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John Quiggin 
After living abroad for nearly 3 years I am ready to return to Brisbane. But I was looking on the real estate website the other day and was horrified to see that rents are about triple what they were when I left. You used to be able to rent a unit for $150 a week, now that can barely get you a room in a dodgy sharehouse. I’m sure that wages haven’t risen that much over that time and Centrelink payments definitely haven’t!
I recall a couple of weeks ago Krudd 07 was asking Howard what he’s going to do about the housing affordability crisis – is there anything that can be done? Is it because of the recent population explosion in SE QLD? Is all the urban sprawl development not meeting demand, does the council need to start rezoning and put up some high density housing (blocking nimby views)? Are the landlords raising rents because of interest rate hikes, to cover the fat mortgage repayments on their investment homes? Would changing the negative gearing tax breaks (a discarded idea of Latham’s I think) lower house prices and rental prices with them, or would it increase rental prices by reducing the supply of houses for rent?
Maybe the government should just impose price controls (at least in my personal case). We don’t all have rich parents with multiple properties to spare!
It seems that US Republican presidental candidate (and libertarian) Ron Paul is likely to remain in the primaries for a lot longer than perhaps previously expected. His pockets have been significantly filled by genereous fans and the power of Internet social networking.
http://alsblog.wordpress.com/2007/10/06/ron-paul-the-5-million-dollar-man/
What is also interesting is that of all the candidates (ie Republican, Democrat or otherwise) that employees of the US armed services have made personal financial contributions towards, Ron Paul tops the list.
It is heartening to see that a candidate that repeatedly promising to abolish income tax is going to remain in the US presidental debate a little longer.
terje, would you be willing to pay a flat tax of x% on every transaction? and no other taxes at all?
Gerard – the housing affordability problem is simply a question of supply and demand. Supply has not been increased to keep up with demand. The State and Local Governments are responsible for this. It is NOT a Federal problem except at the ballot box. What do you expect the Feds to be able to do about it? Legislate to have Local and State Governments reduce the time it takes for them to re-zone land, give Development Approvals, fund roads, power, water, etc? (all State and Local things).
Apart from the very short-term once off measure of releasing some Commonwealth land, which would then suffer from the delays caused by the Local and State Goverment processes or lack there of, exactly what do you expect the Feds, Libs or ALP, to do? (And don’t start the baloney about Negative Gearing!)
Once when I was working in market research I did a phone survey for the Brisbane City Council, regarding rezoning. The problem is that suburbanites are deadset against high-density housing going up in their areas. Fair enough – it blocks out the sun and doesn’t look so nice. Wouldn’t you kick up a stink if a high-rise block of flats went up in front of your house? Any council that bit the bullet and rezoned an area would suffer from nimby activism and the opposition party would inevitably jump on the bandwagon. But the population is rising and urban sprawl housing estates are not where the demand is.
I’m sure it is a supply and demand problem, and I know that heaps of people are moving to SE QLD, however I doubt that the balance of supply and demand has shifted so much in the past 3 years to triple the cost of rents. I’m thinking it might have more to do with interest rate rises, since many houses for rent are investment homes that use rent to cover the cost of paying back the mortgage.
As for the negative gearing baloney – I don’t know enough about it. Would discouraging negative gearing with higher taxes have slowed down price inflation in the housing market, but raised rents higher by reducing the supply of places available for rent? It’s hard for first-home buyers to compete with people who have a stack of equity on a previous home to borrow off. The first home-buyers grant is better than nothing but it really doesn’t make much of a difference unless you’re buying somewhere out in the sticks. But then if you’ve got a job in the city you need to spend half your day communiting and the cost of fuel is always going up. I guess life wasn’t meant to be easy.
At any rate, Krudd is full of hot air with his talk about reducing HECS debts. Not that reducing HECS is a bad idea – but I don’t think it is true as he says that high HECS is discouraging poor people from going to university – it is the cost of living and particularly housing while you study that is the real problem. Bloody raise Austudy to meet the spiralling cost of rent if you want to help out poor students Kev!
Interest rate rises should, in theory, ceteris paribus, push house prices down.
Prais the Lord and pass the ammo – you are psot on about HECs – it shouldn’t be seen as discouraging peopel going to Uni. Th HECS Debt Scare is one of the greatest injustices played out on the unsuspecting public by lefties in modern Australian history.
Gerard There is no easy answer to the problem of high house prices/high rents. The only answer I can give is that house prices always seem high at time of purchase, but seem cheap years later.
Falling house prices would be a disaster for many and a levelling off is the best you could hope for.
The answer may be to encourage people to move to regional Australia through tax breaks.
I don’t know why Australia is so urbanised.
Time to spread out.
Al Loomis,
I think low taxation is far more important than flat taxation. However for many reasons I would like to see income taxes abolished. And most other taxes do tend to be flat in nature.
The LDPs tax policy (which I advocate) is not really a flat tax. The income tax formula it proposes is:-
Tax = 0.3 x (Income – $30000).
For incomes below $30000 the result is a negative tax (ie the government pays you). Others may chose to describe the negative tax as a social wage.
Regards,
Terje.
http://www.ldp.org.au/federal/policies/tax.html
Razor, it seems that you are not a young dentist.
Bugger the young dentists, I’m not wasting any pity on somebody that makes that much moolah straight out of uni. If anyone can afford to pay back their HECS debts its the young dentists. The problem is that young people of every profession (and most are not lucky enough to be dentists) have to take out an astronomically huge debt if they want to own their own home. Otherwise they have to rent, and rents are going nuts. Inflation may be low on ‘made-in-China’ stuff but it’s out of control in housing. The HECS debt is part of the general burden on young people but it pales into comparison with these costs. People aren’t turned off uni by HECS – it is the cost of living while you study at uni – with rents going insane, and part-time job wages and Austudy/Youth Allowance not increasing to meet it. If Krudd wants to help poor students he can damn well increase the pittance they get from Centrelink.
Interest rates hikes should lower the cost of housing, but due to the recent fad of buying investment homes and renting them out to pay back the mortgage, I’d expect that it would raise rents – and that might account for much of the recent increases.
I think the problem is not that Australia is too urbanized – it’s not urbanized enough! City populations (especially Brisbane) are growing fast, and the new houses are all being built on the edges – leading to ridiculous urban sprawls. This leads to high rent prices in the city, as well as ridiculous traffic volumes as people drive an hour to work and back, and I imagine it also costs a fortune in laying out new roads, electricity, sewage and water piping.
Australia is a big country but we’re all crammed into a few spots. It might be time that we in the capital cities started living vertically like they do in big cities in the rest of the world. This means high rise apartments – rezoning low density residential to high density residential. This would help meet the supply problem, but nobody wants their areas rezoned for high-rise apartment buildings. I don’t blame them either. It’s a dilemma.
Bilb – no I’m not a young Dentist, but giventhat the maximum annual rate that you are required to pay back a HECS debt is 8% above $73,960 = $5,916, cutting base income back to a lowly $68,044 bfore tax – shocking isn’t it.
gerard – I recommend youdo some research and see what happened last time they tried to nix negative gearing on rental properties. Oh, don’t bother, I’ll help – rents went through the rooff and rental stock started to dry up. They restarted negative gearing.