Senate Affordable Housing Report debuts

The long awaited Senate Affordable Housing Report – 8 May 2015 was released late on Friday afternoon.  It is a very large (496 pages) pdf file. h/t Patrician & Stomper

The nature of these things is for a lot of very interesting information, assumptions, biases and quotes to be buried deep in the various sections, with the lot workshopped together by committee into an Executive summary.  This is below, but presumably there will be loads of contentious things stashed in the body of the report.

Anyone who has taken a look at Macrobusiness will be perfectly aware of the types of issues contributing to Australian housing affordability.  This report will be interesting insofar as it is slipped into the letterbox about 18 months out from an election where both sides of mainstream Australian politics will need to pay more attention to the issue.

Executive Summary

In this report, the committee underscores the importance of affordable, secure and suitable housing as a vital determinant of wellbeing. But, based on the evidence, the committee finds that a significant number of Australians are not enjoying the security and comfort of affordable and appropriate housing—that currently Australia’s housing market is not meeting the needs of all Australians.

Sustained growth in median housing costs above the rate of median household income growth in recent decades has made it increasingly difficult for a growing proportion of Australians to afford housing that is safe, secure and appropriate to their needs. Added to the general decline in housing affordability, and indeed compounding the trend, the stock of affordable housing—that is, housing appropriate to the needs of low- to moderate-income households—has failed to keep pace with demand in recent decades.

The committee does not believe the issue of housing affordability in Australia is rightly categorised as either a ‘supply-side problem’ or a ‘demand-side problem’. With this in mind, it is clearly evident that supply is currently not keeping pace with demand in the housing market. In this context, policy interventions that add to demand without addressing or at least accounting for supply-side constraints risk inflating house prices and exacerbating affordability problems.

Worsening housing affordability is reflected in declining home ownership rates. This decline is troubling for a number of reasons, not least because home ownership can be an important means for people to achieve financial and social wellbeing. Moreover, high rates of home ownership also provide broader economic and social benefits to the community. As such, while the committee believes governments should work to improve affordability outcomes for all types of housing tenure, it considers it appropriate for governments to promote home ownership.

The committee makes a range of recommendations directed primarily toward improving home purchase affordability. They include state governments phasing out conveyancing stamp duties, to be achieved through a transition to more efficient taxes, potentially including land taxation levied on a broader base than is currently the case. Other recommendations are directed at improving the efficiency, effectiveness and equity of infrastructure funding arrangements, which can have a strong influence on the cost of new housing. Similarly, a number of recommendations are made with the intention of ensuring land supply, urban planning and zoning processes have a positive effect on housing affordability.

Evidence indicated that direct grants to home owners, including First Home Owner Grants, need to be targeted carefully in order to be effective. While the committee suggests that First Home Owner Grants might need to be more tightly targeted, it also believes that shared equity programs are a promising means of helping more Australians become home owners, and consideration should be given to expanding such programs. Equally important, the committee recommends that programs designed to help older Australians ‘age in place’ when they want to, or downsize (or ‘rightsize’) to meet their needs, should be explored.

A large amount of the evidence received during this inquiry concerned the possible effect on home purchase affordability of existing taxation arrangements for investor housing, in particular negative gearing and the capital gains tax discount. The committee recommends that the Australian Government investigate the effect of the current taxation treatment of investment housing on home purchase affordability (among other things), and consider if alternative approaches would help improve affordability.

The problems engendered by poor housing affordability are also clearly evident in the private rental market. Here low- to medium-income earners encounter significant problems accessing affordable and appropriate housing, with significant numbers experiencing rental stress or even severe rental stress. Indeed, one witness described the private rental market as a brutal place for people on welfare payments.

Evidence indicated strongly that renting must be recognised as a mainstream, and for some, a permanent form of tenure in Australia’s housing system and must be placed on Australia’s national policy agenda as a key issue to address poverty. Undeniably, the increasingly tight and expensive private rental sector is locking some low- to moderate-income earners out of affordable and appropriate housing. This situation indicates market failure and suggests that market solutions to low cost housing will simply not emerge naturally: that there is a clear need to find ways to attract private investment into low cost and social housing. But currently, without government incentives, affordable housing does not tend to appeal to private investors.

Many pensioners and people dependent on welfare or disability payments, who find themselves priced out of the private rental market, seek relief by accessing social housing, which provides a much needed safety net. But here they also face fierce competition.

An adequate supply of social housing would mean that older Australians are better able to age in place and not have to forgo daily essentials simply to pay their rent, and people with disability are not left to fend for themselves in substandard dwellings that make no allowance for their particular needs. Also, an adequate supply of social housing would mean that women escaping domestic violence would not be forced to stay in motels or, worse still, remain in abusive relationships. Unfortunately, social housing is in short supply and waiting lists are long. It has become ‘housing of last resort’ and many people desperate for safe, secure and affordable housing are left to ask ‘Where do I go?’

The committee makes recommendations that address identified deficiencies in Australia’s rental market, including a concerted effort by governments at all levels to commit to increasing the overall proportion of social housing as a percentage of Australia’s housing stock. Another cluster of recommendations call for the review and reform of tenancy laws (security of tenure, stability and fairness of rent rises, energy, comfort and safety standards, evictions and dispute resolution mechanisms). In addition, they also deal with the responsibilities and obligations of landlords when it comes to energy efficiency and home modifications for tenants with particular needs.

The committee also targets its recommendations at reinvigorating and improving current Commonwealth and state and territories agreements—National Affordable Housing Agreement (NAHA) and partnership arrangements including National Partnership Agreement on Remote Indigenous Housing (NPARIH) and National Partnership Agreement on Homelessness (NPAH). Furthermore, recognising that the National Rental Affordability Scheme has started the much needed process of attracting private investors into Australia’s affordable rental market, the committee recommends building on its success. The committee also looks at ways to make Commonwealth rental assistance more effective. In addition, the committee recommends establishing a Housing Supply Financing Task Force to investigate and advise government on mechanisms, including housing supply bonds, for engaging private investment in the affordable housing market.

Undoubtedly, Australia has a housing affordability problem—the challenges are complex, diverse and interact differently in different parts of Australia.

Considering the vital importance of housing to a person’s overall wellbeing and the current problems gaining access to affordable and appropriate housing, the committee is convinced that access to affordable housing is a matter of national importance. Furthermore, affordable housing should be a national economic issue that needs to be a central and cross-cutting theme of government.

The committee believes governments, including the Australian Government, have a legitimate role, and indeed a responsibility, to use policy interventions to improve the efficiency, efficacy and, critically, the affordability of the housing market. Evidence indicated, however, that Australia’s housing policy and effort is fragmented, which has led to a good deal of confusion and discord in attempts to address housing issues. The various levels of government, and indeed different areas within the same government, often have contradictory objectives that pull in different directions. Clearly, one of the dominant messages coming out of this inquiry is the need for the Australian Government to give coherence to the numerous local, state and national incentives and schemes intended to contribute to the provision of affordable housing. A long-term, integrated and coherent plan with consistent policy governing a national approach to affordable housing is needed.

In the committee’s view, the Australian Government should be the driving force behind the development and implementation of this plan. As such, the current lack of a dedicated Commonwealth housing minister is of concern. Housing-specific policies, and policies that shape the housing market more broadly, have direct and in some cases profound effects on the lives of Australians across the socio-economic spectrum and in all tenure types. In this context, the committee contends there is a compelling argument for a dedicated Commonwealth housing minister able to provide cross-portfolio and national leadership on this important policy issue.

Many of the key policy levers that shape the Australian housing market and housing affordability rest with the Commonwealth. In particular, demand-side levers such as taxation policy generally reside with the Commonwealth. Although many supply-side policy levers fall within the remit of the states and territories, the committee is firm in its view that the Commonwealth is best placed to provide the leadership to coordinate and guide the cross-jurisdictional reform necessary to improve the efficiency of housing supply across Australia.

An institutional mechanism is required to bring all levels of government together in order to deliver the overarching strategic approach to affordable housing in Australia. The committee believes that the Council of Australian Governments (COAG) provides the ideal structure within which the Commonwealth and states and territories can develop the strategy and devise the best way to implement it. A Ministerial Council on housing and homelessness within the COAG system, as the committee, recommends, would allow representatives from key government agencies, the not-for-profit organisations, industry bodies and associations, academics and other housing experts to participate in, or contribute to, the formulation of policy.

In this report, the committee recommends that the Australian Government direct its attention and efforts to a number of areas, and makes recommendations accordingly, including developing a long-term national affordable housing plan that:

  • recognises affordable housing, including affordable rental housing, as a mainstream and national policy objective and places affordable housing at the forefront of government policy across Australia;
  • is spearheaded by a dedicated minister for housing and homelessness and supported by an institutional infrastructure that would provide the continuity, expertise, experience and established networks with all levels of government;
  • fosters intergovernmental cooperation in solving housing issues within a ‘whole-of-system housing policy framework’;
  • places a high priority on improving the supply-side efficiency of the Australian housing market;
  • reinvigorates NAHA placing particular emphasis on improving transparency and accountability, and introducing a robust evaluation and reporting framework;
  • contains clear, consistent and longer-term funding commitments adequate to meet the growing demand for social housing;
  • recommits to halving homelessness by 2025;
  • takes account of the findings outlined in this report including facts such as the age pension assumes home ownership and the projected decline in home ownership especially among older Australians;
  • builds trust and confidence that Australian governments at all levels, led by the Commonwealth, are committed to increasing the supply of affordable housing;
  • provides consistency, coherence and policy certainty for the affordable housing sector that would enable housing providers to forge stronger partnerships with the private sector;
  • recognises that significant volumes of public and private finance would be required to meet the projected need for additional rental housing and the importance of attracting institutional investors into the affordable housing market;
  • understands that efforts to attract a significant level of institutional investment into affordable housing have to date been largely unsuccessful; and
  • makes institutional investment a core policy objective in affordable housing.

Overall, and as highlighted in the strong and resounding messages drawn from the bulk of evidence, the committee is firmly of the view that:

  • the Australian Government cannot vacate the affordable housing space or step back from its responsibilities to ensure that every Australian has access to affordable, safe and sustainable housing; and
  • in the long run, investment in affordable housing returns dividends not only to the individual struggling to access safe, secure and affordable housing but to the budgets of the Australian, state and territory governments and ultimately the Australian taxpayer (by having a more productive community with reduced costs for social, health and unemployment services and for justice and policing.)

 

 

 

Comments

  1. this must be written by HIA:

    remove stamp duty – effectively enable short term speculative trading
    reintroduce FHOG
    move infrastructure cost from developers to homeowners
    give some free money to developers

    The fact that price of an average price of residential land in Alice Springs is higher than in NYC reveals everything. No supply side issues exist (there is plenty of land in Alice Springs), it’s all speculation. People are willing to pay more for house/land in Alice Springs only because they think price will go up in future.

    • I’m still wading through the detail DrX but, my reading of it isn’t that negative. There seems to be a clear concern here for lower/middle income earners and the cost of housing supply. Stamp duty moves may be positive if supply distortions are tackled as it is a major cost to new housing. A more responsive supply of housing would wipe out any speculative gains so on balance the stamp duty issue isn’t a problem if other supply issues are addressed.

      The reintroduction of the FHOG isn’t given carte blanche approval. Rec 14 suggests they apply to new builds only and be means tested (+ value caps etc). There are also multiple measures designed to improve the ability of FHBs to save (such as improved supply of affordable rentals). Some positive ideas with respect to shared equity schemes to. There also seems to be greater acknowledgement of the need for direct government action to address the market failure with respect to affordable home ownership and renting. There is acknowledgement of the need for direct government investment in social housing programs (see rec 40).

      The bigger concern for me is whether this report will do any more (ie: be acted on) than all the other housing reports we’ve had over the years. Frankly I have my doubts.

    • Doctor X, Alice Springs has terrible land use policies replete with supply restrictions. There’s plenty of land that you’re not allowed to use.

      The supply side matters as well as the demand side.

    • Forrest GumpMEMBER

      FHOG’s are used by recipients who purchase their home then rent it out after the 3 or 6 months mandatory occupation period has expired. It’s a waste of tax payers money

      • Its just a taxpayer gift to property vendors. Fuck that shit.
        Roads, hospitals… everything left to rot and we just keep feeding this RE monster.

      • The very two first properties I lived when just moved to Australia were exactly that: FHOG that could not be sold for 6 months.
        Rent was insignificant, I could live until sold and moving was at the “first home buyer’s” expense.

  2. For me housing affordability comes down to a simple equation
    Total available Assets / Total available Capital
    We have a situation where all manner of Australian assets are in terminal decline (Manufacturing, Farming, local retail….) yet we continue to import capital thereby expanding the capital base and shrinking the Asset base.
    Given the above is it any surprise when the value of the surviving asset (mainly homes) inflates.
    Sure in the recent past we’ve expanded our countries productive asset base by building more than our fair share of mega mining/LNG projects but if these assets are neither owned nor operated by or for the benefit of average Australians. Are they really our assets?

    Remove these mining assets from the balance sheet and your left with the sad reality that an expanded capital base gets divided over a shrinking asset base. Looked at over the last 50 years the only guaranteed asset is residential Housing, so until housing eventually capitulates we’re also guaranteed to see speculative capital crowding out home ownership. The only possible exception is that we somehow develop new Aussie owned and financed businesses that are so globally profitable that they absorb all speculative capital, ….BTW I won’t be holding my breath waiting.for this outcome.

    Without new asset creation path the ONLY solution is massive devaluation of housing stock followed closely by Negative equity…and an economic feedback flow that’ll ruin our remaining small to medium business sector as it attempts to support the four pillars of Aussie banking. @#$% it’ll be ugly!

    • Ronin8317MEMBER

      In Australia’s case I would replace ‘total capital’ with ‘total capacity to borrow from overseas lenders’. Unlike China, the speculators are not buying houses with cash.

    • China-Bob,

      You are on the right track. The question is then why would there be so much capital flowing into a country that is running down its productive economic capacity or selling off title to it.

      Negative gearing, supply restrictions etc are things that exacerbate the problem – all would be much less of an issue without an open door policy to unproductive capital inflows and a debt driven economic model.

      The answer is quite straightforward – whether the Greens or some other politician is prepared to drive the debate is another thing.

      http://wp.me/p2unfG-bh

      • Very good Pfh. Hopefully di Natale has the guts and persuasive ability to drag that party along with him.

        I particularly like the fact that the Iceland monetary reform report is written by someone called Frosti,

  3. This line stood out to me, “This situation (in regard to renting) indicates market failure and suggests that market solutions to low cost housing will simply not emerge naturally…”
    Perhaps that is the fault of the market being rigged?

    • Forrest GumpMEMBER

      Yes, it certainly is rigged. In favor of the tax funded landlord.

      Landlords, by virtue of either sitting on growing capital gains, or a lowering of their tax bracket, leave their government funded investment vacant for months at a time at the end of each tenancy and then cherry seek golden coined tenants willing to pay above market rents. As each passing month goes by with the property remaining empty because advertised rents are too high, the landlord doesn’t need to sweat. It’s not cash flow that he’s chasing, its capital gains or a bigger loss to offset his taxable income.

      As the landlord nears his lower tax bracket, only then he needs to adjust the rents to a more realistic market price. In the mean time, If by the off chance he hooks a gold pocketed tenant, great! This results in the property being advertised at above market price for as long as 5 months.

      The main defense in keeping Negative Gearing is the purported idea that it keeps rents low.

      It doesn’t result in lower rents- Only higher rents.

      This is the KEY issue for housing affordability.

      • billygoatMEMBER

        +100 or many. Great to see my own thoughts (&experience as tenant laid out clearly) personally I’m at point that I find everything written& spoken about housing to be either futile or hilarious in its dishonesty. Any sane, wide awake person can only sit back & watch the naked emperor & his court of sycophants.

  4. Well there is no direct confrontation of the real issues. Cheap money, Capital Gains concessions not just for investors but owner occupiers, home included as part of any assets test. If interest rates where at 12% our housing affordability issues would be solved. Once again they call for more government intervention with social housing. Would need to read the report in full but it seems more of the same sadly

  5. The former Housing Commission customers have been pushed into sub-prime loans from our lovely banks by corrupt governments sneakily restricting such supply. When they default in the coming crash the banks sub-prime loans will be pushed onto the taxpayer.

    During the oncoming housing depression a New Deal program of 50,000 Housing Commission units a year for 5 years on nationalised land should provide much needed jobs and stop any revival of this predation of the housing poor classes.

  6. I think this is a positive and hope more people read it and start to understand that excessively high prices for property isn’t a good thing.. I’m so tired of the media, entertainment (RE shows) and halfwit investors constantly referring to property as an investment only concept..

    • Gives you a pretty fair idea where it’ll end up. On that giant pile… probably right on top of that Murray report.

  7. From the report:

    Prosper Australia recommended abolishing stamp duties and implementing a broad-based land tax that should be levied at a federal level and then fully rebated to the states.

    Appearing before the committee, Prosper Australia was asked how a land tax would apply in situations where an income-poor person owned a family home on high-value land. The example of a pensioner sitting on $1 million block of land but not earning any income from it was put to Prosper Australia, and whether a land tax would price that pensioner out of her home. Mr David Collyer, Prosper Australia’s Policy Director, replied:

    Not necessarily. We, collectively, could remove the burden from her either by deferring it or by increasing pensions if that proved to be an issue. You cannot do these things in isolation. The idea is not to impose a new tax on everybody and not change other taxes. The purpose of a land tax is to give you the opportunity to remove other taxes that we know are very bad for us. We are not trying to increase the government tax take; we are trying to rebalance or reposition taxation.

    Mr Cameron Murray also challenged the idea that local government planning regulations were acting as a constraint on housing supply. Mr Murray—who more broadly disputed the underlying assumption that housing affordability in Australia had deteriorated in recent decades—referred to this as the ‘planning constraint myth’. If constraints on development type and scale through local government planning regulations existed, Mr Murray argued, then this would show up as an increase in rents commensurate with house prices, and a reduction in the stock of approved but undeveloped housing sites. Mr Murray presented evidence suggesting neither phenomena existed, including evidence that local councils in Queensland had, in fact, approved ‘far more dwellings than can [be] absorbed into the market’.

    • GunnamattaMEMBER

      David, did you get any sense in talking to the people on the committee about what there thoughts were about what would flow on from the release of the report?

      Was there much sense from the people involved that it would be a serious step on the road doing something about it, or was it more that it was seen as a political palliative?

      • Gunna, It is a backbencher committee and carries little weight beyond public attention and moral suasion. They will not move the Abbott government, whose enduring agenda is to switch more taxes onto labour and off private capital incomes. The ALP Senators were alive to the idea of SD => SLT. They are watching the ACT slowly-slowly reform very carefully. The SA housing and tax inquiry comes from the same impulse.

        We don’t know what is going on inside the ALP and its debates on tax and land. These snippets give me heart.

        Don’t Buy Now!

  8. Another trap… look how this is being played out in the MSM

    http://www.perthnow.com.au/realestate/a-senate-committee-report-into-housing-affordability-has-recommended-the-abolition-of-stamp-duty-and-negative-gearing/story-fnhlgp12-1227347294301

    The game?
    ‘Lets scrap negative gearing and stamp duty!’
    Result?
    ‘Well, we couldn’t actually scrap NG (for whatever BS reason) but stamp duty? Gone baby! So spend up more on houses!
    Don’t worry, we’ll replace stamp duty with some other (even higher) tax or a broader-based GST… because really, those savers and other non-participants aren’t subsidising our speculation enough!

  9. 2big2failMEMBER

    ABC The business yesterday:
    This piece is about negative gearing (nothing new)
    http://www.abc.net.au/news/2015-05-08/the-real-estate-market-is-hot-and-it-looks-like-it/6456926

    This piece is an interview with Iwan Sunito from Crown Group. He says it’s faster to get building approvals in Melbourne (6 months) as opposed to Sydney (15 -18 months and up to 2 years). He also says that in the Melbourne CBD vicinity, buildings are allowed to go to up to 70 stories whereas in Sydney’s CBD vicinity typical limits are 15-17 stories.
    http://www.abc.net.au/news/2015-05-08/extended-interview-with-iwan-sunito/6456924

    NSW state government needs to get its act together and tackle this. They are happy importing people from overseas while maintaining land restrictions and approval bureaucracies. They need to take a serious look at current planning restrictions. How do you measure progress? median house price in Sydney should be brought down to $300K.

    Leith had a good article (from 2011) looking at Texas as an example (along with some good comments):
    http://www.macrobusiness.com.au/2011/09/housing-supply-australia-look-to-texas-to-solve/

    • GunnamattaMEMBER

      Great quote from Harley Dale in that package by Mike Janda

      ‘Housing is a confidence industry. Most industries are, but more than most housing is driven by confidence, and it feeds on itself. And you could get all sorts of adverse consequences that flow from any move to change negative gearing.’

      When the tide turns, when there is nothing more that can be done to prop it all up, you sort of know these people are going to squeal real loud, and you know that the whole shebang is really going to come apart. Unfortunately I cant see that happening until the powers in play have sacrificed the very fundamentals which Australia will require to create a viable economy going forward, to the false gods of high real estate prices.

  10. Yawn. Here we are in 2015, and the best report we can do is not even as good as the 2003 Prime Minister’s Home Ownership Task Force Report, principally authored by Chris Joye, which actually recognised land supply restrictions as the main problem.

    The fact that mainstream analysis in Australia has been going backwards on this for so long, shows how entrenched the vested interests are in keeping the land-rent racket going. Australia is on its way to being another Britain. It is sometimes said as a joke, of nations like Egypt, that they are not a nation with an army, they are an army with a nation. Britain is not a nation with a rentier class, it is a rentier class with a nation, and Australia is following their example now a few decades after the 1947 Town and Country Planning Act in the UK, set up the rentier class as owners of the economy.

  11. Here are some excerpts from the 2003 Prime Minister’s Home Ownership Task Force Report, the principal author of which was Chris Joye, but co-authors included even the great Edward Glaeser. It is baffling that such a well authored report went nowhere, history could have been SOOO different. Is the current report this clear?

    Page 279:

    “…our basic conclusion is straightforward: the high cost of home ownership in Australia appears to be a function of growth in the extrinsic value of land. Furthermore, this is a disease that is rapidly spreading throughout our largest urban centres. And unless radical action is taken, there seems to be no respite in sight..”

    On page 288:

    “…The industry believes believes that the cost of Australian housing has been needlessly magnified by three factors:
    1. A 314 percent (420 percent) increase in land (dwelling) related taxes over the last decade, which have been levied at all levels of government
    2. Ad hoc, inconsistent and highly restrictive planning processes that prevent developers from boosting existing capacity; and,
    3. Reluctance on the part of municipalities and State Governments to release new greenfield and brownfield sites, and fund the essential infrastructure necessary to service such areas…”

    They discuss some innovative ideas to incentivise local governments to release land and expedite development.

    In their summary on Page 304, they say:

    “…there is an affordability problem, but it has nothing to do with the distribution of income or a dearth of
    exploitable land. Rather, it is the result of oppressive government regulations (often imposed with the enthusiastic support of proximate communities) that severely constrict the stock of low-cost properties.
    Combined with ever-growing demand, these artificial constraints on supply propagate price rises. And so, despite the fact that many Australians are increasingly concerned about the costs of home ownership, much more intellectual capital needs to be invested in fostering supply-side policies. The good news is that we can do so without spending a cent of public money…”

  12. In conjunction with the publication of the 2003 Report, Joye said the following in “The Australian” in August 2003:

    “Providing Affordable Housing Must Be A Priority For All Tiers Of Government”

    “….there is an affordability problem in Australia, but it has nothing to do with income levels, interest rates or a dearth of exploitable land. Rather, it is the result of oppressive local and State government regulations (often imposed with the enthusiastic support of proximate communities) that severely constrict the stock of low-cost properties and, when combined with ever-growing demand, artificially inflate the price of housing…

    “…we believe that several innovative steps can be taken to improve the availability of housing without resorting to subsidies, and which would contribute to a striking reduction in the costs of home ownership right across the country. The overall objective here is to accelerate the approval and land release process so as to promote private-sector investment in the production of affordable housing…”

  13. The fact that Joye was so comprehensively “turned” for several years, not long after his 2003 Report, shows the reach of the vested interests tentacles. Reduced focus on the land supply side, and the endless dragging up of one red herring after another on the demand side, has one patent objective: maintaining the land-rent racket to the benefit of “big property” and “big finance”. None, repeat, none of the reform packages that omit land supply side reform, will work. That is precisely why there is such furious advocacy of “reform” packages that do not include land supply side reforms.

    • We are now 12 years on from 2003 and what was thought to be a bubble then, was only a pimple in comparison to what we have now. It’s going to take a very brave government to take measures which will pop the bubble now. Look at the howls of indignation, every time the idea of ending negative gearing comes up in the MSM.

      It will be far easier just to keep stoking the fire with masses of immigrants, the continued allowing of unfettered foreign investment (despite warnings in the press to those who might break the law) and continued withholding of land supply.

      • Just published and very apropos:

        “Booms, Busts, and Normal Times in the Housing Market”

        Luca Agnello, Vitor Castro & Ricardo M. Sousa

        http://www.tandfonline.com/doi/abs/10.1080/07350015.2014.918545?journalCode=ubes20#.VU7bivmqpBc

        From the New Zealand Herald coverage:

        “…The statistical analysis of of 20 industrial countries since 1970 has found that housing booms and busts are lasting longer and when governments take a “wait and see” approach to those cycles, they can spiral out of control.

        The longer the booms last, the less likely it is that intervention will be effective…

        “…The paper’s authors say their findings support preventive policy interventions by governments during boom times and emphasise the need for timeliness.

        A counter-cyclical policy was needed before housing booms and busts reached 26 quarters in order to avoid large and persistent housing price swings and to speed up the return of the market cycle to a normal phase…”

    • It’s worse Phil. The land-rent racket is not just to the benefit of “big property” and “big finance” but to government & all existing property holders and those prospective buyers for whom high prices are a positive sign of investment fundamentals i.e. especially foreign buyers.

      Rowan Callick, The Australian, 7 May: ‘As Australia’s rescources industry fades as the core of our economy and our engagement with Asia.. Victoria’s new Labor government claims it is coming up with the replacements…the seventh winner Victoria is backing most heavily of all is the property industry – its continued high prices underpin the government’s spending growth. The government is undertaking a broader review of housing affordability, but did not canvass any moves to increase land supply in this budget. Too many new homes could start to undermine current high prices and thus government receipts. The budget, Pallas said “sends this very powerful message: Victoria is open for business”‘

      I weep for my country.

  14. This country is utterly stupid. We have an abundance of land and yet upto 100km from capital cities it’s not unusual to find families of 10 cramming into a single home. ( after driving past 50km of baron land)

    We regulate too much, my grandfather came to this country in 1930’s he built his own home how he liked it using his own hands it was HIS land and he did what he liked with it. Australians have lost this freedom.

    In China you can not own land but you may build whatever the fuck you like provided it doesn’t impeede on your neighbours and it’s safe. China has more land freedom than Australia.

    • And I won’t even start bemoaning Australian urban planners, just look at freeway South in WA, they buillt Fiona Stanley hospital 10 meters from Edge of HWY.. Hmmm did anyone ever think that just maybe the fwy might require widening one day? Idiots!

      Reminds me of 2004~ I was on a small European island POP 300,000. The media was totally taking the piss against Australia and their “land shortage”

      It stopped me in my tracks, I couldn’t believe What I was hearing, dumb country.

      Anyway let the unproductivity continue… As you were.

  15. http://www.news.com.au/finance/real-estate/chinese-property-investment-through-the-roof-what-it-really-means/story-fndban6l-1227348237828
    The company’s report out this week said Chinese buyers were “important drivers of house prices”, having claimed 23 per cent of new housing stock in Sydney and 20 per cent in Melbourne in 2013-14
    Foreign investment is often blamed for locking first home buyers out of the market, but experts say the public has a distorted view of how much the Chinese truly influence housing prices.

    “It sounds like a big amount, but realistically it’s still a pretty small percentage of the entire market,” Cameron Kusher, senior analyst with property data analysts CoreLogic RP Data, told news.com.au.

    “So, maybe for a first-home buyer, they need to change the sort of properties they are after. They should look at the existing market, rather than the brand new market.”

    Mr Kusher said people who already had “equity” — that is, people buying their second or third home — were more influential on property prices than foreign investors.

    He said foreign investment was concentrated in Sydney and Melbourne and had a negligible effect in the other capital cities.

    He suggested Sydneysiders and Melburnians who were struggling to find an affordable first home may need to consider buying in the other capitals, or the regional cities of Newcastle or Wollongong in NSW

    An entire article (paid manipulative spruik) of douchebagery and misinformation

  16. The core issues are …

    • Land supply …
    • infrastructure financing …
    • process …
    • construction costs …

    … as New Zealand Deputy Prime Minister explained October 2012, with the major Government announcement, following the Productivity Commission Report … accessible via PERFORMANCE URBAN PLANNING …

    http://www.performanceurbanplanning.org/

    Putting it in very simple terms in the New Zealand context … refer ANDREW ATKIN THE REAL DEAL …

    http://andrewatkin.blogspot.co.nz/2013/03/the-real-deal-housing-in-new-zealand.html

    Why haven’t we seen these types of poster in Australia yet ?

    Hugh Pavletich
    Co-author Annual Demographia International Housing Affordability Survey

    • SweeperMEMBER

      That’s funny, I was just reading the report and it was highlighting the tax setup for housing investors as a “core issue”. Actually pretty much the only non contentious, uncontested “core issue” according to any impartial observer. Yet it’s not on your list?
      There is no housing shortage – Fitch said so.
      Supply side is elastic to consumer demand – that’s why consumers are paying the same % of income on housing as they always have.
      Construction costs are not onerous – one thing this country doesn’t have a shortage of, is unskilled building/construction workers.
      What there is, is an asset trading on sixty times earnings which benefits from a tax setup that lowers the cost of capital v other assets, and is now in a classic speculative bubble.
      A classic financial speculative bubble.

      • A speculative bubble in a commodity, urban land, the total supply of which has been subjected to new forms of regulatory rationing since the mid 1990’s. Prior to that, it was harder for it to be speculated in.

        Also, it is necessary to understand that these regulatory distortions are even capable of enabling oversupply along with still-inflating property prices – the reason for this in Spain, was that the supply chain for housing is about 7 years long. Of course 7 years worth of sites in progress is a lot of overhang when the bubble pops.

        In Texas, in contrast, the supply chain is 7 WEEKS long, and when any downturn hits, a whole lot of small builders pack up their pickup trucks and go back home to do alterations, maintenance, joinery, etc, until demand for housing picks up again.

        There could hardly be a more exemplary comparison of the free market in action versus “the fatal conceit” of interfering regulators.

  17. Affordable housing is essential and has numerous benefits on both citizens and the government.
    House prices are shooting up and will continue to rise until more property is generated to cover the excess demand.

    • (same link)
      “(The Government) needs to do something about the property market. (It) has known the damage being done by….house prices since it came to office….The Reserve Bank keeps warning that prices can fall but we don’t believe it. Not after the way prices here barely felt the global crash…..In our hearts we all know this is no good for social equity or the productive economy…..The property lobby will answer that rental housing should be treated as a business rather than compared to owner-occupied houses….This is a business doing social and economic damage and we need a government that will act.

  18. flyingfoxMEMBER

    Haven’t had a chance to go through the document yes but looking at a couple of summaries and especially GR Putlands tweets, I think there are enough good suggestions to have a very meaningful impact if they implemented. A big IF which is reinforced by the fact this got released on a friday arvo at 5 pm.

    • StomperMEMBER

      It will either be ignored and left to gather dust like the last two inquiries OR it will be cherry picked to suit political ends.

      • Exactly – I can see some “solutions” being adopted, cherry-picked as you say, with the full knowledge of the powers that be, that there will be no reduction in the trend that favours the big rentier interests.

  19. On any day of the week you can start a volatile discussion here on what is happening with so called global warming and have plenty of opinions for either side.
    Literally millions of dollars have been spent keeping that argument going.

    But a situation is with us where the numbers are indisputable but where everyone chooses to look the other way and hopefully ignore it.
    This situation is income and wealth inequality.
    Indisputable numbers show that almost all of the income growth of the last few years has accrued to the top 5% and the 1/2 % of the wealthy have increased their share of wealth by 3 times, over the last 20 years. Include among the wealthy, both persons and corporations.

    Indisputable>>no one disagrees with that.

    Globally what is occurring is that this money has been taken out of the riskier avenues of mercantile trade and channeled into investment funds, where the money is secured with some sort of lien.

    What is now occurring is that there are not enough commercial business opportunities to sustain individuals who have to toil in some form to earn an income to foster growth or to repay a debt, or for corporate ventures to forecast a ROI greater than less risky,, say Govt bonds.
    Technology, off shoring, robotics is mostly the cause of the corporate uncertaininty

    How this relates to housing affordability is that there is insufficient investment in the nation, community, to allow people who want to buy a house the traditional way by paying it off from the rewards of labour.
    Those with the money and who could develop businesses to create that employment have said No the future is too misty. Today even a 3 year forecast could be completely incorrect.

    I think everyone now recognises that we cant sit around drinking each others coffee as a manner of a sustainable lifestyle. So unless some miracle encourages the wealthy to part with their hordes and for corporations to create business for people to toil in, housing affordability is a mirage.
    My call is it is worse than a mirage.. it is now unattainable for very many
    Australia has been going backwards since it became accepted that two wages were needed to pay the debt involved in buying a home. WW

    • AusDreamNoMore

      WW what you have said is clear as daylight to all of us. There’s even parts of the media reporting on affordability and Australia’s huge debt. The problem is though these politicans are not working for the general public they work for the top guns. Shots are fired at the top and these politicans cater for them.

      Tell me when was the last time you saw a decent protest here in Australia?

      • Aus, A protest isnt goin to do it, the solution has to be encouraged.
        Those with the cash and the means have no inkling to assist the others on the lower rungs. and their cash is out of reach.
        There is the impasse.WW

  20. proofreadersMEMBER

    If and when anything worthwhile from this report is implemented, it will be (already is) too little, too late and possibly misdirected anyway.

    Off senior’s memory, I think that I heard a figure the other day of there being 42,000 people on the public housing waiting list in NSW. Meanwhile, the immigration floodgates are well and truly open in NSW and elsewhere in this country, as it is the only thing dressing up the GDP figures and keeping the economy from imploding for the time being.

    BTW, someone told me a while back that our very well-paid Federal politicians get extra (and not shabby) pay for every committee they sit on.

    Does anyone out there in MB land know whether that is the case and if so, what is the going rate?

    If it is the case, there is at least one reason to have a conveyor belt of inquiries.

  21. Always interesting to look at the submissions to inquiries.
    Cameron Murray and Catherine Cashmore are there, but especially look at RBA. Sorry, no time for precis, off to play tennis.

    As usual, the inquiry ToR leads the final report into a quagmire of argument. Sigh.

  22. Lately i have been searching in old articles and forums prior to the GFC to see if there were any similarities in the psychology and market sentiments, to the one that exists in Australia now…
    This article in may 2005 hit home.

    http://www.nytimes.com/2005/05/27/opinion/27krugman.html?_r=0

    Let me just highlight a few things from this article..
    – Characteristics of a bubble…
    – In certain areas… Concentrate in a few regions.
    – Many homes purchased as speculative
    – Increasing home purchases for investment.
    – 31% of new mortgages interest only.

    One article which i forgot the name, otherwise i would link, had someone saying that “people have been saying that for years” etc..
    So weird reading the comments and then knowing what happened 2 years later.

    • If only our housing bubble was like that in the USA then housing would be available to everyone in Australia. The average house price (of new homes) in the US, at the peak of their bubble was… wait for it…$329K in March 2007 http://commons.wikimedia.org/wiki/File:Median_and_Average_Sales_Prices_of_New_Homes_Sold_in_the_US_1963-2010_Monthly.png

      So wouldn’t you think that with our housing bubble so much bigger than theirs OURS would have a greater chance of popping? I certainly hope so, but since the GFC our bubble has defied all laws of gravity.. One thing the US didn’t have was both sides of government absolutely committed to blowing the bubble bigger with whatever means possible.

      I suppose too, that we really ARE different. We have fewer cities, and so the impact of foreign investment is far greater here than what it ever could be in the USA. Our wages are higher, but even so, the price to income ratio is still far higher here than what it was there. And we have negative gearing, and SMSFs being allowed to leverage into property leading to a far higher proportion of our population owning investment properties than the US. And now that so many Australians have amassed a fortune through property, the boomers are helping their children buy into an overpriced market, and helping pushing prices even higher. There are so many pillars supporting our housing bubble, I really wonder if it will ever burst. I want it to burst, but wanting won’t necessarily cause it to happen.

      .

      • flyingfoxMEMBER

        Only three major differences that count:

        1) The culture. You are defined by your property here.
        2) No recession for 24 years.
        3) Mining boom.

  23. Far too much common sense in there…it’ll never catch on!

    On a side note anecdotal evidence from estate agents in my area of a spike in new stock on market in the last week or so … Anyone else seem the same? I wondered if it’s foreign investors heading for the exits before the new regulation / enforcement is put into play… Maybe just wishfull thinking though!