There are many contributors to the housing affordability crisis but the parasites that are destroying Australia’s economy and the wellbeing of Australians are legislation and government policies that fail to recognise the unique nature of land as an essential resource for everyone. Federal Government legislation allowing tax concessions for investors, State Government land valuation legislation and Local Government regulations and approval processes treat land as an investment, spawning a real estate industry that has made housing unaffordable for the majority of Australians, supported by ridiculously high immigration that ensures demand exceeds supply. 60% of politicians own more than one property so don’t expect the parasites to be removed.
Every part of the real estate industry benefits from high land prices.
- Bank loans create new money on which they charge fees and interest. High value housing loans now form most of the business of banks, reducing their ability to provide loans to small and medium business.
- Land developers are able to develop and sell land at exorbitant prices in times of high demand and low supply, and
- State Governments effectively set a floor under exorbitant prices through Land Valuation legislation, generating high income through fees such as land tax, rent and stamp duty. These valuations help to legitimize high prices that inform developer’s pricing, bank loan approvals, investment decisions etc., thereby ensuring strong growth in land prices. Since 1987 the price of land has increased by a factor of 40, ten times the increase in the building cost of houses. This is generally hidden in public reports by combining house and land prices as property price.
- Property investors (including 60% of politicians) benefit from
- Big increases in asset values
- Higher rents
- Generous tax concessions
- Real Estate agents and mortgage brokers benefit from higher commissions and fees.
- Local Government benefits by charging higher fees for, and imposing more conditions on, development approvals. This also slows down the approval process, thereby constricting supply and increasing prices.
- Homeowners benefit through big increases in the value of their home, enabling them to borrow on the increased equity. However this is not a real benefit. If they want to move, they will have to pay an equally high price for another property.
The only cohort that doesn’t benefit are first home buyers and renters. The parasites are strangling the dreams of our children and grandchildren. Dreams of
- Home ownership – it is generally acknowledged that home ownership is now out of reach for most young people,
- An affordable lifestyle – mortgages and rents take up a large proportion of disposable income, and this will only accelerate under existing policies,
- Raising a family – the birthrate, now 1.6 children per family, is declining as parents realize they cannot afford the cost of raising larger families,
- A secure lifestyle – with the falling birthrate the Federal government is obsessed with high levels of immigration, which is adversely affecting Australia’s cultural values and security, and increasing the housing affordability crisis. High immigration helps to maintain high demand, thereby providing short term protection for investors and banks by delaying the inevitable housing bubble crash while the bubble keeps growing.
Australia’s economy also suffers through the decreased spending power due to high mortgages and rents, high social service costs (eg rent assistance), high wages needed to support high living costs, decreased productivity due to reduced financing available for business, reduced demand for services, and decreased competition in global markets. Daily news reports bear witness to the fact that all of these consequences are evident today.
Over the last 40 years successive governments have introduced policies and legislation to help first home buyers that have all led to further price escalation. With 60% of parliamentarians owning 2 or more properties (30% own 3 or more) it is clear that we have voted for the parasites that are feeding investor profits and strangling our country.
The way our Government is treating Australians and destroying our way of life is disgusting. What can we do?
This affects every Australian who doesn’t own a house, or has children or grandchildren who will one day want to own a house. That is, most of us. There are things we can do.
- Object to the State Government valuation of your property. Those of us who own properties will have them valued by our State Government on a regular basis. These valuations are highly subjective. This is recognised in the legislation by incorporating an objection process to enable owners to request changes, and to appeal to the Land Court if they are still unhappy with the valuer’s reassessment. The onus is on the property owner to confirm their valuation. The chart above shows three valuations I objected to over a 38 year period. My valuation was reduced each time, resulting in a saving of approximately $3000 in Local Council rates, which are based on the State Government valuations. If enough owners object it should force valuers to issue lower valuations, making it harder for developers to justify exorbitant prices and banks to approve larger loans. The ultimate objective would be to change the valuation legislation from market based to a system that recognizes the social value of land and reflects the value of home ownership to Government and the economy.
- Get better informed on what experts are saying about the housing crisis:
- Vote for the party with the best policies for stabilizing house prices. The rest of the economy really does depend on affordable housing.
- Share this information with your local politicians, your friends and on social media and radio talkback programs so that the Australian public are better informed by the next elections. Politicians won’t change anything unless there is very strong community support for change. Only vote for politicians that will abolish tax incentives for investment properties and have the courage to implement policies that recognise land as an essential resource for everyone, not a lucrative opportunity for investors. These will generally belong to political parties that are prepared to abandon neoclassical economics (eg Sustainable Australia Party).
- Advocate for change in legislation governing the way State Governments value land. The current system using Market Value is another failure based on neoclassical economics, which does not consider the role of banks in creating money or private debt in economic modelling.
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