I’ll believe it when I see it, but if they have the guts to do the right thing and remove this artificial negative gearing distortion saving many billions of $$$ (of course it’s a scam, why should I and the members of the millenials in effect personally be paying thousands of dollars in taxes or interest on ballooning government debt to prop up existing house prices), they’ll get my vote at the next election even though they’ve completely stalled what little progress was being made on the NBN (Turnbull, we brought you in to get things moving, not stall it completely). Thanks MB and SBS for the speculation.
Of course, I can only personally say such a thing because if I choose to stay in Australia, which is looking like a very BIG IF over the next 5 years, this is a necessary (but sadly unlikely to be sufficient) condition to deflating house prices into a somewhat affordable range.
Take a reasonable long-term historical perspective, such as average loan size just 10 years ago, c.2003 was A$120,000. Then flip it and just consider today, for instance that Boston median house prices are around US$400,000 (vs more like A$700,000 in Sydney). Or that I could buy (today with no debt, like WOW that was an eye-opener!) a dogbox studio apartment in Boston for just US$65,000 (thanks Flipping Boston S2, Ep8 via Foxtel, the worldwide perspective alone has just paid for itself many times over) whereas the bottom in Sydney starts around A$200,000. This is a lot of ranting, but it’s supposed to be theraputic to get the problems off one’s chest.
It’s worth it if some of our politicians do get the message that outside of the 24 hour news cycle, people still need to make ends meet, still need to figure out how to plan to have a family, and want a reasonable (I’d say fair, but it became unfair when the pension age didn’t start rising 20 years ago) deal from the society they are a part of. Ross Gittins has some excellent articles on economic rent-seeking, or basically taking a larger piece of the eco-cake than you should reasonably be entitled to. People will stand some oppression (for instance I fully support any efforts to reduce income inequality though I believe in bottom up economics where the poor will generally spend the money they get, boosting the economy, and even though that will disproportionately hurt me as a relatively high income earner), but too much will break the proverbial camel’s back. I’m also aware that the grass always appears greener on the other side which is why I’m OK with getting a somewhat unfair appearing deal. Mostly because I think that I’m a reasonable enough person that once I’ve found a way to pay for one of these houses or 3+ bedroom apartments, I’ll be pretty close to having “enough”, then at that point I don’t care if the rest goes to charity or porkbarrelling or whatever else, it’s all cherries on top =)
It would be nice if the government also reduced demand in other ways, e.g. by not boosting immigration to the moon (407,000 new people or 1.8% per capita, yes it’s not Libya’s 20% per capita but it’s still a lot, though I believe asylum seekers should be classed as immigrants), but I’m a realist so I don’t support reducing that intake. An argument could be made that we actually should take these people so we have a greater societal capacity in the longer term to handle the inevitable climate refugees without having huge societal shocks, since little real progress seems to be being made on climate change.
The solutions remain as they have always been – primarily about supply, e.g.
- Cutting red tape stopping developers getting out there and building houses and apartments (some positive signs on apartments at least).
- Considering a broad-based land tax replacing stamp duty, to reduce the effectiveness of land banking speculation.
- Releasing more government land for purchase by private citizens, for instance the NSW goverment appears to be planning to release land for about 800,000 people over the next 17 years (8 regions identified, around 100k per region). If one third of the 400k p.a. immigrants come to Sydney and surrounding regions, that’s easily 2.2 million people (at a constant immigration quota) or a shortfall in housing for up to 1.4 million people (yes there are regional centers outside Sydney, don’t know how many people can move there without an NBN) which will need to be made up by building upwards or increasing dwelling sizes just as the baby boomers kids are leaving and probably needing dwellings of their own. <Insert generation rent joke>…
To our good politicians (from all sides, primarily state and federal), I sincerely hope the electorate rewards you if you make the tough choices and pop the bubble.
I guess I understand from the expected mining capex cliff why the Reserve Bank of Australia decided it was safer to go all in on the bubble by dropping rates over the past year or so. Hope they finally get rewarded with some serious inflation that makes us all poorer. In a perverse way, the higher they rise the further they fall… so if the serious (like 30% or so as happened in Ireland) crash comes somewhere between 2017-2024 as the baby boomers look to fund their retirement and get whacked by falling “investment property” prices, I would be quite pleased. But this shouldn’t be about intergenerational warfare, it should be about building (pun intended) a sustainable society, not a speculative society.