This report on the housing market and the dangers now being experienced by having had the previous restrictions in this market by overseas buyers lifted by the government, is just another example of the government over-supporting the bulding / housing industry.
The incentives that were hastily put in place called "stimulus" were for insulation in the roof and by association the repairs to the ones that have burnt, school buildings, wanted or unwanted, and other forms of infrastructure but which all supported almost exclusively the building industry.
Then the shortage of homes due to excessive migration, planned or unplanned, the lifting of restrictions on overseas, that is Chinese buyers, have all subsidised just one group.
Why? Has this been a fop to the builders and therefore the unions prior to an election? Now that's a cynical thought but probably has more truth to it than one imagines. And, of course, it is highly visible, warrants substantial media cover, ad nauseum and is seldom out of the news.
It is difficult to see the excessive conerage on auctions on TV with the large numbers of hopeful buyers trying to make a bid. There have been occasions during such coverage that the only bidders were Chinese. As this article says, no one wants a falling housing market on their watch.
So if you want to sheet home the blame for the inability to be able to buy a home and to now spend the rst of your life paying rent (as houses do not come down in price, ever) then it is just another example of poor policy, again with serious ramifications for Australians, the losers in all this.

The current government is lucky that they have such a knave in Tony Abbott who could never ever be considered as a serious bet for PM. The mistakes that have been made in this case affecting generations to come as they never ever realise their dreams of owning a home, the reason for which few people had made the government's connection.
This article by daily reckoning clearly makes that point.

Looks like Rudd is trying to pass on the hot potato that Howard passed to him. The US has shown that unsustainable low rates coupled with fractional reserve lending can extend bubbled beyond a decade, clearly they are giving it a red hot try.
Both the major parties seem content with obscene financial industry profiteering and the mantra: Inflation is Bad, but house inflation is Good. They are also understating real inflation and real unemployment.

Wouldn't any home purchase by a Chinese company or a Chinese national have to be approved by the Foreign Investment Review Borad? And if FIRB has approved the purchase then we've deemed it legitimate etc. I can see the point he's making but it cuts both ways. If we can buy properties overseas then I don't see the harm in allowing foreign investment here.

Rudd has 'made no apologies' for supporting a big Australia that just keeps growing. That shows the extreme shallowness in his strategic thinking. This is alarming from our Prime Minister.

For healthy, vibrant and sustainable communities we require a completely different policy setting: no further population growth beyond our current 22 million.

Sadly our PM and Opposition Leader are both beholden to the big developers who need unrestricted foreign property investors to fuel their business models of growth to 36 million and ever more growth pushing to 50 million.

Bubble property prices will continue unless continued high population and foreign investment growth is seen for what it truely is - more like a cancer, manifesting itself as outbreaks of crime hotspots over the vast urban sprawls, so common in other parts of the world.

The decaying slums that have been previously limited to neglected aboriginal communities will pop up in the cities, becoming reminders of policy failures to cater to our social, economic, sporting, cultural, educational and environmental well being comes at an awful long term human cost.

It seems that only the Greens would end these misguided policies and change course before it's too late. Perhaps they will become a major party before long.

The decades long migration formula of high levels of skilled migration needs to be put on hold for at least a decade. A pause would allow us to catch up on the backlog of our nations failing infrastucture. We also need time out to up-date our broken federation system of governance and to reflect upon and plan for the impacts of climate change. Is that asking too much, Messers Rudd and Abbott?

Interest rates are still lower than when I bought my first home over 40 years ago.

While I am not personally affected by interest rates, foreign investment and foolish immigration numbers jacking up the price of houses, I do sympathise with those Australians trying to buy their own homes.

However, as long as those same would-be home buyers do not exercise their democratic right to object to population increases and foreign ownership of residential property (foreign investment to the detriment of ordinary Australians) nothing will change

Quick response and Leigh

Well said, thank you.

Quick response,
I would like to think the Greens could grasp the nettle on population and sustainability where they would get a windfall of support. However I reckon they are acting like a deer caught in the headlights and are doing nothing (a suggested inquiry counts as nothing) through a needless fear that a firm policy might lose some of their supporters.

Just a word of warning from an Australian expat living in Las Vegas. Since the housing bubble burst in Las Vegas, house prices have fallen almost 60% from their peak. The old adage that house prices cannot fall has clearly been disproved around the globe in the latest crisis.

In fact, the ratio of housing prices to income in Melbourne and Sydney is much higher than anything ever seen in Las Vegas (and has even exceeded the worst excesses of LA and San Francisco). This should be a big red flag to those considering entering the housing market.

The massive Chinese credit stimulus is unwinding and US consumption is not coming back anytime soon (most Americans are up to their eyeballs in debt, unemployment is at record highs, and incomes have been stagnant for more than a decade).

P.S. I am also with the author is seeing this as a huge hijacking of productive investment in the Australian economy.

As the writers say:

>>>To be fair, there isn't much data yet on how much of last year's national price surge was fuelled by foreign buying. And let's face it. By "foreign," most of the media accounts mean Chinese. And you know, from a Chinese perspective, buying real Australian houses with money not subject to Australian interest rates is probably a great investment.<<<

So in fact much of this article is pure speculation. If it isn't true then we've wrongly blamed China for the affordibility crisis. Personally, I love how its called an affordibility crisis now that it affects middle class Australians! But at any rate, negative gearing and the fact that many baby boomers own two or more properties, combined with the fact that we only really have five major cities probably accounts for most of the crisis.

How much do houses cost in Dubbo, Mudgee and Whyalla?

A good summary from a well known exponent of that somewhat less than common,"common sense".

Australia has been misgoverned for at least the last 30 years.That is due to the philosophy in the oligarchy of Growth At Any Cost.The only real beneficiaries of this are big business,developers and their hangers on.

It is particularly noticeable in immigration policy,artificial stimulation of the birth rate,selling off resouces,exporting jobs and the housing bubble.

Really,most of the Australian economy is a bubble and it will inevitably burst.Many relatively innocent people will be badly hurt.
The perpetrators of the disaster will get off scot free or even benefit.

Time to sharpen the pitch forks.

I'm not against foreign investment - but not
if it's to the determent of our citizens.
There should be laws put in place that allows
property ownership only for permanent residents.

At present the current laws are extremely unfair
especially to young families wanting to purchase
their own home. Overseas investors are pushing
the prices up and making home ownership for many
Australians simply a dream.

Things need to change.

Foreign investment is not the problem, and would allow the housing crisis to be resolved more quickly were the fundamental cause addressed. And the fundamental reason is the severe and opaque regulation of the right of people to develop their property, so restricting supply. The restriction allows great corruption of the development approval process in much the same way as drug prohibition creates a multi billion dollar illicit drug industry.

People critical of immigration and foreign property investors as a cause of the property bubble should realise that these are very much secondary to the effect of restricting supply. As an analogy, imagine a marijuana production and distribution network. The operators have bribed various officials to keep their operation going, and the authorities are vigilant at keeping any competition in check. Now what would hurt this operation more; a gradual reduction in the population they are servicing, or decriminalising the supply of marijuana? The former action might reduce the profit a little, the latter would kill the organised crime operation.

Fester:

>> People critical of immigration and foreign property investors as a cause of the property bubble should realise that these are very much secondary to the effect of restricting supply. <<

This is a canard. ABS statistics show that over 800.000 houses were empty on census night. Allowing for several obvious explanations (simply out visiting; holiday houses; waiting for a rental lease etc.) that still leaves a huge number of unoccupied buildings. The chief cause of the bubble is the availability of credit. It would not matter if the physical 'supply' were much smaller than it is now, actual demand would be determined by how much people could borrow. The term 'demand' should not be used to mean the clamour of people for more houses to be put up for sale, but the total amount of money ie. credit available for buying ever more expensive houses. Prices are being driven by a mania, one which includes both home buyers and so called investors. I say so called because in reality most of them are speculators who are 'investing' in nothing. A bubble is self-perpetuating, but requires more and more credit, or debt, to fuel it; for a time it runs on euphoria and the shaky belief that there will always be another purchaser willing and able to pay more for the same house later. Price rises merely reflect this belief, or the fear of missing out that is spread by articles in the media that are nothing but media releases by the real estate industry.

So called 'investors' are buying houses with 40% of the available bank credit. Many of them lie vacant, simply because they were purchased for their rapidly appreciating value and on the strength of our insane negative gearing terms and artificially low capital gains tax. It defies logic to argue that there is an under-supply when such a large proportion of houses are bought by speculators; those houses as physical entities exist and either lie vacant or are rented to those who cannot afford to buy and often can barely afford to rent them...

... As a result, the real supply shortage is in public housing. Only about 4% of Australians live in affordable public housing, compared to 20% or more in Europe and even the UK. Waiting lists are many years long. Much of the housing that might be used for this purpose is being bought by tax-payer subsidised speculators who see no need to rent it at all or at affordable levels.

Chinese speculators, with suitcases of cash, are merely adding their bids to what many local buyers can afford on the strength of mortgages that they could never pay off anyway - they'd still owe heaps when they attempted to retire with their inadequate superannuation. But of course, the negative equity that they were left with when the bubble burst might have brought their loans to an end much sooner. It will be interesting to see what the Chinese do when the bubble bursts in China; many purchases made here might have to be turned back into cash.

"Chinese speculators, with suitcases of cash, are merely adding their bids to what many local buyers can afford on the strength of mortgages that they could never pay off anyway"

Except that it still hasn't been proven that they exist and that they are having the effect that the authors suggest.

"ABS statistics show that over 800.000 houses were empty on census night"

But where were they empty? I doubt they were empty near the CBD or the main suburbs of Sydney, Melbourne or Brisbane. Poor urban planning is as much a cause of our housing crisis than any outside factor.

How long does Australia have to put up with do nothing gutless governments
Non democratic states should not be allowed to buy any property or shares in businesses.
As for the Rio tinto business my motto is :- Dont buy chinese last, dont buy it at all!

"ABS statistics show that over 800.000 houses were empty on census night"

This statement is patently false, and suggests little empathy or interest in the plight of the burgeoning numbers of Australians suffering housing stress. There is currently a severe housing shortage which is increasing. Last year saw Australia's population increase by 450,000, yet only 109,000 homes were built. There is an urgent need for new supply, but this will not happen while government is more interested in helping their mates than giving landowners back their rights. It amazes me how people are drawn to such bizarre explanations like working women or wanton speculation. Now it's those dastardly foreigners and their filthy lucre.

What is needed is a freer market. Landowners need to have the right to develop their land. Where I live, council changed the rules a few years ago after many people started subdividing their properties. The argument for change was that it was important to preserve the character of the area. Over subsequent years rabbit warren developments have popped up like zits on a kid's face, all built from the finest quality cardboard and staples. When I spy these hideous shitboxes, I cannot but wonder whether there might have been another reason for restricting our rights.

http://www.abc.net.au/news/stories/2010/03/18/2849944.htm?section=business

David Jenning and others;
There was a new five story block of units built near here.
The salesman for the company tried hard to sell me one of the units.
I saw him again and asked about the unit and he replied that they sold
them all in Hong Kong, every single one of the 25 units !

They are only available for rent. Talking to him I gathered that they
were all bought by one company. This I think is illegal but maybe
every employee bought one.

This has only just started, but I think it will fall over as the rents
will be fairly high judging by the original sale price of $750,000.
The Chinese economy is tottering on the edge of a bubble burst.
By the end of this year the eonomy will enter a rather risky time so
don't expect too much fun times next year.

The debt clock has gone up $3,000,000 in the last 15 minutes.
Now at $74,296,871,389.00

David Jennings:

>> Except that it still hasn't been proven that they (Chinese dwelling purchasers) exist and that they are having the effect that the authors suggest. <<

No, it's not 'proven', and one reason for that is that it is not possible at this stage to get this information from the government; who knows if records are actually being kept, by whom and when they will be released? But it would be startling if all the stories were apocryphal, or if the government's rather reckless opening up of Australian real estate were being ignored by the wealthy citizens of the country with the world's biggest debt bubble, potential bidders whose bids are not constrained by Australian loan to valuation ratios (now becoming much less generous). It is said by friends of mine who have witnessed it (and I can't confirm this as I don't attend auctions) that some auctions in Melbourne are conducted partly in Mandarin. Besides, in my post I did suggest that they are probably just adding to the bids of local bidders, coming over the top as it were. Meaning that the housing bubble is still very much a local phenomenon, Australian home purchasers and so called 'investors' determining prices in a full fledged mania.

David Jennings:

>> But where were they empty? I doubt they were empty near the CBD or the main suburbs of Sydney, Melbourne or Brisbane. Poor urban planning is as much a cause of our housing crisis than any outside factor. <<

A reasonable question. I don't know exactly where the empty houses are, but I would guess that they are spread all about, with more in the less desirable areas.

But if your question implies that the empty houses are ALL on the fringes of suburbia or in country towns, the laws of supply and demand, if they existed and worked as the housing spruikers and free marketeers would like us to believe, should have ensured that prices would drop to a market clearing rate, shouldn't they? Has that been happening? In reality, even in those less desirable areas prices have risen to unaffordable levels. Houses on the very fringes of Melbourne, in supposedly unfashionable, unlikable areas where prices have languished for many decades and even declined when other areas have risen, have multiplied in price by nearly 10 times in the last 10 years. How much have incomes in those areas risen in that time?

The main factor in the house price mania is the willingness of banks to keep extending credit to Australian home-buyers, beyond what they can, in reality, afford. The other factor is the insane slanting of our tax system to favour 'investors' who lose money!

One other point: the mania is possibly creating a demand monster. But how much of the manic demand (that is, the total amount of credit available for house purchasing) is for occupied, established houses? Just how much of the demand is tied to a clamour for houses that don't exist? Do we need more houses, or cheaper houses? I don't think more houses will make them cheaper if credit continues to mount up.

Fester:

>> This statement is patently false, and suggests little empathy or interest in the plight of the burgeoning numbers of Australians suffering housing stress. <<

Tripe. How do you know it's 'patently false'? You don't. You're arguing with the census statistics? You know better? Go to
http://bubblepedia.net.au/tiki-index.php?page=OverbuildingByLocation
Last column - 'Unoccupied dwellings, 2006' = 830,376

And 'little empathy' for those suffering 'housing stress'? Me? Tosh. It's the government who has shown little empathy. I have stated in a post that the real crisis, those 'suffering' the worst 'housing stress' are those that require public housing at affordable rates and without having to wait 10 years. What empathy for or interest in those people have you shown? The current tax system is mostly to blame, allowing 'investors' to purchase houses with 40% of available credit and to make a loss on the income from them while waiting for the lowly taxed capital gain! The negatively geared of this world are the ones who have little empathy. Are you negatively geared, Fester? Talk about government being 'more interested in helping their mates'!

Today, the housing minister gave a mealy mouthed explanation of the FHOG - it was intended to help the building industry. Astounding. The grant pushed up the prices of houses so much that eventually people could no longer afford to buy and builders began to lay people off - this is happening at a disastrous level in Queensland.

By the way, your raw population statistics imply an average household size of about 4 for those newly built houses, if in fact those are the only dwellings available for those 450,000 people which is most unlikely. That's not so bad, though. Perhaps you should be blaming all the lone dwellers and childless couples (or even separated/divorced singles?) living in 4-bedroom/3-bathroom McMansions.

Fester, the house price mania is indeed driven by what you call 'wanton speculation'. Many house owners are also speculators. Do you think that everyone in this country can become rich by losing money?

David Jennings,

you might also be interested in the ABS census statistics for 2006 which can be found at

http://bubblepedia.net.au/tiki-index.php?page=OverbuildingByLocation

Many regional areas are included. It's well worth a close look.

Rap

"You're arguing with the census statistics? You know better?"

Yes, I do know better, and I would suggest that you are misinterpreting the census statistics. If you look at the census data you will find that

"Unoccupied dwellings include vacant dwellings available for sale or renting; dwellings such as weekenders or holiday homes and seasonal workers' quarters which were not occupied on Census night; dwellings normally occupied but whose occupants were temporarily absent on the night of the Census; newly completed dwellings whose owners or tenants had not entered into occupation on Census night; dwellings described as 'to be demolished', 'condemned', 'exhibition home', etc. The total number of unoccupied dwellings does not, therefore, represent the number of vacant houses and flats available for sale or renting. "

http://assda.anu.edu.au/census/c66/explanatory/dwellings.html

There simply isn't enough information to draw a meaningful insight. Still, that didn't stop a false insight being drawn from the data. But there is plenty of other data to sugest a supply crisis, such as rental vacancy rates, which are at record low levels across Australia. Of course, there are divisions within markets, but to suggest that there is no housing crisis in the face of so much evidence is strange. Where are all these vacant dwellings?

"By the way, your raw population statistics imply an average household size of about 4 for those newly built houses, if in fact those are the only dwellings available for those 450,000 people which is most unlikely."

Yes, but how many of those homes are available to people who need them? A vacant luxury apartment does little to ease the rental crisis for the needy. I dont think that Marie Antoinette could have interpreted it better.

I can add a little more to this discussion.
On the Pacific Hwy in Northern Sydney there has been a number of
five to seven story unit blocks built. About 16 blocks in one area.
Driving past them at night you can count the number of lit windows in
all of them on your fingers.

I have been in some of these blocks and the car parks are almost empty.
It is not just that they are at work or somewhere because even the
storage areas are empty.

They are just not selling despite the agent's enthusiasm.
That is why they have been filling the jets to Hong Kong.

The reason has to be because they are too expensive, even for someone
like me who has a house to sell. One that I know about has knocked
$100,000 off the original price.

DEbt Clock Now $74,411,638,891.00
Up a billion since yesterday !