Australian property through foreign eyes

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By Catherine Cashmore, a market analyst, journalist, and policy thinker, with extensive industry experience in all aspects relating to property. Follow Catherine on Twitter or via her Blog.

I had the good fortune to meet two investors from Dallas Texas last week – visiting in part, to survey the Australian real estate terrain and in return, provide a unique opportunity to glimpse the madness of it all through foreign eyes.

A cursory look through the press paints a colourful picture for our visiting observers. Obviously, the spectacular rise in Sydney’s valuations has come under incredible scrutiny over the past 12 months or so.

Like any upswing in the ‘property cycle,’ it’s been exacerbated by a mix of forces, culminating in a shortage of effective supply against a bull run of speculation, which all agree has an inevitable end-by-date and no doubt subsequent ‘correction’ when the tide changes. (‘When’ being the operative word.)

The latest stats from RP Data’s capital city ‘Home value Index’ for the first quarter of the 2014 have evidenced “a near record level of growth throughout the month of March” rising in excess of 2% coupled with an “ongoing escalation in housing finance commitments.”

Sydney dwelling values are now reportedly 15.8% higher than their previous peak, some distance from Melbourne, which shows a more ‘subdued’ 4.7% ‘post peak’ increase (movements, which in industry ‘speak’ are neatly termed a ‘recovery.’)

In response, the RBA, are like ‘a read blowing in the wind,’ employing the same old wooden tools they’ve always relied upon as they warn investors in their latest Financial Stability Review, – (like last year’s review, when stating how “undesirable” it would be “if households were to exhibit less prudent behaviour than they have over the past few years”) – that the:

..cyclical upswing.. cannot continue indefinitely..” and any ease in lending rates holds the “potential to encourage speculative activity in the housing market….”

Community service groups hurriedly rush to Canberra, flagging a wealth inequality crisis, presenting yet another shandy of submissions to the ‘rinse and repeat’ sequel of the last Senate inquiry into Housing Affordability,

And as Barclay’s Chief Economist Keiran Davies sounds the alarm, reporting household debt to disposable income has hit a record “177% peak,” the public outcry against foreign investment ‘bidding up prices’ has prompted the Coalition’s conservative version – reminiscent of Kevin Rudd’s 2010 ‘1-800-I-SAW-AN-ASIAN-AT-AN-AUCTION’ debacle – to assess “what is happening on the ground” and stave off the growing concerns that seem to indicate rules are not being adhered to.

The analysis my two new friends from Texas would hear from Economists in response to the above backdrop is equally schizophrenic.

Whilst Governor of the RBA’s Glenn Steven’s is telling audiences that a modest overheating in housing markets could have “long-term negative consequences for economic growth.” AMP’s Chief Economist Dr Shane Oliver is assuring the “normative” response to low interest rates producing a sharp surge in established house (land) prices, is “great news for the economy!”.

According to Oliver:

“Housing may show an “overvaluation criteria for a bubble,” but, we’re not in one yet, otherwise “property spruikers [would be] out in a big way” or “buyers rushing in for fear of missing out!”.

Obviously, Dr Oliver has not been attending many auctions or property seminars of late – otherwise he’d have plenty of evidence of the above practices (at least in the two biggest capitals.) They’re all but engraved into Australian culture.

Notwithstanding, Christopher Joye is back to the task of boosting his readership figures, evidencing the quite the opposite – warning ‘overvalued prices’ could see “unprecedented 10 to 20 per cent losses across the board” when/if the market ‘normalises.’

Grave concerns indeed, albeit, it whistles the same tune as most industry commentary regarding affordability, with anxieties only going so far as to ensure an already inflated platform can be sustained (through ‘prudent lending,’ of course) without open and strong advocacy into the policies that would stop these cyclical peaks and ‘corrections,’ which result in numerous ‘crash’ predictions, inevitable pain for new home buyers, a real wealth inequality crisis – for what seems to be for no more than generating publicity, whilst maintaining the ‘status quo.’

“Build more houses!”

Unfortunately, the assumption – both here, and overseas – remains, that the only way to make houses more affordable, is to increase the supply of new dwellings.

Building more accommodation seems like an easy prescriptive cure, with supply verses demand being a well-tested economic model – that is, until it comes to the land market.

We can’t seem to deliver this supply at normative prices for the locational price/distance trade off.

Speculative activity, further promoted by a constipated planning system, has resulted in ever increasing land values, on ever decreasing ‘lot’ sizes.

Analysis by RP Data shows vacant land prices over the past 20 years, have lifted from a median rate of $76.47 per square metre, to $507.70 per square metre, as of the end of 2013. Whilst the average ‘lot’ size has dropped from 700 square metres, to 500 square metres – and in some states, less than 400 square metres over the same period.

Obviously reforms to the planning process would greatly assist, however contrary to common belief, it would not alone provide a cure.

To truly restore housing back to ‘fair’ value, we would have to remove the level of speculation manufactured into the structural design of our housing market and this is one side of policy reform Government has repeatedly refused to address.


To be clear, an increase in the natural price of land, is an expected result when economies are improving due – for example – to capital investment in infrastructure, as is the case in Australia currently, with Tony Abbot’s desire to be knighted the ‘Infrastructure Prime minister.’

Infrastructure intensifies the use and demand for land as the population grows, assisting job creation and collaboration between individuals.

Therefore, taken alone, rising values should be a ‘good’ thing for our country – (and economy) – or at least they would be, if the gains truly benefited the community.

Any manufactured improvement to a location’s public amenities, gifts a beneficial trade-off to the owner, who receives a windfall in remuneration as the resulting economic impact boosts productivity.

This increase in values is what economist’s term ‘economic rent,’ although expressed rather misleadingly in popular vocabulary as ‘capital growth.’

To clarify – ‘capital’ infers something that can be reproduced through productive activity, however we know from housing data, that the true gain in “house prices” is really collected in the rising cost of land, which takes up a 4.1 trillion dollar share of our 5.02 trillion dollar housing market.

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Land cannot be reproduced because it can’t be moved, it’s fixed in supply, and therefore any financial benefit derived from improving the surrounding facilities, is merely soaked into the ground.

This is why ‘land banking’ is promoted within the industry as a popular ‘investment strategy’ – although to be clear, it’s not investment at all.

Investment implies the creation of wealth, whereas speculating is a zero-sum game; the wealth is not created, the landowner does nothing – and for the homeowners in Australia, lucky enough to be situated close to the best seats in town, it’s a generous tax-free unearned windfall.

Unwontedly or not, land bankers who hold their underutilised plot in lieu of ‘capital gains,’ are ‘free loaders’ on the economy, and building activity does not respond to demand, but is only boosted when values are assessed to be on an upward trajectory.

Policies such as negative gearing, depreciation, capital gain exemptions, the encouragement to acquire properties and gear against them in self managed super funds, as well as the use of the family home as a wealth reserve for retirement, enforces speculation into the foundational makeup of our property market.

Land Cycles

But I’m not informing Australian’s of anything they don’t already know. People have become acclimatised to property being ‘expensive,’ and our housing has become expensive because its value is derived from its accumulated and speculated future ‘capital gains’ – correctly termed economic rent.

According to statistics, homebuyers typically move every ten years or so. The price they are prepared to pay, is balanced against the price they expect to achieve, minus expenses – and in all my years assisting buyers, (barring the odd downsizer) I have never met a single one who calculated otherwise.

This is why property ‘cycles’ – this is what promotes speculation.

The banking sector, which has a monopoly on this process (after all, how many can purchase a property without a mortgage?) increases the volatility of this cycle markedly; however banks, lending, money (credit) creation, lack of regulation does not cause the cycle, (or stop the cycle.) Speculation does.

We had land booms and busts before the evolution of our modern banking system – and without a change to the structural makeup of our housing market, we’ll continue to have them.

Lending restrictions can mitigate risk, but due to the vested interests of banking system, it will not remove it to the degree needed to stop the cyclical impacts.

Easy Earnings..

Notwithstanding, for those homeowners and investors who purchased over the last decade or so, making money through buying, holding and acquiring property (land) has been a far more effective in accumulating ‘wealth’ by way of earning income and channeling it it into productive activities.

The BRW rich list is littered with examples, and for those who are not involved in the business of property, land is where they invest their dollars.

Of course, for the first homebuyer on a single wage is ‘priced out’ – the mantra resumes that we just need to build more dwellings, the process of which contains just as much speculative activity in its design (including how we fund for infrastructure) so as to exacerbate the problem.

But how does it look to our Texan friends?

Well let’s just say, they’re not rushing to move here.

Texas is one of the top locations for interstate migration in America.

As with Australia, the economy has been super charged by way of a commodity boom, but unlike Australia, industries such as tech, manufacturing and business services are thriving and hiring in droves.

The expansive list my new Texan friend’s reeled off, highlighting the number of companies moving their central operations into the state (rather than ‘offshore’ as they do here) is impressive, and when I asked how much they would spend purchasing a ‘home’ I was told that “3 times gross earnings” would buy the ‘best’ in town, which was summed up by the comment “like the house my parent’s own.”

Most of the units and condos in Texas are rentals – owned by large investment funds for example, and used as a hedge against inflation and source of positive cash flow.

There are less family sized rentals (detached dwellings) albeit, because housing is ‘affordable,’ there is also less demand.

Devoting earnings to building a property investment portfolio isn’t a consideration for most Texan residents.

The state didn’t experience a housing bust, because it didn’t experience a housing boom.

The subprime crisis didn’t hit, because speculation was removed.

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This was in part due to liberal and well funded supply policy, which ensures housing is built on demand, and essential infrastructure funded by way of a ‘deductable’ Municipal Utility District tax, administered by residents, funded by a bond, and payed back proportionally over a lengthy period of time.

The additional key however in what’s been termed the “Texas miracle” is low taxes on productivity, lack of state income tax and a good regulatory environment, offset by higher than average property tax.

It’s not perfect – Texas does not remove other taxes, such as sales tax, which has a destructive impact on commerce – and property is taxed as well as land (where as ideally, in a truly productive environment, only the unimproved value of land – the economic rent – should be subject to a tax, which is far easier to accurately assess than the total capital improved value.) However it makes the point.

Whilst Texas boosts and attracts productivity with lower taxes, discouraging speculation in the areas that destroy it, Australia leans to the opposite.

We’re not immune to real estate crashes and there is plenty of evidence to prove their increased severity when prices are allowed to escalate. But, the best way to mitigate the risk, and protect against volatility, is to encourage the industries that advantage the working population most (manufacturing for example,) and take the air out of those that advantage land speculators the most.

Unconventional Economist
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  1. Hear, Hear!

    Thank you, Catherine for another bold dissection of Australia’s poisoned land market.

    The energy, savings and debt capacity of the whole country has been diverted to collecting the economic rent of land. However, the price of land relative to rents has risen so high, the asset class is uninvestable.

    This is the only public forum willing to discuss this uncomfortable fact, and use data to illuminate rather than florid gestures to persuade. There is a debate on tip-toe in the (paywalled) AFR, which refuses to acknowledge the role of zoning, debt, tax bases and speculative appetite.

    We live in a land of lemmings.

    Don’t Buy Now!

    • How well did the “Don’t buy now” work for anyone over the past 5 years?

      Unemployment is the big direct threat. Government won’t act to bring prices down, although it might act to temper a boom.

      If government overcomes an external shock through deficit spending on high employment activities (as Labor did in 08/9 through school building and insulation installation) then unemployment remains lowish.

      What is the shock that government wont overcome that will cause the unemployment that significantly reduces house prices?

      The peak of unemployment could well come in 2-3 years as could an increase in supply as current multi-dwelling approvals become comleted projects, so there is a risk now that prices have risen so far and approvals have risen, given the mining cliff and automotive industry comin collapse.

      Place your bets and take your chance. It could go either way.

      • Interesting juncture, isn’t it. Anyone who bought is showing paper profits that are irrelevant unless they sell.

        Don’t Buy Now! was borne out of the reality first home buyers were excluded from the market except on the most onerous terms – a situation that has only worsened.

        Prices WILL revert to mean. They cant go much higher without lots more debt. You do not want to be heavily geared in a falling market.

      • @David anyone that bought may be showing paper profits but they bought for a much, much lower price. Starter homes around my area have disgustingly gone from ~550k to ~750k over the last few years. By living through this fkn nightmare (1st world problem I know), I have come to finally learn that what “should” happen probably won’t.

      • @Andy! You’re right, it is a first world problem. Yet as you and I have experienced firsthand, it is no less significant for those who live through it. Australia is an expensive country to live in even at a fairly basic standard of living.

        For me, the crying shame is the missed opportunity this country had to be one of the best in the world for everyone who resides here. Had that potential been realised it might also have positioned us to maintain a relatively high level of humanitarian immigration without fear of beggaring the existing citizens.

      • Andy, you are so right unfortunately.

        David, you should have been correct, and a few years ago I was convinced that prices would revert to mean. I thought then, how much higher could prices go? And especially after seeing the bubbles burst in the US, Ireland, Spain etc.

        But David, what you and I failed to realise was that the government’s determination in keeping the bubble inflated is far more powerful than what you and I think should happen. Who would have thought, for instance, that our own government would turn a blind eye to foreign investors flouting the law and buying up multiple existing houses – properties that they are legally forbidden from buying? Who would have thought that the government would give preference to foreign buyers over Australian citizens wanting to buy a home? Who would have thought that our government would continue to give preference to local investors, and indeed to anyone willing to pump that bubble even greater?

        I think that what has happened has been completely unforseeable. But then, those who did buy at any time in the past are reaping far greater benefits than they ever thought possible. Who would blame them for wanting their gains to grow bigger?

        How on earth can we ever fight a government who is deaf to our complaints? Whose members have their snouts so deeply entrenched in the trough that even if they did listen, they wouldn’t change a thing? My pessimistic prediction – bigger first home owner grants to keep propping up prices, more immigration, more foreign buying, ignoring pleas to do something about neg gearing, and basically anything that sends prices further upwards. The sky is the limit.

      • “What is the shock that government wont overcome that will cause the unemployment that significantly reduces house prices? ”

        The answer to that’s easy, it’s the timing that’s tough. The end of the China boom.

  2. ‘1-800-I-SAW-AN-ASIAN-AT-AN-AUCTION’ – pure gold.

    Excellent article. The popular vernacular ‘investing’ in aus is not geared around increasing capital, productivity or even cash flow. The fattest balance sheet in the world still requires a healthy cash flow to increase wealth without a buyout.

    • migtronixMEMBER

      Well there’s also that pesky issue of an open border and rampant gun/drug running…

      EDIT: The Lone Star state is run by the Freemasons…

      • Over the course of the 1990s, the prison population both nationally and in Texas began to grow at notable rates. Even though crime rates peaked in 1990-1991, prison populations and incarceration rates continued to grow for most of the rest of the decade. (This chapter’s feature Rating Crime in the U.S., Texas, and the South summarizes trends in crime rates beginning in 1960.)

        In part, prison population growth reflected new trends in law enforcement and sentencing. These included new guidelines on minimum sentencing and mandatory time served, in addition to numerous state-level “three strikes” laws (requiring enhanced sentencing) and zero-tolerance for drug related crimes.

        Taken together, the proliferation of tougher law enforcement and stiffer sentencing caused an unprecedented increase in incarceration rates across the nation. Yet, in Texas this rate of incarceration accelerated at a breathtaking pace. By 1995, the state’s incarceration rate was almost two-thirds higher than for the nation as a whole.

        This trend has moderated somewhat, but the state’s incarceration rate still remained more than 50 percent above the national rate in 2001. By the end of the 1990s approximately one Texan in one hundred (or over one hundred and fifty thousand people) was behind bars.

        skippy…. The great thing is you used to be able to cut a check right out side House of Representatives Chamber. Now that’s what I call transparency. They used to go inside till one crazy bloke started spraying the chambers with them in a moment of unbridled passion.

      • migtronixMEMBER

        @Skippy: Naturally the rise and rise — in numbers, share price and profits — of the private sector operated incarceration facilities had no bearing on that trend whatsoever 😉

      • migtronixMEMBER

        @Mav: Thanks dude, Taibbi is always worth a read but that one looks like a cracker.

      • Funny that mig, seems a lot of magistrates and polies are share holders.

        “Human rights organizations, as well as political and social ones, are condemning what they are calling a new form of inhumane exploitation in the United States, where they say a prison population of up to 2 million – mostly Black and Hispanic – are working for various industries for a pittance. For the tycoons who have invested in the prison industry, it has been like finding a pot of gold. They don’t have to worry about strikes or paying unemployment insurance, vacations or comp time. All of their workers are full-time, and never arrive late or are absent because of family problems; moreover, if they don’t like the pay of 25 cents an hour and refuse to work, they are locked up in isolation cells.

        There are approximately 2 million inmates in state, federal and private prisons throughout the country. According to California Prison Focus, “no other society in human history has imprisoned so many of its own citizens.” The figures show that the United States has locked up more people than any other country: a half million more than China, which has a population five times greater than the U.S. Statistics reveal that the United States holds 25% of the world’s prison population, but only 5% of the world’s people. From less than 300,000 inmates in 1972, the jail population grew to 2 million by the year 2000. In 1990 it was one million. Ten years ago there were only five private prisons in the country, with a population of 2,000 inmates; now, there are 100, with 62,000 inmates. It is expected that by the coming decade, the number will hit 360,000, according to reports.

        What has happened over the last 10 years? Why are there so many prisoners?

        “The private contracting of prisoners for work fosters incentives to lock people up. Prisons depend on this income. Corporate stockholders who make money off prisoners’ work lobby for longer sentences, in order to expand their workforce. The system feeds itself,” says a study by the Progressive Labor Party, which accuses the prison industry of being “an imitation of Nazi Germany with respect to forced slave labor and concentration camps.”

        The prison industry complex is one of the fastest-growing industries in the United States and its investors are on Wall Street. “This multimillion-dollar industry has its own trade exhibitions, conventions, websites, and mail-order/Internet catalogs. It also has direct advertising campaigns, architecture companies, construction companies, investment houses on Wall Street, plumbing supply companies, food supply companies, armed security, and padded cells in a large variety of colors.”

        According to the Left Business Observer, the federal prison industry produces 100% of all military helmets, ammunition belts, bullet-proof vests, ID tags, shirts, pants, tents, bags, and canteens. Along with war supplies, prison workers supply 98% of the entire market for equipment assembly services; 93% of paints and paintbrushes; 92% of stove assembly; 46% of body armor; 36% of home appliances; 30% of headphones/microphones/speakers; and 21% of office furniture. Airplane parts, medical supplies, and much more: prisoners are even raising seeing-eye dogs for blind people.”

      • The ability to support such activity’s in the mid to long term with some semblance of quality of life.

      • Glad you could support your opinion with data david collyer.

        How many historical data points would you like me to present, showing the effects I describe in relationship to extended time lines.

        skippy… remember were talking about human lives here.

  3. There’s a lot more differences between Texas RE and Sydney RE than there are similarities. Sure the main unit of new construction is the Mac-Mansion but that’s where the similarities end.

    Texas construction schedules are about 1/3 as long as the typical Sydney development schedule. Perfunctory tasks like city council approvals are very predictable, there are no “how long is a piece of string” questions and no onerous environmental /OHS regulations and practically no NIMBYism (even for Dallas city residential redevelopment)

    From my limited experience everything associated with Sydney RE development costs 3 times as much and takes 3 times as long as it does in Dallas. In my mind they represent two polar opposite systems, it’s like comparing a high volume manufacturer with a niche medical systems manufacturer, both are valid business models, under one model you get lots of housing cheaply, under the other; well you get exactly what you’ve got in Sydney.

    Personally I dont believe it will ever be possible to implement Texas style RE development processes in Sydney, the Sydney populace simply does not want it. About 70% of the existing population is more than happy with the present system, they are so happy even they gather in small informal groups each weekend to congratulate themselves on their investment acumen, They tell each other how smart they were to have purchased when they did. It’s a real hoot to be an outsider at one of these events….if it were a business equity investment, questions like; What’s the net-free-cash-flow of your portfolio? would be valid measures of their investing prowess. For a laugh try asking that question at your next local gathering RE IP owners, the exasperate/confused looks tell you all you need to know.

    • China-Bob,
      Seriously, instead of spending time with your current group of friends I suggest you contact a western Sydney charity and do a bit of work handing out food parcels or cooking and serving the free meals.

      • @Claw, I’m from the Lower North Shore my south of the harbour Sydney experience only extends to small patches of the eastern suburbs a few inner west suburbs and the CBD, I wouldn’t be caught dead in Western Sydney.

      • migtronixMEMBER

        do a bit of work handing out food parcels or cooking and serving the free meals.

        BTW Claw what stops the people receiving these services providing these services? For pay even..

        Edit: ditto CB and even then manly is as far as I’m willing to venture!

  4. Texas is also too hot, and a s-hole.
    I would rather pay triple the price to live in Sydney.

    • jdliveuk, you pay more than triple, like-for-like, to live in Sydney. Those sea glimpses have to be paid for, otherwise nature has no incentive to create them.

    • Texas is also too hot,
      Good point. Sydney can only get away with it’s outrageous housing policies because it has the natural advantage of good weather.

      • migtronixMEMBER

        @UE pretty sure that was /sarc from Claw…

        Damn you Melbourne start raining just as I walk to get a coffee why don’t you!

    • Yea no argument there Texas is far too hot in summer, but for the other 9 8 ok 7 months of the year the climate is actually pretty good. You get about 2 weeks of cold each winter usually with a little snow and ice storm but that’s it for winter apart from that winter daytime temps are usually 60’s and sometimes 70’s.
      Spring in Texas is awesome, course you do get the occasional Tornado but generally they restrict themselves to wreaking havoc in trailer parks .
      Autumn is OK but knida short Summer does not really end till October and winter sort of starts in mid November.

      If you’re looking for an outdoor retirement lifestyle Dallas is probably not the best choice, nor id Huston, but if you work 5 days a week in an office and spend most weekends at kids activities little league, soccer …. Both Dallas and Austin offer a damn good lifestyle especially for the money (I’m not a fan of Huston it’s way too humid)

      When I was young and single in Dallas I used to fly somewhere else most weekends, DFW is a huge airport, so you can find cheap get-away flights to everywhere (even Sydney direct). I know many young engineers that still do exactly this, 5 days work in Dallas, weekends where-ever.

      • migtronixMEMBER

        I do this from Melbourne what’s your point? From London the whole fkn world was your oyster!

      • Woo hoo.. My FIFO between Melbourne-Sydney is ending this week (moving family to Melbourne).

        So long.. Skybus, Sydney airport and AirportLink.. Rent seeking banksters.. Go suck someone else’s blood.

      • @Mav – sounds like good news but beware that we have plenty of rent-seeking bankers down south as well.

  5. There are crucial differences. Dallas, and most of TX, has plenty of flat, basically useless (other than for development) land and it’s cheap, and they are happy to encourage sprawl as far as possible. It’s not sustainable by any means and it’s NOT what Australia needs.

    Texans use huge amounts of energy to power their sprawling tract developments and oversized homes, especially to keep them ice cold in the summer. Not to mention the amount of fossil fuels used to push enormous trucks and SUVs down giant freeways to these distant suburbs in traffic every day.

    In addition, housing is cheaper because property taxes are very high. To be fair there’s no state income tax and housing is cheap, so it’s not a big burden unless you “volunteer” for this tax by living in an expensive home, but we’re talking about ~2.5% of the *appraised* value of your home every year in taxes. Keep in mind, if you buy a house at age 30 and it’s tripled by age 60, you’re now obliged to pay 3x more in property taxes a year in retirement. Property taxes on a $500,000 home are $12,000+ year, something Australians are completely unaccustomed to.

    One other factor not mentioned in the article is extremely cheap labor used in Texas construction. Almost all of the laborers are illegal Mexican immigrants who work for ~$7/hour. Construction costs including materials are currently around ~$800 per sqm in Texas.

    Exurban tract developers have long been destructive and exploitative in Texas, I have seen it with my own eyes, growing up in these areas over the past three decades. It’s not something Australians should strive to replicate. There are much more sustainable ways to reduce housing costs and you start by reducing all the investment incentives currently in place.

    • So what you are saying it Texans use the resources they have available – energy and land and Mexicans, and as a result have cool homes in summer and cheap housing.

      By contrast Sydney government chokes supply to create artificial scarcity of land and Sydney residents suffer expensive housing as a result, but does have cooler weather than Texas.

      Which do you prefer?

      • Their eating through their resources at an astonishing pace, for a one time bump in happy numbers. Its a tax on the future, whats not to like – for some.

        • “Their eating through their resources at an astonishing pace, for a one time bump in happy numbers. Its a tax on the future, whats not to like – for some.”

          And this is different to Australia how exactly?

      • Sydney area still has new developments with reasonable houses around AUD$400,000. Factor in higher Australian wages, currency difference, and lack of property taxes, and you’re not much higher than Texas. Yes they are far away from CBD, just like the tract developments in Texas but let’s compare apples to apples.

        Limiting land release prevents developers from exploiting land and limits sprawl. Sprawl is a short-term solution and completely unsustainable. Limiting land release makes denser redevelopment of inner-areas economical. Limited land release combined with limited construction approvals? Now you have a problem.

        I’m likely the only person on this thread who grew up in one of these Texan suburbs. I’d pick Sydney any time

      • @ Unconventional Economist

        “And this is different to Australia how exactly?”

        Population to land mass, Texas has a greater population than Australia and projects to reach 45 million in decades. Do the math.

        Skippy… BTW 2/3 of Texas resembles the outback.

      • “Only $400,000”

        After tax, after expenses, how much exertion in required to acquire $400k?

    • Ahhh yes, joonix. The old property tax straw man, debunked years ago on this blog.

      No one is saying that Australia should fully emulate Texas. And even if we did, we would certainly not become Texas. But there are lessons that we should learn from them, particularly around land supply and infrastructure financing.

      Oh yeah, and if you are worried about car/energy use, the sensible thing to do is to tax the inputs directly, not attempt to indirectly regulate them via strict planning. Economics 101.

    • sorry joonix

      don’t dispute your childhood/early adult experience, but I’m here now (in Houston) and your numbers don’t equate with my research as to the market now

      I’m npt saying I would like to live here, but you can’t get away from the huge numbers of internal immigrants who come here for good jobs paying good money (in their view) with the chance to buy into an affordable housing market


    The eastern nimbys have beaten back the government, I wonder if the north west has a bunch of self entitled nimbys to go into battle?

    That said I wouldn’t blame them entirely. The NW rail link was supposed to make life easier, now they’re just going to pile as many people as possible on it. Japan here we come.

    You want mass immigration? Well there’s a good chance you’ll get a block of units built next to you. That should be the message that’s hammered home to the average idiot voter.

  7. You can’t compare Texas with Sydney.

    Here is my list so far:

    1) Texas has a high prison population
    2) Texas uses a lot of fossil fuel with its SUVs
    3) Texas is very hot
    4) Texas is horrible and no decent person wants to live there
    5) Texas land is horrible and not worth saving for any other purpose
    6) Texas has land tax
    7) Texas has illegal cheap Mexicans

    • migtronixMEMBER

      I really can’t tell if that’s sarcasm…
      Wasn’t Sydney the world’s biggest open air prison once ? I read that on a plaque in the rocks one time

      • Yes quite often, actually grew up in Az. Lots of jobs down in Texas for ashland chemical and huge distribution warehouses, drove from Boulder Co all the way down and months on site. Plus friends in DFW, Austin [brother lives there] and Houston [exit point to Costa Rica – banking – company umbrella haven]. From the 70s onward, hay the S&L thingy was fun eh… Dallas was the epicenter.

        Seriously TX is like the gateway to Panama and all the financial fraud that goes on, sort of like Mexico and drugs. Yep have friends down on the border with Mexico too and in Mexico.

        skippy… in my observations Texas is the new Miami of the late 70s and 80s.

  8. Catherine … you are outstanding !

    Great further reading at Tory Gattis “Houston Strategies” blog …

    They have the highest standard of living because they are in the wealth creation game … unlike Australia and New Zealand in the poverty creation game of illusory wealth, flicking grossly over-priced houses to each other.

    Joel Kotkin of New Geography explained this …

    We prefer to operate a Bankers Welfare Programme as mortgage slaves instead !

    • This is so amusing to me. Houston is a terrible development model. Have any of these people actually been there? I’m from there and it’s a hellhole, particularly after the recent population growth!

      • I dont like Huston either, but I’m not sure why you are so down on Texas in general.
        Austin is a nice place to live and work. San Antonio is also great especially if you can get a good job there (Hint: lots of high tech work at the NSA’s top secret cyber defense attack bases…oops) it’s also close to Padre Island if you want a tolerable beach getaway.

      • migtronixMEMBER

        I’m with you joonix! No one here talks about Germany or Switzerland or Japan. Huston? Texas in general? Blergh!
        No one bothers to mention that the whole place is funded by the federal government as a military base. Free market my arse…

      • I’m late on the thread but have to say joonix – don’t know what your earlier life was about, and as stated earlier, wouldn’t want to live here (I’ve moved on in life and don’t need to have a job/future) but….

        great place to invest and is a vibrant economy in contrast with so much else in the US let alone Oz

  9. Catherine, I don’t know if you read the comments here, but here’s a style tip from a pedant: cut back on the use of the quotes – particularly when you’re not actually quoting someone!

    It seems every second sentence had ‘quote marks’ to indicate the word didn’t quite have it’s ordinary meaning (I think). It’s very distracting to the flow of the sentence – it’s a bit like someone air quoting with their fingers every 10 seconds in a conversation.

    Look at this sentence:

    “Sydney dwelling values are now reportedly 15.8% higher than their previous peak, some distance from Melbourne, which shows a more ‘subdued’ 4.7% ‘post peak’ increase (movements, which in industry ‘speak’ are neatly termed a ‘recovery.’)”

    There are four sets of single quote marks, none of which are necessary. The post-peak increase in Melbourne was indeed more subdued, but your use of quotes made think that you were trying to convey some other meaning.

    I very much enjoy your analysis, but your writing style gives me a headache!

    Pedantic rant over.

    • migtronixMEMBER

      Ahem.. to invoke Murphy’s law…

      ‘quote marks’

      did not need the ‘ ‘…

      Now I’ll invoke Goodwin Law — You, sir, are a grammar Nazi 🙂

      • I think you’ll find that quote marks are permitted when one is indicating ironic usage…but point taken.

        And to be fair, I’m genuinely trying to improve the author’s writing. I counted 40 instances of quote marks for non-quotes in that article…that’s overkill by any standard.

      • migtronixMEMBER


        I know, and I agree with you — the example you cited should be enough for anyone 🙂

    • I’m often rather pedantic too, when I read others’ comments, however when I type my own, my fingers move so quickly, wanting to get my point across, that I usually make several grammatical errors.

      Catherine writes long articles, and I do notice the odd spelling mistake e.g. “like ‘a read blowing in the wind,’” when of course she meant “like a reed blowing in the wind.” However, when you look at her content, she is second-to-none. She always writes fantastic articles, and given that she works in real estate but has the guts to stand up and say what’s really happening deserves a lot of merit.

      Catherine, keep up the good work, and we’ll forgive you for the occasional spelling and grammatical errors. It’s more important that you get the information out there in the public domain.

    • Dude, Catherine hasn’t used quotes! Quotes look like this: “quote”, not this: ‘quote’. A quote is used when the author is quoting another persons words. She hasn’t done this. Oh the irony! Or did I just walk into your sucker troll trap!? Well played if so. If not, give yourself a weeks ban.