There’s a lot of anger out there about rising house prices. It is getting to the stage where an average person on an average income will not be able to buy a house in commuting distance from a major city.
There are several reasons behind this abject failure of policy – the first home buyers’ grant, which simply inflated prices well beyond any value it had to first home buyers; John Howard’s massive cut to capital gains tax, encouraging increasing numbers of home-owning Australians to buy investment properties by using the equity they have in their houses to outbid people trying to buy their first home; negative gearing; the lack of investment in public transport infrastructure in new suburbs so that properties further out from jobs can still be connected with them; and the fact that rising house prices made middle-class home-owning Australians seem wealthier – even if it was at the cost of their children never leaving home.
The problem with those explanations is that they keep anger focused on where it’s both deserved and where any change to these policies must be made: the government. Specifically, economic policies that are creating an unbridgeable divide between rich and poor.
How to redirect that anger? Who would make a convenient scapegoat? The Daily Telegraph knows – IMMIGRANTS!
Wealthy migrants pricing locals out of Sydney property market
AUSTRALIAN families are being priced out of the property market by record numbers of highly paid skilled workers arriving from overseas.
Research by The Sunday Telegraph has revealed for the first time how skilled immigrants – predominantly from Britain, India and China – are forcing house prices to some of the highest levels in the world when compared with average incomes.
Contemptible. And their “research” shows nothing of the sort.
Almost 115,000 permanent skilled visas were issued last year, compared with just over 40,000 in 1998-99 – an increase of 187 per cent.
During the same period, the median house price rose 168 per cent, from $156,600 to $420,600.
I could go through the many other factors that are much more closely linked to house prices over the ten year period described (essentially, the time of the Howard government), but the fundamental point is this – correlation does not equal causation. Lots of other things almost doubled over that period. That doesn’t mean they’re the main reason for the increase in house prices.
That said, if you look closely at house prices right after the GST, right after the FHOG, and right after the cut to CGT – three policies which directly affected EVERY sale in the country – it is difficult to ignore the pattern that emerges.
Oddly enough, the Daily Telegraph article mentions none of these factors.
It does, however, introduce us to one of these oppressive foreigners:
Mark Taylor arrived from Britain on a skilled visa in 2003. The engineer-turned-management consultant was attracted by Australia’s lifestyle, weather and plentiful job opportunities, but soon became obsessed with buying property. He now owns four houses around the country and is scouting for a property in Sydney.
“The tax breaks are just fantastic,” the 37-year-old from Maroubra said. “You can offset losses on rental income against your tax, which you can’t do in Britain, and that makes it such an attractive market.
The Tele journalist completely misses the point of this: it’s not that Mark’s a foreigner that’s got him buying four – soon, five – properties – it’s that Australia makes it far too attractive to use the property market as an investment engine, instead of, you know, housing people. Why does Mark choose to continue pouring his money into property? Because successive governments have chosen to make it one of the best investments in the country, and sod the consequences for those who just want to live in their own home.
We have a system that encourages the property-owning class to buy more and more property for itself, leaving those who did not own property before the boom permanently locked out. We are moving to a nation of landlords and renters – and it’s not because of immigrants. It is, as Mr Taylor reveals, because housing as an investment is “so attractive” here.
THAT is the failure in policy.
And, separately, skilled migration has a point – it’s about bringing needed skills to the country. You know, like doctors, surgeons, engineers – people our underfunded education system has failed to produce in the required numbers. For the benefit of all of us. The other policies listed above – cuts to capital gains tax, the first home buyers’ grant, lack of investment in public transport infrastructure – ARE NOT POSITIVE. They are about making the wealthy wealthier and screwing over the disadvantaged. Even IF skilled migration had an impact on property prices, it’s not the place we should be directing governments to change policy.
Changes are desperately needed to address the housing crisis, and urgently. It’s just a damned shame that newspapers like the Daily Telegraph are diverting attention away from what would actually help.
it’s not that Mark’s a foreigner that’s got him buying four – soon, five – properties – it’s that Australia makes it far too attractive to use the property market as an investment engine
In his case it’s also the exchange rate coming from the UK. Before the GFC it was something like 1:3 for UK people coming here. But still, way for the Tele to miss the point on policy settings. Isn’t the FHOG supposed to be phased out soon?
The point isn’t that he’s wealthy, and has been able to buy ONE expensive house – it’s that he has four houses and is looking to buy a fifth. And why is he doing that? Because the housing market is presently functioning primarily as a place for those with wealth to invest.
We could cut back on those skilled immigrants – with the resulting shortages affecting us all – and the problem would remain, because wealthy (non-immigrant) investors would continue to buy up all the entry-level properties and lock renters out.
I didn’t think the FHOG was being phased out, just slightly reduced.
“doctors, surgeons, engineers”
“After 2001, when students were encouraged to apply for permanent residency after completing university or trade courses – and not incidentally when hairdressing was added to the Migration Occupations in Demand List – the industry further expanded with a proliferation of private colleges, many less subtle about marketing the possibility of permanent residency.” (from article by Liz Thompson and Benjamin Rosenzweig)
In order to sustain the rental demand needed at the back end of the ‘housing as investment’ model (not to mention our third largest export – crappy privatised education), you need to keep competition for rental properties artificially high by stacking the market with ever more renters fed into that market.
It’s stacked high with a mass of renters formed by locking people out of the housing market.
Most of the people of my generation or younger I know who bought a house before it became ridiculous, now also own an investment property. And most who didn’t – don’t feel they’ll ever be able to enter the market.
The problem isn’t the low proportion of immigrants in the market – it’s the large number of investors.
another day, another boring post whinging about the difficulty to get into the housing market.
home ownership, a privilege, not a right.
i should clarify that, not a privilege as in inheritance, more a reward for your hard work.
The point, of course, being that the generations coming up now will not be able to earn that “reward” no matter how hard they work.
And you’ll notice this post is a direct response to a current article on news.com.au about a current issue that affects an increasing number of Australians. Sorry it bores you.
i wonder who they’ll blame when the bubble bursts
“home ownership, a privilege, not a right.”
Why should I be more privileged than someone ten or fifteen years younger? I’d happily see my property devalued if it gave youngsters a chance to buy their own home.
As I see it houses are for living in, greedy pricks just see houses as assets.
So, why did you bother posting?
another thing, what happens when renting or buying a home in australia becomes too expensive for immigrants?
how many many years at 17% price growth before they decide its too expensive to live here? not many, when you look at how prices are like compound interest.
when the demand wanes due to extreme affordability…guess immigrants will be to blame for that, too
But you can’t get blood out of a stone. When the renters simply cannot pay the going rent the ‘investment’ turns south and those who were paying the mortgage on the investment from the rent have to sell at whatever price they can to avoid having the mortgagee do it for them. At that point the market corrects, the bubble bursts and prices become ‘affordable’ again. Does anybody know anyone who saved up and bought their house with cash?
I know a busdriver who owns 2 houses. He could ‘afford’ them because the bank was happy to lend him $800,000 in a booming market.
(now he’s deeply in the sh1t and can’t get rid of the renter at the price needed to clear the mortgage).
The government has too many friends in the bubble business so everything will be done to prevent the market doing what it logically will.
“The greatest shortcoming of the human race is our inability to understand the exponential function.”
– Albert Bartlett
There are no green shoots and this is all going to get quite ugly over the next few years.
“I know a busdriver who owns 2 houses. He could ‘afford’ them because the bank was happy to lend him $800,000 in a booming market.
(now he’s deeply in the sh1t and can’t get rid of the renter at the price needed to clear the mortgage)”
Like I say, houses are for living in.
“There are no green shoots and this is all going to get quite ugly over the next few years.”
Quite right, people need to realise this before borrowing ridiculously large sums of money, what would $800 000 be to a bus driver? 16 years pay? Madness.
Immigration is a driver, supply and demand is the primary issue for the housing market. Shares and property currently have equal tax implications with the following exceptions:
1. FHOG – you don’t get a first share investors grant, although a lot of people are using the grant as a way into property investment.
2. Capital tax exemption if you live in the property as your primary residence – you can still move out and rent it for 6 years, then move back in and still have the capital tax exemption.
Get rid of these “priveledges” and you will see some impact on the housing market. Negative gearing on property should also be removed (as it has in the U.S.) But to claim that the “importation” of viable lendee’s is not affecting the market is not having an impact is also false. It is a factor, just like the others, and is resulting in a housing market growing above the pace of inflation. At least with shares you have to be a resident (or someone who pays tax) to claim the franking credits on share dividends.
“But to claim that the “importation” of viable lendee’s is not affecting the market is not having an impact is also false.”
I am unenglished – delete “is not having an impact is”
Immegants! I knew it was them! Even when it was the bears, I knew it was them.
I’m 100% in agreement with you, Lefty – successive governments have fiddled with the supply/demand equation, and society suffers as a consequence. I’m happy to see that you, unlike the Telegraph, can identify the real source of the problem – government interference in the market – and that you advocate the reduction or elimination of market-distorting policies.
We’ll make a libertarian out of you yet 😉
I was dismayed at the choice of words the Telegraph used for its heading.
However, there is some element of truth.
As we’ve been reading in the headlines lately for all the wring reasons, Australia is an attractive destination for many students from SE Asia hoping to gain University degrees.
Not all of them return home to Asia after they graduate. Some will stay on here and obtain PR.
Consider the burgeoning middle classes in SE Asia. Many of them can afford to send their children to Australia for a University Education.
Once the children graduate, obtain PR and a good job and income, the parents may well decide, upon retirement, to relocate to Australia.
Many parents, who live in SE Asia, will but property here under their children’s name.
These oversease investors are also driving up local prices.
Australian property is seen as an attractive investment because unlike China, the Government can’t just decide to confiscate your house one day to make way for a factory.
Actually, jeremy, there are two clear causes of this malaise.
1. State government refusal to release more land.
2. Sydney and Melbourne having to bear the entire force of our out-of-control immigration.
It seems bus drivers are to blame for the unsustainable housing price bubble.
A stress test for lenders if unemployment reached 10-15% to stop the upcoming banking collape here.
Lending money against equity which has not been crystled and is only equity on paper is a recipe for disaster. Esp. when Assets are massively overvalued and a correction is only a matter of time.
Simple Logic is not something our Govenments take into account. Trying to bail themselve of the upcoming shit by throwing open the gates to wealthy immigrates and jamming another 2-3mil. people in already overpopulated cities will not solve the problem.
They simply need to take the stimulas out of the property market, let deflation take its course and stop the ponzie scheme that they allow the banks to keep lending into.
The thing about common sense is that it is not common with powerful(govenments) and rich (exec’s). Not when they profit from illogic, and continue to kick the ponize scheme can down they road.
If pommie ‘Mark’ has 4 or 5 properties, you could always make him an offer to buy one of them. That’s how, you know, er, markets work.
“If pommie ‘Mark’ has 4 or 5 properties, you could always make him an offer to buy one of them. That’s how, you know, er, markets work.”
Your average worker entering the market can’t, because the prices are now too high. The only people who can afford them are those in the higher tier of incomes or those with equity in an existing house to borrow against.
“Actually, Jeremy, despite your “racists”self-indulgent hand-waving, there are two clear causes of this malaise.”
Releasing more land is no use without also building public transport infrastructure to those suburbs so people can commute from them; and immigration is only barely related to the housing prices.
Even conservatives like Jarrah can see that it’s government policies encouraging investors to push home-buyers out of the market that are the real problem.
One arm of govenment pushes kids into overvalued houses with the FHOG the other bankrupts them by jacking up rates.
One arm of govenment encourages investments in housing against enquity in current properties owned, the other arm of govenment jacks up rates causing rents be ever increased until renters cant pay, then owners cant pay they bank holds the baby prices collape and the banks collape, the govenment borrows to bail out the banks, the govenment cant pay it dues. The liabilities fall to the taxpayer, taxes increase to pay the banks and govenment driven drepression.
Stress tresting banks and lenders now and not lending against leverage (paper equity), can stop impending doom. Short term pain for long term gain. Govenments need to take respon. and think long term financial stability, not short term unsustainable profits (that are future lent against) as current is stupid fucking craziness in the extreme. Bankrupting kids and distroying countless lives forever more.
“home ownership, a privilege, not a right.”
It’s only the privileged and those lucky enough to have been old enough to buy before the 300% increase in the market who’ll ever get there, LGWS.
Imagine being an 18 year old today looking at the housing market. The housing prices have gone up 300% in ten years, and wages have increased, what, 4%? Do the maths.
Seriously, can you not see it’s harder now? For people starting out with nothing, unless something happens, owning a house is going to be an unobtainable dream.
The class devide due to when you were born will bread an angry unclass of youth. Higher crime rates as they rob those older to get justice for the morgage of their futures they had no say in. And less police and public services to contol them getting even due to lack of govenment funds is maybe due kama. You reap what you sow.
When you distroy the dream of home ownership for a generation the countries soul decays. No wounder the kids now riot on Australia day we have wreaked their only dream and they now live without hope.
“Damn immigants! Theys comes heres, and don’ts even bothers to learns themselves the language!”
“Yeah! Those are exactly my [i]sentimonies[/i]!”
” RA RA RA! ANARARARA!”
“Yeah, you said it, Barn.”
~Moe Syzlak, Homer Simpson, Barney Gumble