< Improving housing affordability ultimately depends on building more and cheaper houses, not on suppressing or diverting the demand for housing. >

What an extraordinarily WRONG conclusion!

Improving housing affordability depends primarily on demand and supply. So if the demand is lowered while the supply is kept well up, housing prices will fall.

By far the easiest thing to do is to significantly lower the demand, by lowering our enormously high immigration rate.

It would be enormously difficult to significantly boost the rate of house-building to the point where it would significantly lower costs, for as long as the current demand continues. Just think of all the new suburbs, loss of bushland, loss of agricultural land, and all the associated roads and other infrastructure that would be needed, all of which the existing taxpayers pays through the nose for.

Again, BY FAR the easiest thing to do to lower house prices would be to significantly reduce the huge ongoing demand for new houses.

This would also reduce the demand for all the associated infrastructure, and services, and resource consumption, and impact on the environment…. and it would lower the rate of overburdening on existing infrastructure and services.

Heavens, it might actually mean that we could start to improve the quality of I & S, rather than be eternally struggling to maintain the same quality for ever-more people.

When you look at it in a somewhat broader manner than what Stephen Kirtchner has done, the answer is crystal clear – we need to greatly reduce population growth. and the biggest and easiest factor therein is a large reduction in immigration!

Australia has been living in an artificial economy for too long: too much government meddling, too much corporate welfare (listening to developers barking for higher immigration to keep them rich, tax breaks, negative gearing, foolishly low interest rates); and, of course, the absurd idea of just GIVING taxpayers’ money to first home buyers.

We are supposed to be a market economy and a democracy. We are neither, including under the new Abbott government, which is supposed to stand for such things. Both Coalition and Labor are high immigration junkies cheered on by the builders. All taxpayer aid to business is wrong, and fewer people coming here is going to bring prices down. As it is, housing is being built for FOREIGNERS to let out; they pay more, and the local population suffers. Property salespeople are so excited about the big money coming in from the Chinese that they don’t even bother to hide their big, greedy grins any longer.

We most certainly don’t need to boost supply to further help the most mendicant industry in Australia. We do not need to give tax breaks on mortgages. We do not need to “reward” people for saving. We do not, and should not, need to allow foreigners to own real estate in our country.

What we should be doing is reducing immigration to only those we need so that demand is reduced (we have no obligation to keep builders in business for ever), then let the market look after the cost of houses. And, remember, there is a right for people to have shelter here, but there is no right for them to necessarily own that shelter.

A good article that identifies a significant problem - the increase in costs caused by taxes, charges and regulations.

Reducing immigration and banning foreigners from owning property are not just bad ideas, they will do nothing to address the fundamental problem of unnecessarily high costs.

Nonsense, Rhian

This excerpt from an IMF working paper shows historical house prices in Europe since 1985

http://books.google.com.au/books?id=8uzLSwrQMMwC&pg=PA12&lpg=PA12&dq=house+prices+Europe+historical&source=bl&ots=NOXcombPRy&sig=U7dcur1GVrh0L2O5LYRaezNteTA&hl=en&sa=X&ei=3h7iUvzJIsnFkwXm0YGgDQ&redir_esc=y#v=onepage&q=house%20prices%20Europe%20historical&f=false

If you look at the table and graphs, you will see that prices have not gone up much in most countries and have actually fallen in some in real terms. The countries where they have gone up the most tend to be the ones with higher than average population growth. To compare with Australia, see this two part series by Philip Soos

http://www.propertyobserver.com.au/trends/a-history-of-australian-property-values-in-charts-philip-soos/2013051361302

The land component has gone from about 30% of the price of an average house in the early 1970s to 70%, even though the average block has been getting smaller.

Do you seriously think that house prices would be so high if we had a stable population?

As well as boosting demand, of course, through mass migration, our politicians have been restricting supply by concentrating nearly all the development in a few big cities and holding back on land releases. The taxes and charges you complain about are to pay for the costs of extending infrastructure and public services to more and more people. Supplying a new suburb with roads, sewers, water mains, electric power lines, schools, hospitals, libraries, etc. doesn't come free. An average new migrant family needs all of this right away, but will take years to contribute enough to pay for their share.

http://ideas.repec.org/p/pra/mprapa/6869.html

If the home buyers weren't paying for a lot of it, we would all be facing much higher taxes and charges, even though most of us will see no significant economic benefits from mass migration -- the Productivity Commission's opinion, not mine.

Divergence
The book in your first link finds positive but weak and inconsistent correlation between population growth and house price growth for part of the period studied. It says “for the whole period, total population growth appears to exhibit a limited correlation with house price movements”. Hardly a ringing endorsement of the theory that cutting migration will make housing affordable. It also found that in the countries studied, housing costs had gone down. So if Stephen’s article is right, and tax and regulatory costs in Australia have risen, then the study is not especially relevant.

Your second link ascribes the increase in prices to “debt-financed speculation and the relative non-taxation of land rent”, and describes the land prince increase as a “bubble” that is likely to burst. No mention of population as a significant factor.

Your third link does conclude that migrants are a net burden on the community because of their demand for both private and public infrastructure. Many other studies do not. However, it explicitly excludes housing from this mix, because it admits this is paid for by the migrants themselves. So it has nothing to contribute to the matter under discussion.

You ask, “Do you seriously think that house prices would be so high if we had a stable population?”. Yes, I do. Australia enjoyed decades of population growth well above the average for the industrialised world, and also relatively affordable housing. As you rightly say, prices are a function of both supply and demand. This article, and a lot of other evidence, points to supply as the key driver of recent price rises in Australia.

I’m not sure politicians have been encouraging migrants to settle in cities; I think policies aim to do the opposite, e.g.

http://www.immi.gov.au/Visas/Pages/119-857.aspx

I agree that constrained land releases are part of the problem, though.

Ludwig,
Cheers for that, couldn't agree more.