complete waste of my time even bothering?

    You are making excuses here to cover the reality that none of your strident assertions on this topic has any empirical basis. You are trying to prove after the argument that which you insisted was a fact knowing that you had no proof. Stop wimping out by suggesting that I am immune to reason and prove your claim or admit that you are wrong

    2. Leon asked me to continue a blog debate by email. I repeatedly told him I wasn’t having the debate via email – I was not actually engaging with him in a forum where it wasn’t going to be public – and then you published it as if I had been having a proper debate with him. Without my permission. Contemptible.

    I have read the exchange Jeremy and you were arguing about the substance of the matter that Leon raised, That is debate and in fact in the correspondence you yourself said that you were happy to have the debate publicly.

    As For the issue of your permission. A conversation (even on over email) is between more than one person and I would contend that it is a property owned equally by all parties involved so having permission from one party to the dialogue means that permission from the other is not required especially when you had not made any claim to Leon that the conversation was to be kept private as you have when you and I have corresponded.

  20. “So what you are doing here is admitting that you have no empirical data to back up your often made assertion about investors “swarming” the market. I am hardly surprised”

    I’ve lots of anecdotal data, and it’s widely recognised that that’s what’s happened – I’ve never heard anyone seriously dispute it. You keep avoiding the question: would you concede anything if I took the time to find you precise figures? Happy to if you would.

    “I have read the exchange Jeremy and you were arguing about the substance of the matter that Leon raised, That is debate and in fact in the correspondence you yourself said that you were happy to have the debate publicly.”

    I was not having a full debate with Leon. I made some remarks but repeatedly pointed out that I would not go into detail or have a full debate over email.

    You and Leon misrepresented that email exchange as a full and frank debate. It was nothing of the sort. I made only limited remarks because I was responding via my Blackberry to his ridiculous demands. I did not address his points (such as they were) in detail because I wasn’t going to spend the time to do so over email.

    What you and Leon have done with that is profoundly dishonest and disingenuous.

    “in the correspondence you yourself said that you were happy to have the debate publicly.”

    And I was. But that email exchange was not the debate. I said I’d debate him in public in the comments to that post or not at all.

    And spare me your bullshit postulating about “permission”. It’s not a legal question, it’s one of manners. And you and Leon have demonstrated to the world that no-one should engage in any kind of good-faith email correspondence with you because you’ll abuse any such good faith whenever it suits you. You’re both beneath contempt.

  21. Splatterbottom

    Jeremy: Would you concede anything if I showed you figures …….. Or would it be a complete waste of my time even bothering?

    All information is useful, but being economics, it is hard to get anywhere near certainty. Notwithstanding Rob J’s and Keri’s outraged protestations on earlier threads, I am not even sure how big a problem this is.

    I am a bit cautious about ending negative gearing, which would treat property investments differently to other investments (like shares), as that would be using the tax system to distort the market.

    I am concerned about the influence of developers on state and local governments, particularly as regards supply of land. The state government in NSW is putting a lot of pressure on councils to increase the number of dwellings. This usually involves rezoning for higher density housing. This both a blessing and a curse, but it is certainly highly profitable for developers.

    What you seem to want to do is to decrease demand, by making it harder for investors to acquire residential housing. Surely this will decrease the number of new houses being built, and drive up rents?

    If the New Zealanders are successful with their plans to limit depreciation on residential investment housing and to end negative gearing, and this doesn’t do anything too drastic, that would be interesting. But then again, they don’t have CGT at all!

  22. Tim Colebatch in The Age has commented a few times on the growing presence of investors in the real estate market. There’s an article of his from 18 March 2008 where he states the proportion of new loans taken out by investors grew from 20-30% in the 1980s to nearly 50% in 2003. (Sorry, don’t have a copy I can link to.)

    The average investor has greater access to funds than the average owner-occupier, so it’s natural to expect that as more investors enter the market, prices will rise as investors outbid potential owner-occupiers and more people resort to renting instead of owning real estate.

    Take the investors out of the market and it’s guaranteed that prices will fall, but also that more people who want to own their own home will be able to afford to do so. Meanwhile, as long as the population is growing there will always be a market for new housing, so it’s unlikely to mean a collapse in construction. At the moment the construction industry is able to extract economic rents from over-exuberant investors: this is bound to cease sooner or later.

  23. usesomesanity

    The govenment needs to incentivise saving not going into debt and spending beyond your means with CGT concessions and the like.

  24. Splatterbottom

    Taking the investors out of the market will guarantee less houses will be built. Prices and rents will increase due to the shortage of housing.

    If it wasn’t for meddling socialists, the law of unintended consequences would be an obscure concept. Instead it is a daily truth that is never detected by those whose happiness depends on them reshaping the world in their own shitty image.

  25. Jesus, SB – we’re talking about taking investors out of the already built housing market. Give them incentives to build new homes, by all means.

  26. Splatterbottom

    If your aim is to drive down prices, that in itself will reduce the number of new houses being built!

  27. It’s land prices that are the main problem; reducing them won’t reduce the incentive for people to build houses on that land. Particularly if other incentives are given for the building of new homes.

    The present system does not encourage the building of new homes – why bother, when huge profits can be made just by sitting on existing properties?

  28. Splatterbottom

    I’m all for making more housing land available, and even for rezoning, within reason, to allow existing land to carry more people.

    What I don’t get is why you think the laws of supply and demand don’t apply to housing. House prices are the way demand is expressed. If they are lower, less houses will be constructed. You can’t manufacture a dual price structure for existing and new homes.

    Anyway, it doesn’t matter. Rudd has just killed the goose that lays the golden eggs. Mining investment will plummet. Houses (and everything else) will be cheaper but people will not be able to afford them as the economy dives. Foreclosures will rise dramatically.

    Maybe some sort of resources tax is justified, but the proposed tax is utterly rapacious. Not content with burning our houses, Rudd has decided to cremate the mining industry.

  29. “What I don’t get is why you think the laws of supply and demand don’t apply to housing. House prices are the way demand is expressed.”

    Of course they do – the problem is when they’re artificially inflated by policy that makes them by far the best place for people to park large sums of money. They stop being about the primary aim of housing – housing people – and become a way for the rich to get richer and the poor to become serfs.

    I don’t see why capital gains shouldn’t be taxed at the same rate as any other income.

  30. Splatterbottom

    Jeremy:

    They stop being about the primary aim of housing – housing people – and become a way for the rich to get richer and the poor to become serfs.

    House prices are about an agreement between two willing parties. They don’t and shouldn’t have an ‘aim’. Houses are used for accommodation – either rental or owner-occupied.

    Funnily enough, I don’t see a lot of serfs around. You need to get over this medieval mentality. Robin Hood is dead, and his idea of robbing the rich to pay the poor is deeply discredited, as is its socialist variant.

  31. usesomesanity

    SB- “Houses (and everything else) will be cheaper but people will not be able to afford them as the economy dives. Foreclosures will rise dramatically.”

    This is what happens when massive bubbles burst. Sell your home now and block your ears.

    Australians must not spend more than they earn, it will prob. take them going bankrupt befor they learn.

  32. Pingback: Landlords continue to outbid homebuyers « An Onymous Lefty

  33. Pingback: Chief Executive of their hearts – Pure Poison

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