Australia’s empty homes

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.

“The home, built in 1857, had been unoccupied for years” said the report of a dilapidated Victorian-era mansion in Sydney’s Balmain East.

ScreenHunter_71 Sep. 30 17.30

Situated in an exclusive residential pocket next door to Balmain East ferry wharf, and sporting bayside views of Sydney’s Harbour Bridge, the 457 square metre block of land attracted 200 people to the auction, 18 registrations to bid, and sold $830,000 above the reserve to a local home buyer for $2.68 million.

According to Property Observer, the site had been acquired in 1973 for $33,500 by the notable gay right’s activist and historian, Alexander ‘Lex’ Watson – president of The Pride History Group, and lecturer in Australian Politics at Sydney University, who sadly passed away earlier this year after a long battle with Cancer.

$33,500 in 1973 dollars would be $289,724 in real terms today – making the selling price of $2.68 million, a value almost ten times as great.

The location was the key of course, with planned upgrades to Balmain East ferry wharf, which will now receive services from the Parramatta River along with extra ferries to McMahons and Milsons Point, further enhancing its value.

Had the home been only a few kilometres away, a few hundred thousand could have been wiped off the price tag and the media sensation may not have been so great, even so, it is not the only dilapidated property to make the press of late.

Opportunistic buyers caught up in Sydney and Melbourne’s property boom, have snapped up a string of empty homes, selling under stiff competition while exceeding all expectations of price.

An empty hat factory on Wilson Street, Newtown, also vacant for years, sold earlier this month for $1.725 million.

A dilapidated home on 360 square metres of land in Thornley St, Leichhardt, vacant for more than 30 years, sold a few weeks ago for $1.4 million at auction.

A home in total disrepair at 19 Durham St, Stanmore, situated on 172 square metres of land, vacant for years and sold for $923,000.

And not to leave Melbourne out, an unliveable Richmond property on 726 square metres of land, also vacant for years, sold for $2.544 million – $900,000 above the price it achieved only two years ago.

ScreenHunter_72 Sep. 30 17.44

The list goes on…..

Barring the last example that came with plans and permits for two town houses, these properties transacted for nothing more than their land value. However, while the buyers purchased a location, they did not pay for the services that rendered that location valuable or, in the case of the first example, compensate the local residents for suppressing access to some of the best views in town.

Instead, reinforced by inelastic zoning constraints, generous tax treatment, and unrestrained speculative growth in dwelling finance commitments, they unwittingly rewarded the sellers with a substantial unearned gain for withholding valuable land from use and depleting the nation’s housing supply.

This means of ‘creating wealth’ common in most western nations, sits at the root of many of our economic and social problems today. It has both a debilitating and destabilising effect on the economy, evidenced clearly in a painful and rising trend income and housing inequality that burdens the capacity of the ‘welfare state’ to compensate.

Interestingly, Lex Watson, the prior owner of the Balmain East property cited above, was purportedly greatly influenced by the writings of John Stewart Mill whose work was said to be: “the touchstone of his life and later activism.”

Born in London in 1806, John Stewart Mill is remembered as: “the most influential English-speaking philosopher of the nineteenth century.”

Inspired by his father James Mill, who tutored his nine children with daily lessons in Latin, Greek, French, history, philosophy, and politics, John Stewart Mill was a leading economist – a prolific logician, who dedicated his life to championing the causes of liberty and equality, while advocating ‘radical’ ideas, such as the abolishment of slavery and equal rights for women.

In 1848 he published the most prominent textbook on economics in the 19th century: Principles of Political Economy – critiquing systems such as communism and socialism and cementing Mill’s reputation as a leading public intellectual.

Extending on the ideas set out by Adam Smith and David Ricardo, Mill employed concepts that that have been written out of today’s economic narrative, that conflate land and capital – virtual opposites – while failing to distinguish between income that is ‘earned’ and the economic surplus that disproportionately flows to those that “love to reap where they never sowed.” A process best set out in Mason Gaffney’s book, “The Corruption of Economics.”

Writing on the moralities of taxation in Book V, Chapter II of ‘Principles of a Political Economy’ Mill commented:

“The ordinary progress of a society, which increases in wealth, is at all times tending to augment the incomes of landlords; to give them both a greater amount and a greater proportion of the wealth of the community, independently of any trouble or outlay incurred by themselves. They grow richer, as it were in their sleep, without working, risking, or economizing.”

From this Mill concluded that the government should collect society’s economic rents in lieu of taxes that impede productive labour and industry, including taxes on the improvement and the transfer of property, (stamp duty) which he said, should rather be: “distributed over the land generally, in the form of a land-tax.”

He was not the first or last to do so.

He followed a long line of influential activists, from Thomas Paine, who in his 1797 publication Agrarian Justice stressed:

“Men did not make the earth…. It is the value of the improvement only, and not the earth itself, that is individual property…. Every proprietor owes to the community a ground rent for the land, which he holds.”

To most recently, Dr Ken Henry, who chaired Australia’s ‘Future Tax System Review’ and noted: “… economic growth would be higher if governments raised more revenue from land and less revenue from other tax bases.”

The classical economists recognised that unless profits from the ‘enclosure of the commons’ – land, water rights, minerals, and so forth – were effectively collected and shared for the benefit of the community, all productive gains, every improvement in society and the economy, would be capitalised into rising locational land values, enriching those that owned the assets but more so, those who created the credit and traded on the debt.

This is equally applicable to reductions in the cost of construction.

For example, news that high-density apartment towers close to public transport in Sydney, will no longer require parking facilities, delivering an estimated saving of $50,000 – $70,000 in development costs, will do little to ease affordability. Rather it will simply leave more funds available to bid up the price of land and this is precisely what we are seeing in Australia – sky rocketing land prices requiring ‘super tall’ structures to provide a viable return on investment.

While the small one and two bedroom units may be spruiked as affordable, when calculated by cost or rental value per square metre of floor space, they are remarkably expensive.

Mason Gaffney expanded on the theory, coining the acronym ATCOR“All Taxes Come Out of Rent.” Showing that whether renting or buying, total tax liabilities from whatever area carried by the consumer, deduct from the cost of a site to the extent they limit the amount a buyer is both prepared and able to pay.

It follows that the removal of all taxes would naturally wash up into higher prices for real estate, which in theory leaves the resulting rise in the economic rent of land ‘just’ enough to replace the forgone revenue. (For more, see Fitzgerald (2013) “Resource Rents Of Australia”)

When that liability falls on productive industry, deadweight losses occur. For example, 90% of our taxes are distortionary, adding 23% to prices of goods and services.

However, when the burden falls on land and monopoly rents – minerals, fuels, the broadcasting and communications spectrum, patents etc. The reverse is the case.

In respect of land, a higher tax rate levied on the unimproved value would discourage leaving dilapidated homes vacant for years while we struggle with an assumed housing shortage – suppressing the speculative element that adds to the volatility of the market cycle.

Furthermore, when the gain is collected and used to fund the expansion of infrastructure in order to service a growing population, the tax base is expanded without a subsequent lift in rates.

In the 19th century, nature’s ‘free lunch’ was largely limited to the aristocracy of the great landed estates, today monopoly profits are absorbed by the financial sector which wields significant political leverage from lending ‘endogenously’ created credit against real estate collateral, with the compounding interest disproportionately increasing levels of household debt. As I pointed out previously – Australia will increasingly feel the effect of this as we move into 2019.

Our current tax system is crooked. It allows large companies to jump through loop holes in legislation and ‘cook the books,’ shipping profits offshore, leading to an estimated $1.6 billion in tax revenue forgone, while land on the other hand, is used by investors as an effective tax haven.

In a recent post by Dr Gavin R. Putland of the Land Values Research Group, he notes:

“No matter how high your gross income may be, you can make your taxable income as low as you like, simply by buying enough negatively-geared properties. Such artificially reduced taxable incomes are used in ATO statistics on negative gearing, which are then trotted out by the property lobby as “proof” that most negative gearers aren’t rich — as exposed, for example, in Michael Janda’s article “The myth of ‘mum and dad’ property investors” (The Drum, 24 September 2014).”

Enlightening the disparity of our tax laws further, Putland includes a citation to a series of exchanges posted in the comments section of Michael Janda’s article in The Drum:

… Deductions for expenses incurred are a fundamental of our and every other economy. Show me one society where you cannot deduct expenses incurred.

Gavin R. Putland:
How about *our* society? The cost of commuting to work is manifestly a cost incurred for the purpose of earning your wage or salary, but you can’t deduct it against your wage or salary (or anything else) for tax purposes. QED.

Mitor the Bold:
That’s an ATO commandment, but theoretically you should be able to.

Actually, Mitor, it predates the ATO by about 200 years, and is derived from a pre-industrial-revolution House of Lords ruling which said that if tradespeople choose not to live in or over their business premises, then they should not be able to deduct the cost of travelling to their work.

However, I agree that theoretically you should be able to. Which is why the novated vehicle lease business has grown so rapidly, because that effectively enables people to deduct the cost of travelling to their chosen place of work. Bad luck for all of us who travel by public transport.

Gavin. The cost of travelling from your home to work is not a work related cost. It is the cost relating to your choice where you live, a personal aspect of your life. No worker, contractor or business can claim as a deduction ‘personal’ costs. QED.”

As Putland points out:

“So there you have it, proles: The industrial revolution never happened. You always have the option of living at your place of work. If your place of residence is somewhere else, that is a “personal” choice on your part, and the cost of travel between the two is a ”personal” expense, not a work-related expense. If you want a big deduction against the wages of your labour, you’ll have to gear up and speculate on assets.”

Australia’s economic narrative is more concerned with suppressing wages than high land values.

Joe Hockey has unashamedly stated that any rise to the minimum wage “will cost jobs” and “reduce competition,” while remaining notably silent on the average CEO pay, which sits at an estimated 63 times average earnings (as at 2013,) as well as showing scant regard for rising land values which increase the associated costs of running a business, while discouraging growth in productive industry.

It uncovers a damaging neo-liberal agenda, which will do nothing to raise the living standards for Australians struggling to make ends meet.

Meanwhile in Germany, the house price-to-income ratio has fallen by almost a third nationally since the early 1990s, yet residents enjoy low unemployment and some of the highest wages per capita in the world – including the highest minimum wage in the world. Germany weathered the 2008 depression better than any other country in Europe by maintaining its focus on value adding growth.

The public needs to recapture the debate and push for a better set of democratic tools, that let the people decide directly on the benefits that can aid their communities, rather than the current state of affairs which is coloured with vested interest, polarising voters with false promises and flawed economic thinking.

The rise of citizen’s juries, where a diverse and representative group of people are randomly selected and given the information and training needed to deliberate together on matters of policy – for the benefit of all, not just a few – limiting the power of corrupt government officials, may take us one step closer to achieving this.

Top of the agenda should be every citizen’s right to affordable access to land and shelter.

Unconventional Economist
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  1. The quality of the case put by Ms Cashmore is indicative of a movement gathering steam.

    The piece seems to me to perfectly logical, reasonable and has compared the views, actions and inaction to a) the real world with real people and b) the history of thought that no doubt was required after earlier property busts.

    I agree that only a bust a big painful bust will deliver us to address the moral questions sited in Catherine’s fine work.

    • A big, ugly, painful bust is certain. If we do not reform our taxes, we will be right back here again in a generation.

      Untax wages, untax enterprise and use land, resource and monopoly taxes as Treasury in Australia’s Future Tax System urges.

      Outstanding work, Catherine.

      • Raise interest rates.

        Stop giving speculators near 0% real interest rates.

        Anything else is politically unlikely and/or a distraction.

      • Remove NG, raise rates and heavily restrict foreign buying (new builds in select areas only)….. Those that squeal after that can be fed to the sharks…!

  2. PS

    I am reading about Debt and the concept of ‘Conquest by Debt’ crops up regularly.

    I know this is what flawse and others oft refer to in their comments.

    If it turns out that we are eventually subjugated by means of having become indebted, then John Howard will be labeled a 5th columnist a traitor to his people and his country.

  3. It should come as no surprise that a commonwealth land tax was an unremarkable part of the commonwealth tax system from 1910 until the 1950s.

    That means that for over 40 years both sides of politics understood the merits of a land tax.

    Clearly, the appeal of such a tax to any party that considers itself progressive should be obvious and I include the small l liberal wets in that category.

    It is a tax that is simple to administer in a country with an existing rate system based in the unimproved value of land and is equitable.

    The ACT government is introducing a land tax right now and there is NO reason that a land tax could not be RE-introduced at the Federal level as part of tax reforms that shift more of the burden if taxation from the productive income earners to the unproductive rent seekers.

    The specifics of the tax and how it is administered can be discussed.

    A flat small rate on all land might be the best option but a threshold of land value might be a good way to introduce the tax. There may be some good reasons not to tax low value land until is reaches a minimum threshold of value.

    • +1

      Alas, I can’t see those that make the rules (officially and unofficially) in this fine nation of ours accepting that only those with significant landholdings (aka them) should be slugged with an LVT. Perhaps if we flip your idea Pfh and say only the paupers (sub $1 million) pay the LVT, at least it might have a shot…..Joe Hockey would call it ‘lifting’.

      But seriously, I don’t get the sense there is ANY appetite for genuine reform on either the right or left in govt. Not on land tax, and worse, not on NG.

      • Events will force their hand. They already are.

        The GST was designed to reduce tax on incomes and a land tax can do the same.

        No surprise that a dry LNP government would prefer to crank up the GST rate than introduce a mild land tax but if the ALP, Greens and the PUP senators push the land tax alternative they could force the issue onto the agenda.

        I reckon the average person if given a choice between a higher GST and a modest LVT as a way if cutting their income tax they will go for the LVT.

        And if they don’t because they genuinely prefer to pay a higher GST or higher income taxes that is their right.

        Joe has a bloody big hole to fill and he has no magic pudding.

      • I reckon the average person if given a choice between a higher GST and a modest LVT as a way if cutting their income tax they will go for the LVT.

        If you could show people the numbers, I’d be inclined to agree.

        Sadly any attempt to do this would be countered by saturation-level propaganda about how poor old granny who can’t afford to pay her land tax is going to get kicked out of the house she’s live in her whole life.

        Thanks to media requiring “balance”, what matters is no longer data, evidence, or logic, but who can yell the loudest and garner the most raised hands in a grotesque parody of a high-school debate club.

      • I foresee developers and real estate agents and banks seeking recognition as a religion, and claiming the exemption on land tax available to charitable organisations and religious societies. Oh that’s right, they’ve already done that.

    • Howard demonstrated that a new tax can be introduced if the asvantages are explained and people can see how they and the country will be better off.

      The introduction should be revenue neutral until people understand why greater reliance on a land tax has advantages.

      Raising the tax free threshold on income tax to somewhere around $40,000 to $50,000 would be a compelling off-set for most.

      Income up to $50,000 free of tax in exchange for a modest tax on the value of land.

      Getting people working with less taxation on their efforts beats crowding around the ‘wealth effect’ of a housing debt ponzi scheme.

      • Couldn’t agree more – I just don’t have any faith in the current crop of wingnuts and careerists that inhabit Canberra. A pox on both their houses….

      • Hang on…

        Didn’t Howard say “There will be no GST under my government” prior to the election and then promptly introduce one after the election in 1996?

      • Bubbley,

        He won the 1996 election and made the GST a policy for the 1998 election and won even though the ALP and Greens ran hard against it.

        A big new tax.

        That took some balls but it was about the last time he used them.

        The LNP curled up in the fetal position with the ALP running as far as possible from their 1980s record – nothing more than the ALP returning to form it now appears.

      • It will take a crazy brave Lib/Lab leader to transparently run with a Land Tax platform. If you could get the Murdoch press and Bolt/Jones/Hadley behind it, maybe.

      • Where in the world has a Georgist style land tax been implemented and is it working as intended?

      • 3d1k,

        Who said anything about Georgism?

        As for taxes calculated by reference to the unimproved value of property, that is the basis for calculating rates in many local councils in NSW. And was used for 40+ years Federally.

        So the answer is Australia and all that we are talking about is increasing one tax a bit and reducing another.

        No different to the GST.

        In fact much less controversial.

        Joe just might find a sensible LVT the most politically rational way of filling his budget black hole. Juicing the wealthy minority a bit maybe his only hope come the next election.

    • Only $124 in stamp duty for a $129000 home in 1992! How on earth has the stamp duty increased to such an obscene amount. Also aren’t people being doubled taxed for existing properties? GST and stamp duty.
      This home was bought in the inner west of Sydney, not sure why people with decent incomes (now usually two incomes) can’t adfford to buy in inner city suburbs.

      • It’s obscene. Stamp duty is meant to cover the cost of the government departments “stamping” the necessary paperwork for their records of a transfer. Fair enough, this service has to be paid for. But there’s no way it costs thousands for a few public servants to review, stamp and archive a few documents.

        State governments are the ultimate monopolistic price gougers. Scumbags!

    • Our current Labor and Liberal parties have made it pretty clear who they work for.
      And sadly I think even parties which still claim to be progressive such as the Greens are too afraid to implement Land Tax or Negative Gearing reform.
      GetUp likes to think of themselved as Progressive but they have rejected several attempts by members to get a campaign on negative gearing or land tax or housing affordability going.

      If change is going to happen it need to be forced on our politicians by an educated public.

  4. An excellent piece that will be read exclusively by the “converted”. Those in need of the preaching won’t bother to open the blog…..

    • Janet,

      You never know unless you try.

      Forward the link to 20 friends with the subject line.

      “An amazing way to help your kids and our country”

      with the suggestion they send it to twenty more friends.

      • migtronixMEMBER

        Amazing way to tax you, but don’t worry it’ll help the kids.

        Good luck with that sell Pfh our society is too scummy…

      • The Nigerian Prince method may also be effective.

        I note your reference to ‘tax’ – did that little tango with Skippy the other day push you towards the warm embrace of the ultra libertarian crowd? 🙂

        A role for government (ie tax) does not necessarily mean a role for a centralised tax guzzling state. cue Mr Morris.

      • Pft007,

        It seems many read stuff from antiquity out of sociological context, to the specific time periods reality i.e. rents and taxes. This can severely impair the authors actual meaning and its application on the day in question or worse co opt the term and bastardize it for ideological capture.


        In classical terms, which some like to argue, rents were not the general, moralistic category of proceeds they are today. They were a landowner’s reward, just like wages were the reward of industry. So many bounce back and forth, claiming that Smith and Hudson both said something about rents. But when Smith and Hudson discuss rents, they are talking about two very different things.

        This brings into question a whole line of inquire i.e. Austrian economics developed the concept of opportunity cost. Is that creationism? Is the Austrian concept of subjective values as analyzed by Carl Menger also creationism. And if so who are we to question “God’s work”?

        Which then gets into the whole crowding out issue wrt to public sector vs. private sector in times like these, where doubling down on what got us here – is the order of the day – because some prefer recession and unemployment to prosperity because there’s less risk of inflation. Purely because of some peoples misconception of taxes at a fed level.

        Skippy… self-flagellation methinks… with a huge dollop of persecution complex to boot…

      • Thanks Skippy,

        Food for thought but Mig (just kidding Mig) is the man for your Austrian horse hair shirt.

        I am more Post Keynesian Operating Thetan.

  5. Fine work Catherine. You give Michael Lewis, Matt Taibbi and HnH (not necessarily in that order) a run for their money . You should write a book.

    BTW, erstwhile Sydney Morning Domain journo and reformed boomer Ian Verrender gives a historical view on how the negative gearing distortion was introduced. This was something I was not aware of..

    For almost half a century, from 1936, the Tax Act specifically quarantined investment losses from other forms of income. You couldn’t use losses on property or share investment to reduce your personal income or business tax.

    Paul Keating changed that in 1985 when he introduced negative gearing as a sweetener to help counter potential opposition to his proposed capital gains tax.

    Within months, however, he unwound it only to come up against a barrage of vested property interests pounding exactly the same arguments as today, that limiting negative gearing would reduce property investment in new housing and ultimately cause an increase in rental costs. It didn’t.

    Two years later, however, negative gearing was reintroduced. And in 1999, Peter Costello simplified capital gains tax by halving the tax paid for anyone who’d held an asset for more than 12 months.

    Why!! Paul Keating.. Why!!! Didn’t he know the mob that will follow him will surely distort it beyond recognition?

    • +1 Compare Verrender’s analysis with Kohler’s drivel. Alan should stick to reading out the stock prices

    • In exchange for favourable coverage Keating also changed the rules to allow Murdoch to acquire the vast majority of our print media. The powerbase from which Rupert corrupts our democracy to this day.

      For all the good PJK there was a lot of bad. Not that he would admit it.

      • PJK suffered hubris for sure.

        His country now suffers the sane fate as post-Bismarckian Germany.

        One man of considerable ability could pull the levers because he could see the overall narrative.

        However, once you had a successor of lesser ability (or say with Joe Hockey, the least ability) it will turn to 3d1k.

      • Also was the treasurer that got the deregulation of the financial sector up and running, not to mention set up superannuation to be the giant cash cow for that very same sector to milk for all it’s worth.

    • My goodness Mav, far out. Fascinating. Keating and Costello were worse monsters than I thought (apologies to monsters).

    • because, ‘Keating’ is an actor that portrays government officials in the anglosphere. He is currently playing the role of Stephen Harper (PM Canada). He works for or is a member of a giant media family named Greenburg, that portray various officials to change local/global policy on behalf of TPTB. That is WHY we have neg gearing. This is WHY the entire anglosphere is in the same situation as Aus.

    • Re: “Paul Keating changed that in 1985 when he introduced negative gearing as a sweetener to help counter potential opposition to his proposed capital gains tax.”

      I can’t confirm that story. I don’t know who is the ultimate source of it (presumably not Verrender). But to me it smacks of an attempt to discredit the anti-negative-gearers by feeding them a false story and hoping they run with it.

  6. “This means of ‘creating wealth’ common in most western nations, sits at the root of many of our economic and social problems today. It has both a debilitating and destabilising effect on the economy,”


    P.S. Bloody brilliant Catherine!

  7. Wow, how can anybody squeeze so much crap in to one article ? Is there an app for digital diarrhea

    • “..You couldn’t use losses on property or share investment to reduce your personal income or business tax.”
      And so it will be, again….

    • migtronixMEMBER

      Shouldn’t you know omnipresent disbelieve?

      Hard to see how data regarding sales in Sydney and Melbourne followed up with historical perspective and culminating in analysis that aught to bolster the case for taxation reform could possibly be characterised as you just did.

      What happened? Did you have a go at Krishna again and got your arse kicked? Don’t worry there is frankense in your future…

    • “how can anybody squeeze so much crap in to one article ?” I

      Bit of detail might be helpful…

      • It wasn’t a critical and reasoned analysis of the issues.

        It was very well written that’s for sure, albeit very emotive.

        If we want to fix the problem though, you’ve got to sit down and critically analyse the problem and assess what is likely to happen with a change in regime (e.g. tax).

        That makes it quite dangerous. People will “buy in” emotionally , while we’ll be left with the same problem (or worse) and we’ll delude ourselves that oh, but the arguments were so convincing, maybe it would have been even worse in the counterfactual.

        If this is arguing for the removal of stamp duty and let’s say that happens, watch the travesty escalate.

      • mg I don’t think Catherine had any intention of a ‘reasoned and critica’l analysis. Indeed such an analysis requires space about 50 times that occupied by her essay.
        I believe her point was ‘We cannot continue on our present path – it’s destroying our economiues and societies. We better start some reasoned and critical analysis which has been pretty much totally lacking so far!’

    • @ God –

      “digital diarrhea”

      No it’s not that.
      It’s a well written thoughtful article, some of which I agree strongly with and some of which I don’t, but it’s an intelligent point of view and everyone should be entitled to present their point of view.

      The fact that some or all disagree with someone else’s view is not reason enough to discourage their right to present it.

      • Precisely!
        And let’s not what caused the Crash of “87, and other assorted catastrophes…..(like the ‘impossible’ suggestions that Catherine is making!)
        The unexpected!
        I’m sure God could ask the recently deceased hikers on that Japanese volcano about that…..

      • migtronixMEMBER

        Correct PF, I had the same feelings — I don’t much care for Mill and much less Ricardo, it was still a fine essay well worth the read.

        EDIT: Jeepers J did you have to go there? Pretty grim for 8 am…

      • Bet you’d love to see stamp duty go eh PF? Then loan values will get a nice big bump up and more juicy commission for you.

        Anything to convince the masses that the problem is being addressed by any other means that the dreaded (but single most effective ) rise in interest rates.

      • @ melbourneguy – so are you making a case to increase stamp duty?
        Andrew Leigh wrote a thoughtful piece on that some years back – well before he became an MP. Are you referencing that work?

        If we put the cost of stamp duty on every house up to $1M it would reduce the sticker price of every house, but housing would be even less affordable for the people and no more stock would be built.

        Think about that.

  8. “Joe Hockey has unashamedly stated that any rise to the minimum wage “will cost jobs” and “reduce competition,” while remaining notably silent on the average CEO pay,”

    That, CEO pay, ‘s the part that really p…es me off! Throw in lawyers RE agents etc.

    I don’t know about lower wages. First I’d look at the costs of some of our practices. That said it is surely true that there are very privileged sectors that are way overpaid for no other reason than they can hold the country to ransom.

      • GS is loving this new discourse though. “Hah, the fools are convincing themselves that the bubble will be addressed by red herrings. Ahhh my portfolio is safe to thrive, in that beautiful beautiful environment of low interest rates”….

      • Andy, – Our RBA Gov is way way way underpaid compared to Gail Kelly et al!
        I was watching him on TV the other night – the stress of finding that their whole scheme, for keeping the economy going after the end of the mining boom, is creating wild distortion and coming unwound seems to be getting to him.

      • Flawse,

        We are about to see why he got that pay rise.

        It is called ‘danger money’.

        The Governor’s job for the last 20 years has been to drive the economy with private debt.

        The pollies get to crow about THEIR surpluses and the economy appeared to thrive.

        That brilliant plan has reached its use by date and the $1M is for being the patsy that takes the blame.

        Call it the “Single Responsible Regulator” theory.

        Notice how Dastyari was very keen this week to get stuck into the RBA about changing the message.

        The pollies are not going to let the RBA governor suggest this was their fault and fixing the housing debt ponzi is a political issue.

        How dare he!

        Everyone knows that politicians have nothing to do with economic outcomes. Their jobs is to give the RBA a hard time when interest rise and claim the fame if they fall.

        Listen closely to the hearings tomorrow as the pollies try and dump the problem on the RBA.

      • @Pfh that’s very interesting. I’m newer to this, but it is common for pollies to publicly push the RBA like this?

      • He’s already earned his keep I reckon – historical low rates! Swanny laid it on the table at his last contract offer…….its my way or the highway. The guy’s paid three times what Yellen is, in an economy about a tenth the size.

        As for this Senate witchhunt, how predictable. Dastyari’s a property owner (multiple in fact). Either that’s driving him or being married to an APRA official getting into his ear isn’t helping. I’m surprised no one has called him out on that fact – an elected representative with a declaration stating his wife works for an organisation that will be directly impacted by his work as a Committee Chair. Doesn’t sit well with me. Surely there are other vested interests with less baggage on this.

  9. What a shame all those houses were not taken by adverse possession. The scumbag specufestors and land bankers win again.

  10. Hmmm we all know it’ll be a cold day in hell before Australian politicians and more importantly the Australian public are ready to embrace land taxes.
    This gives raise to the question: When this cold day eventually arrives, will the public actually be able to instigate the reforms needed to revitalize the economy?

    Personally I suspect they’ll be so locked into their unproductive ways (institutionalized as it were) that even the concept of a land tax will be so abhorrent that the majority choose hell on earth over tax reform.

    • migtronixMEMBER

      Well with all the manufacturing gone, the bright and motivated youth gone or going (I plan to join Jason in getting the hell out of here — my target is the Northern summer), and an ossification and retardation of the political climate I suspect what you propose is a safe bet!

      Certainly we won’t be doing any of this any time soon…

      Not that I need to tell you but stay in Texas

      • Interestingly there’s a growing crowd of Texans that believe its time once again that the Lone Star Flag flew highest over god’s own land. They’ve had enough of being ruled by the east coast elites and west coast fruits & flakes, so it’s high time some of our own good ol’boys took the reins.

      • Yeah desertification, future super site, bottle neck for drug trafficking [Miami crica 80s], high school curriculum written by creationists, prison industrial complex, $6.4 billion in Recovery Act money, allowing it to leave its $9.1 billion rainy day fund untouched, massive military presence both MIC and Bases, etc.

        Skippy… the idea that Texas is some libertarian paradise is a farce, as for decades it has been one of the biggest lips on the fed gov teat…. but hay when you look at everything through polarized lenses you’ll get that… eh.

      • No one mentioned Co, but, yeah after the refugees from Calif in the 90s started, quickly followed by the tech corps looking for better views the place has gone constantly down hill.

        Now their fracking it to death…

        Skippy… deregulation knows no geological boundary…

      • migtronixMEMBER

        There you go then dude, its not Texas per se, besides I hear Austin is over-run with Cali immigrants.

    • This comments section is now littered with deep insights from self-defined experts who have licked their finger, stuck it in the air, determined land tax is beyond the ken of Aussie voters, and ruled it out, forever and ever, Amen.

      “the concept of a land tax will be so abhorrent that the majority choose hell on earth over tax reform.”

      Well, that hell on earth is what we are about to receive.

      Very few in Australia have any conception of the paralysis-in-pain induced by negative equity – not even Luci can see it.

      When the land market turns – and turn it must – those poorly placed, long and heavily geared, will enter a purgatory that will go on for year after year after year.

      There is a way forward, via tax reform. The pain is not yet intense enough for surrender, but it soon will be.

      Don’t Buy Now!

      • migtronixMEMBER

        Collyer mate when was the last time an Australian parliament did something for the national prosperity? 84? 96?

        We have descended to a pure hate form of politics and nothing is more hated than removing privilege – ask the Laberals.

      • Absolutely DC,

        A bunch of misery guts.

        “Moan moan moan – Nothing will ever change. Man is fallen, original sin no redemption”

        This is our true inheritance from the land of endless damp and cold.

        Change does happen.

        How the hell do people think the ALP drove the introduction of a commonwealth land tax in 1910 and it stuck around for 40 years.

        Or Howard convincing people that a GST was worth cuts to income tax.

        Keep up the good work.

      • So tell me of wise one:
        When faced with the excruciating pain of Negative Equity coupled with sky rocketing interest rates, will the voting public honestly be motivated to increase the depth and intensity of the crises by instigating a Land tax? Seriously?

        Maybe when the crises has passed…maybe, but in the mean time its business as usual.

      • I love your certainty DC.

        How do you stand so confident on this destruction? It’s very logical, but then I hear the kitchen chatter in the office, or watch an auction nearby or even take a peek at RE/Domain and my confidence in affordable housing being a possibility plummets.

      • @Pf
        bunch of misery guts.“Moan moan moan

        I didn’t mean it that way at all, rather I’m saying that instigating real change is as much a matter of timing as it is direction.

        In Venture Capital business circles we call this confluence of idea and time a disruptive event and we actively search for disruptive breaks in the evolution of products that enable new products (ideas) to thrive. In many ways the iPhone is the most disruptive invention of the last 10 years, yet interestingly it’s remarkably similar to some proof-of-concept phone designs that Intel (the chip maker) proposed in the pre 2000 tech boom.

        Intel’s presentation was laughed out of the room by Nokia executives because even the biggest battery couldn’t power such a device for more then a few hours, at the time the focus of Cell phone makers was on achieving stand-by times of over 1 Month (honestly 30days) from a single charge. With the benefit of hindsight we all know which idea prevailed, not that it benefited any of the Intel engineers.

        IMHO Ideas like actions all have their own time or zeitgeist as it were.

      • migtronixMEMBER

        @CB For mine the iPod was, the iPhone being a natural extension.

        Being a nerd I of course had portable memory stick mp3 players (logitech from memory) back in ’98 but the iPod and its music distribution system changed EVERTYTHING.

      • @ China-Bob, I am writing an article for you.

        @ Andy! I am certain of a revert to mean – Mr Market is very… mean. The when is harder. It somewhat depends on whether the Abbott government is willing to sacrifice the Commonwealth borrowing capacity, your superannuation and the integrity of the tax system.

        Matthew Cormann yesterday ruled out using super for FHB home deposits, but that is a confined subset of superannuation. Should retiring boomers be allowed to withdraw big licks of capital to close out their mortgages then go on the pension? Can the super funds be obliged to invest in low interest ‘housing bonds’? Yes and Yes.

    • “Personally I suspect they’ll be so locked into their unproductive ways (institutionalized as it were) ”

      Ohhhhhh YES! These problems aren’t JUST economic!

  11. Thanks for the article. I totally agree that “The public needs to recapture the debate and push for a better set of democratic tools”

    The question is how? Call me cynical but I don’t expect anything to change in the near future. History shows over and over again that vested interest can never see the big picture and will preside over a complete collapse of a system in preference to accepting change.

    Until the matter of housing affordability is made a political hot potato – and thus it is in the politicians vested interest to act – don’t expect anything to happen.

  12. This a great article to be sure but a small correction

    “An empty hat factory on Wilson Street, Newtown, also vacant for years, sold earlier this month for $1.725 million.”

    This place had also been occupied for around 10 years with only an informal arrangement with the owners , I’m not sure if they paid rent but it certainly wasn’t “empty” – people lived there , had electricity and water switched on and looked after the place.

  13. Thank you Catherine for a wide-ranging must-read article.

    Re: “Meanwhile in Germany, the house price-to-income ratio has fallen by almost a third nationally since the early 1990s, yet residents enjoy low unemployment and some of the highest wages per capita in the world – including the highest minimum wage in the world”:

    Let me clear that up before it becomes the subject of a cheap shot. The highest minimum wage may be the de facto situation, but it isn’t the de jure situation. Germany didn’t have a statutory minimum wage until a few months ago. Moreover, the legislation hasn’t yet taken effect, and the minimum is not conspicuously high. OTOH, in practice Germany has long been a high-wage, high-value-added economy. A large part of the explanation is capital deepening: the better equipped your workers are, the more productive they are, and the more you can afford to pay them while remaining competitive. The same principle applies to education and training.

    Re: “Germany weathered the 2008 depression better than any other country in Europe by maintaining its focus on value adding growth”:

    It is also worth noting that in 2007, whether by accident or by design, Germany prepared for the depression by reducing payroll tax and raising VAT. The smaller the tax wedge between labour costs and take-home wages, the higher the latter can be without making the country uncompetitive.

    Re: “Mill employed concepts that that have been written out of today’s economic narrative, that conflate land and capital…”

    I think “conflate” was meant to be “conflates”; i.e., it’s today’s economic narrative that conflates land and capital.

  14. Preaching to the converted. Nothing material will change until under/unemployment doubles (or triples).

    • 2 x unemployment is a certainty, MrMedved.

      Those geared IPs will bleed like a torn artery, an experience I have endured and cannot recommend – the artery, that is.

  15. Awaiting a response from Kelly O’Dwyer…

    Hi Kelly,

    It goes without saying that Australians who live, were born, and pay taxes in this country, should expect of their government, competency in having current, accurate information pertaining to the questions that I ask of you below. In addition to that, it should be a realistic expectation that when these questions are asked of the government by such people, that the response is not one of being redirected through a maze of hoops to get to the truth and source of that requested data, which would only result in the requestor sensing an incompetent data collection methodology in use, and by extension. possibly other things in play.

    Could you please provide me timely answers to the following questions, and advertise to the many that will subsequently read your response to this email, that the government is on top of the situation?

    1. How many existing Australian dwellings are currently owned by foreign nationals?
    2. How many existing Australian dwellings were purchased by foreign nationals in the last 12 months?
    3. At what stage of the sale process are unapproved foreign nationals prevented from buying an existing Australian dwellling?
    4. Does the government see any advantage to more people owning their own home, or having a chance to own their homes?

    Thanks Kelly

  16. A belated shout-out from me to Catherine – great work, the coalition of reformers looks stronger by the day with the strength of the case being made by hard-hitters like Catherine.

  17. Great article again, Catherine. But referring to your final sentence: “Top of the agenda should be every citizen’s right to affordable access to land and shelter.”

    As we all know this is at the very bottom of the agenda. How can we possibly move it up through the ranks of importance when there are so many vested interests who are very clearly not interested in making housing more affordable?