Given Australia's current imigration levels I find it hard to believe that it is responsible for the current hight price of houses.

However, to bring house prices down is a simple task, just remove negative gearing. This will cause a crash in house prices. As a side effect it will also bankraupt a fair number of middle age people who are trying to save for retirement or pay for their kids education or entry into the housing market (it's a vicious cycle). A little bit of pain but long term gain, at least for those young new home buyers.

Another option could be to change Australian's definition of a suitable home. Australians seem to think that if they don't have a room for each kid, one for the TV another for the computer, a parent's retreat, a gardern with a pool, and a three car garage then its just not a house. As well as leading to urban sprawl it will also push up land prices, and push up house prices closer to CBD areas simply because there are fewer homes. Anybody got population density figures for citiies like NY, Tokyo, HK, London etc?

When I look at Sydney I'm always amazed at how few residential high rise buildings they are and how far and wide the city sprawls.

And remember lots of Americans call a trailer in a trailer park home.

Paul

More socialistic drivel – house prices “above their correct level” and “allowed to stay at unrealistic levels”; with the only solutions proposed ones that involve more government interference in the market.

We need to break out of this mindset that looks to the government to solve all our problems. It can’t, and it doesn’t – it usually only makes things worse.

In Sydney at least, house prices are high for 2 principle reasons.

1. Government-created “shortage” of land through zoning laws that restrict development to a tiny fraction of the available land;

2. Government-created shortage of labour through immigration restrictions imposed to “protect” the incomes of the low-skilled.

That provides some clues as to how to solve the problem, doesn’t it?

Winston Smith the government has promoted the high house prices by

1. allowing negative gearing on investment property but not your principle residence, thus enabling wannabe capitalists to enter the investment house market

2. allowing people to enter Australia as business migrants provided they invest $500,000 here, this investment can be in the form of housing

If we lived in a world with out government interference, house prices would be lower, wages would be lower, transport costs higher and food, gas, water and electricity prices would be higher.

I doubt there would be as many people owning holiday homes that are vacant for 10 months of the year.

A reduction in house prices might lead to a reversal of the trend to build 3 or 4 bedroom McMansions for a population that increasingly is living in single adult households, about a third of the population and rising.

This article is very bid on ideas but a bit thin on data to back it up. Damian uses the Economist article as his primary reference but that article only compares rents with house prices. Are the rents too low or the prices too high?

House prices are mostly driven by sales of house to owner occupiers whereas rents are mostly based on supply and demand of units. Investor buying is mostly focused on units because of better rental return, easier upkeep, lower Land Tax and higher tax deductions for depreciation.

We should be looking at why people buy real estate before we make generalised comments. There are big tax advantages in owning your own home. It has no CGT, very minor property taxes and the loan repayments are an effective way of making tax free savings.

Australia Capital Gains Tax is relatively high which gives housing an advantage over equities. Perhaps if we lowered the CGT, more people would invest in the stock market and housing would lose its shine.

The investor market is also tax driven. Negative gearing is particularly attractive to those on a high marginal tax rate. Lowering the tax top tax rate would reduce this benefit.

Essentially there isn’t one real estate market. Different groups have different reasons for buying. Making accurate and meaningful observations is a difficult task.

House prices in Sydney are about half those in London and less than most provincial towns in the UK. So I find it difficult to believe that Australia is considered to be less affordable. People I know who move here from the UK cannot get over how cheap everything is - not just housing but food, petrol and most other essentials. Australia really is the lucky country. It is just a shame so many do not realise this.

It has always been a struggle for young couples to buy their first home - in fact previous generations had to manage without the all the luxury items that are now considered essential in order to make repayments. When most first-time buyers genuinely cannot afford houses then the price will necessarily come down. That is how the market works. Investors generally do not buy houses in outer city suburbs where first home buyers traditionally buy. It seems to me that the younger generation (I must be getting old) seem to think they should be able to afford trendy city units with all the mod cons.

Rob88, I thought the CGT on the disposal of a house would be the same as the CGT on the disposal of the equivalent capital gain in equities? That is, at the tax payer's marginal rate. You might want to go back over your past tax returns... And investors are focused on the purchase of units; but then what do you think most first home buyers are trying to purchase, waterfont houses in Mosman? No, the very units they are renting.

Winston Smith says:

"2. Government-created shortage of labour through immigration restrictions imposed to “protect” the incomes of the low-skilled."

Shortage of labour is because of immigration, since 'short cuts' to a larger population creates extra demand. Using immigration to fill the gaps is exacerbating the treadmill. Why not train people for skills in demand?

House prices are high because of greedy big boys lining their pockets. Winston Smith sounds like someone about to sell one of their investment properties?

A good article that sheds light on the major part that government policies have played in inflating house prices. It is nonsense to say that the government cannnot affect house prices as some correspondents claim. In about 1999 the Federal Government halved the capital gains tax and around the same time introduced the first home buyers grant, originally worth $14K. Together with a directive to the Reserve bank to keep interest rates low and a maintenance of negative gearing, these policies undoubtedly were a major cause of the house price bubble. There are now over 1 million property investors in Australia and a lot more money in managed funds tied up in property. House prices will not fall dramatically unless many of these investors leave the market, however most will be reluctant to get out in a falling market. The government could easily change negative gearing and/or capital gains tax policy and burst the housing bubble but it would be electoral suicide and would probably have negative economic consequences given the numbers of people affected.

Intergenerational inequity in home ownership will probably be locked in for years. The Federal Government has a lot to reflect about in its past and future policy settings.

In Addition to the Economist an out fit called Demographia (google it's easy to find) have listed 5 Australian cities in the top twenty - maybe the economist used this as the source I have know idea -

however for those quibbling, the cost of the average home is now around 7.5-8 times the average annual salary(look it up); it was half that in nineteen eighty. That is the affordability issue not so much the raw dollar cost.

So, as I have noted elsewhere add that to the HECS burden most young Australians are entering the market with the problem becomes just that little bit worse. But as long as the All Ords is on the up no one seems to bothered.

There are several factors ignored in the article that should be considered by people concerned about house prices:

1. All governemnts have a huge vested interest in the housing market as a source of tax and employment. When it comes to tax there is no way houses can hide.

2. The policy of taxing savings on nominal interest rates rather that real interest rates means that the real after-tax return is negative, so no-one saves. As a result, we have an enormous foreign debt. If taxation on savings and loans was levied on real returns the housing and savings position would be transformed, but at the cost of annoying powerful interest groups. With the bi-partisan policy of perpetual inflation this is unlikely to change.

3. Some retirees don't realise the enormous taxation they have to pay on investment property, which really makes it marginally economic. Stamp duty, land tax, vendor tax, capital gains tax, remind you of Lenin's precept that the capitalist would be crushed between the twin wheels of inflation and taxation.

The only thing that will change things is some overseas event such as war in the Middle East, or withdrawal of foreign capital from Australia.

Plersdus is right in that property is a bad investment for retirees. Rental returns are in most cases below 1% per annum. The only things that have made property investment worthwhile in the past are negative gearing (where the investor is recouping part of a loss on the investment) and capital gains, which at the moment are not accumulating in most cases. You have to be paying income tax in the highest bracket for negative gearing to be much help, a fact lost on many investors who listened to bad advice from financial advisors with a vested interest. For those approaching retirement, it would seem to be a poor investment to hang onto property in the distant hope that prices will rise again soon.

Damian, why did you address every option other than the solution? The solution is to simply allow more land to be developed for housing and allow existing land to have higher density housing built on it.

Instead of addressing the problem of supply, as you should have. You ignored it and jumped right on demand.

Given all this, it seems clear to me that this article is no more than an attempt to justify xenophobia using economic terms.

Arhh!, release more land. Already Sydney sprawls from Patterson to Nowra. The residents at the urban fringe have no public transport, long commutes to work.

So where would Sydney spread to? I know there's all that empty land around Sydney Harbour and those National Parks on prime coastal real estate at Kuringai and Royal National Park. Only used by the diminishing middle class - flog 'em orf!

Surely we should increase urban density. Good idea! become like St Kilda with apartment blocks side by side with family homes - watch the sewers overflow when it rains, watch water pool in the middle of the road as the storm water drains fail to cope from the additional runoff from the concreted over yards.

NB the demographia website was set up by a New Zealand property developer. Its report recommends removing land controls.

Is the problem with house affordability the number of investment properties? I thought that Sydney had a high rental vacancy rate. Perhaps the high house prices are the result of housing being the best performing asset class for the last 30 years due to tax breaks and capital gains and poorer performance of other assets. Plus property provides a visible income stream called rent and self funded retirees may build up their portfolio of property over 40 years through familial concerns and pass the portfolio through the generations.

Those truly interested in this issue might want to read the following 2 opposing sets of development principles:

a) The socialist, big-government, centrally-planned vision (which most Australian state governments are trying to impose on us, with the help of regular brainwashing via the broadcast media):
http://www.lgc.org/ahwahnee/principles.html;

b) A charter that respects individual freedom and choice, and which oddly we never get to hear about: http://www.texaspolicy.com/pdf/2001-veritas-2-1-LMC.pdf

You know which one I advocate.

This is another one of those "easy beat-up" topics that is all gas and no substance.

As Rob88 points out, the Economist relies upon a single source the OECD calculation that uses the ratio of prices to rents. Although it makes sense at a broad level – if the ratio is high, the theory goes, potential buyers will hold off, and rent instead – this is simplistic, and can be only indicative rather than absolute. There are so many other social and economic factors that differ from country to country.

Not only is it a pointless statistic on its own, it may equally be interpreted to demonstrate categorically that housing rents are artificially low. Given the overall comparative affordability of housing here compared with other OECD countries, this would be a very justifiable conclusion.

Price is established by the simple application of the law of supply and demand. To pretend otherwise leads to ridiculous statements such as:

>>The resulting prices unfairly disadvantage the current generation of Australians trying to afford what we should aim to have as a basic right.<<

In another forum, the discussion is about whether our water supply is better managed by private enterprise, subject to the normal laws of supply and demand, or as a public utility. In neither point of view is the argument offered that water should be considered “a basic right”.

In what universe can housing be considered “a basic right”, when we can readily accept the concept, and the consequences, of water being a tradeable commodity?

Ok..here I go again :)

Winston... r u a real estate agent ? or someone high up the food chain in that field ? Your 2fold call for 'more land' and 'more immigration suggests maybe ur in there somewhere..

I have a very unpalatable solution to high house prices.

But first, the reason for them. "MARKET" forces.. they will rise to our capability to pay for them. When we can't pay, and can't rent, there will be a slump, and serious downturn.

SOLUTION. Large numbers of females leave the 'out of the home' workforce :) see.. told you it was unpalatable !

Females who are going to share in the life of 'family+chldren' should withdraw from the encessant stressful competitive political draining life of commuting, rediscover the home as a business opportunity, (with work from home jobs on THEIR terms rather than the bosses.)
Income splitting/equalization for married couples with children is allowed:

-Labor demand would skyrocket.
-Wages would go UP. (but 'household' incomes will probably drop)
-House prices would go DOWN (market forces again)
-People would be HAPPIER
-Fewer screaming matches
-The Lion will lie down with the Lamb... oops.. hang on.. that's the millenium.

Anyway.. my observation is that people seem to be promoting that which they perceive to be in their interests. I think my solution is in everyone's interest.

DB,
I agree with your post, seems like a sensible idea to me, or we could go for a combination of Taffy/Winston Smith ideas and build a one room family shack on the edge of a creek somewhere, claim squatters rights, grow a vegetable garden, and become self suffient. yes these two giants of industry could be correct.

In the lucky country, why should young couples expect to live the way Australian families have lived for 100 years, a bedroom for each child, outrageous, a room for the TV lunacy, we should go back to the 1960's & 70's living in communes, squatting on the land, preferably Taffy's or Winston's land.

It never ceases to amaze me how the well heeled lack any compassion for their fellow Australians, every subject revolves around the mighty dollar, as a former close friend [deceased] with ample money used to say "when money becomes your God, you know you have lost your soul" I think we can all take something from that.

Shonga chill out. Their party is in, ours is out, be like me get over it. It is their time in the sun, so they can justify any of their little inane comments, cause their man, is the man. You know I love to read the waffle on O.L.O. from the flat earthers, but just be thankful even Johny aint as right wing as some of the cretins that get on here. At least John will give you enough money for luxuries like food and clothes. I mean [deleted for swearing. Note to posters if we can work out what it means, then it represents that word no matter how many asterisks you put in it and is against the forum rules] he might even let you see a Dr if you pay your medi care levy, and if you pay your $150 a week rent you gets to live in a shoe box of your choice.

Have you noticed like me, that most of the righty's are all self made men? All captains of industry? Not a bricky's labourer amongst the lot of them. If they're not in a jungle in Brazil studying some new plant life in a hope of a cancer cure, they're a consultant for some huge international company. Of course when you see the time a lot of them spend on here, some of them must be on speed to stay awake. Most of them must weigh about 20 kilos cause they aint got time to eat. They all must be celibate? Well some of them are to be sure.

What ever you do don't lose hope, the Nationals are leaving their own party, like rats from a sinking ship, and the liberals are slowly imploding. The A.W.B. scandel is just the start of the goodies they are going to dish up on these left overs of medievil bully boys.

Now I must confess we aint gonna do it with Kimbo. I mean he's a nice bloke but no matter what he does, he is still going to look like a bag of [see above] tied in the middle. Interesting times ahead. [Poster suspended]

BOAZ_David,

You've read my mind. That's what I've always said! The problem is, every time I express that point-of-view, I'm branded a chauvinist pig.

I don't deny a woman her right to work. The problem though, is that now that they all have careers, there's no going back. My wife wishes she could quit work and stay at home for the kids we plan to have (as well as sell her art work on the side), so I'm trying to get work that will pay enough. Sadly though, it looks like our babies will be shoved into day care once they're 6 weeks old. It's cruel but we (the human race) can't just stop re-producing.

Originally, women wanted to have their careers so that they had a sense of independence and, I guess - in a worst case scenario, the ability to walk-out on an abusive partner. The irony of this situation is that households are now dependent on TWO incomes; hence we are back to square one. Abusive or not, we will have to depend on our partner's income since we now need that second job. So effectively, at the end of the day, all we've done is add stress to each household.

Society swings from one extreme to the other. Will we ever find balance?

PHILB,

Love your style mate.

Let's just hope that the Liberal Party never gets a leader as far-right as some of the cretins on this forum. If they do, maybe I'll see you in the soup kitchen one day. If so, I'll invite you back you my cardboard box for a swig of my cask wine bladder and we can chat about how it's our own fault that we didn't become tycoons in a society that beats-up on those who can't defend themselves financially.

BTW, some funny reading that I think sums-up some of the 'self-made' men on this forum...enjoy - http://www.hcdems.com/misc/joe_conservative.html

PhilB, I'd be fascinated to hear from you how this is a party political issue. What would a Labour government do differently, and what effect would this have on the individual and the economy?

It is very easy to sit back and take cheap shots when there is a government in power that you disapprove of, but it is much tougher to offer an alternative.

Because this is not about government policy, it is about how our society chooses to conduct its affairs.

Even a Labour government would balk at the idea of nationalising housing, which is about the only action that would have any economic impact. Otherwise, both sides of politics seem to have chosen to live in a fairly bog-standard capitalist democracy, along with most of Europe and the US.

Where you live in our country is dictated by the amount you can afford. If that is a problem for you, then I have the sad duty to inform you that the majority of your fellow Australians, of most political hues, have decided that this is a fair and reasonable measure.

Even Boaz can't think of a solution, except to deny married women the right to work. That's pretty draconian, don't you think Boaz? What political party is going to pick up and run with that, do you think?

This is not political. It is economic. Live with it.

Reading back I got to PHILB. With tears forming in both eyes the first smoke alarm went off so I closed the kitchen door and found my cheesy toast had popped up but cindered. Then the next alarm went off far side so I closed that way too and exhausted the kitchen with the fan and window opened. That was the last two slices so I gave up on minute breakfast choices on the run.

Mate; I am still smiling about your description of our hapless lot

Pericles, I repeat, the government could prick the (slowly deflating) housing bubble by increasing capital gains tax on investment properties to pre-2000 levels, and diminishing or abolishing negative gearing on investment properties. There would be a flight of investors from the market. Again I repeat, there are 1 million individual Australian prpoerty investors plus plenty of cash from managed funds in the market. Government policy, not economics, is keeping them there. The market has been manipulated by government policy just as it has it many other spheres of the economy. I don't hear too many free-marketeers advocating the kind of policy changes dicussed above because, personal pecuniary interests aside, they know that the result would be short-term political AND economic mayhem, whatever the long term economic benefits.

Most free-marketeers see government intervention as undesirable because it is an unproductive use of capital, so you certainly won’t see them supporting capital gains tax.

It’s one of the most counter-productive and discouraging taxes ever conceived by socialism – an envy tax.

By “transferring” (some would call it theft) capital to the government, you deprive business and industry of access to funds which could be used to improve productivity, thus improving our overall standard of living. What do you want – work longer and harder, or shorter and smarter?

Taxation simply transfers wealth from one to another, and in that sense is to our overall detriment. It does not contribute towards improving our economic well-being. Ask yourself, in this age of high taxation, are we moving ahead, or going backwards? Are rising house prices (and electricity prices and water prices and a whole host of other increases) a sign that perhaps too much is being stolen from the golden goose?

Free-marketeers understand that everyone is better off under a free market. Yes, there will be cases where some lose out, but if we continue to insist that the central goal of our economic system is to protect the weak and less fortunate, then it won’t be long before we all join them.

The large number of property investors has a very real advantage in that rental prices are kept low - probably the main reason why the Economist figures are as they are. If we discourage property investment as some have suggested then a few more will perhaps be able to enter the property market but a very large number of people will find their rental costs skyrocketing due to lack of properties available. It is my experience that those who finally do manage to buy their first house are as eager as anyone to see prices rise as quickly as possible - strangely the altruism suddenly disappears.

I thought it was a city least affordable for it's residents. Doesn't that mean we need to increase the income?

If we are a global city then we shoud compare house prices against other global cities and then wages and find out where the real difference is.

Sounds like, feels like, looks like we are all underpaid.

I am leaving Sydney anyway, the stress and the traffic and the rude people for little salary is not worth it.

Thank you, Damian Jeffries.

Your article is a very good start to an understanding of the atrocious state of the housing market today.

To put my cards on the table, I regard the decisions made by all Australian governments, in recent decades, to move away from a policy of providing publicly owned housing as appallingly bad, not only for social equity, but also for our economy.

On the one hand we had the Housing Trust of South Australia, which provided all sectors of South Australian society, and not just the 'deserving' poor, good quality and affordable housing. In all its decades of operation the HTSA never cost taxpayers a cent.

On the other we have a complete shambles of today's private housing market which has only served as a means to transfer wealth away from many hard working Australian into the pockets of land speculators, property developers, banks, mortgage brokers and real estate agents and caused a commodity that was once easily affordable by ordinary working class Australians to be now even beyond the means of many double income middle class families.

It is especially gratifying that Damian Jeffries has pointed out the link between population growth and housing inflation :

"The current level of immigration is effectively pumping demand and preventing the normal supply and demand pricing mechanism from operating to lower prices. The resulting prices unfairly disadvantage the current generation of Australians trying to afford what we should aim to have as a basic right."

In fact, property speculators are quite aware of this link and openly advocate even higher immigration levels as little more than a crude device to drive up further the already obscene housing prices.

In doing so, they show little regard for many current residents of this country, and, with water levels already insufficient even for our current population, no regard for future generations.

Whoops! My apologies, Damian Jeffree for mis-spelling your name as 'Damian Jeffries'.

Pericles... was starting to miss your 'jibes' at me :)

Can you indicate where I am trying to deny women the right to work ?

I actually advocated a 'shift' in workplace from the politically charged, stress submerged, emotionally challenging 'work place' work to "work from home".

The advantages are numerous. Having done this (my wife worked at home for years.) I can tell you ..

a) No child care costs ! (how much does this cost now ! ?) How much of that 'work in the office' paypacket is bled dry by child care costs ?

b) No stress from the nurturer not being there for the kids.
c) House work can be fitted in as convenient.
d) In the (certain) event of child related health or other problems, there is someone there to manage it first hand.
e) Can be approached as a 'new business' (Hampers/freelance writing?) or simply process or clerical or creative work

In the end, you can say "I made this" (as the Movie company promo says :)

Then, as I've clearly stated in other posts, for a woman who has a higher qualification, she can resume her career when children are old enough to manage for themselves.

I honestly think this 'I have a career to think about' is utter selfishness ME ME ME... in contrast to looking at the bigger picture of bringing the next generation into the world and giving them a good start in life. It doesn't matter squat if Mrs gets that next promotion (which usually means more time after hours) if her children are screaming out for attention love and nurture.

How many have had this experience.. 'Promises' made by the boss, "I'll slot you into sales (from production) in the near future" only to watch as he employs someone else in that position totally blocking your hoped for and promised 'next step' in your career ?
Or the new purchasing officer who comes in claiming a 'wealth of industry experience' and uses that to tell you your job and push u around? (because "obviously" YOU know nothing)

Winston Smith, I think that you miss the point. There is no such thing as a free market in a pure form, all markets are affected by government intervention for better or worse. Capitalists and governments need each other whether they like it or not. Most free marketeers I have heard of actually do want some form of government regulation, as long as they can dictate how it is done. If you change government policy to reduce the benefits of having capital invested in property, the likely result will be a flight of capital, a fall in house values (to the detriment of many owner occupiers causing their consumer spending to drop and debt defaults to rise with flow-on affects for everyone), and a likely rise in house rentals. I believe that few would support this move, least of all the federal government. Free markets as a philosophy is tosh anyway, but that is an argument for another time.

Boaz, yep, I confess I misread your intentions on this one.

Mind you, it will take the best part of a generation before working-from-home, either male or female, becomes an accepted means of conducting business. There are simply too many entrenched positions out there in corporate-land, especially amonst that strange breed, middle-management. They like to be physically surrounded by the people who give their position validity. Sad.

I'm not convinced though that it will have the domino effect that flows through to house prices that you describe. In what way - apart from the possibility that there is less money chasing property, given the lower pay packets - will property values decline?

If it is only a lowering of the wages that is needed, I'm sure our brave and patriotic captains of industry would heed the call immediately, without the necessity of their having to manage a bunch of outworkers.

PK, you've totally confused me by reversing what I thought was your position on the impact of meddling with CGT and negative gearing. Turning these levers is going to cause pain, which kind of rules them out, don't you think?

The only way a government can push house prices down is by making the electorate poorer. It isn't political, in the sense of ideologically canted one way or another, just pure and simple economics.

All those who think it is possible to work from home at the same time as looking after young children are obviously not mothers! Believe me very little would get done and children would get more attention at day care. It can work well once children are at school though as long as the mother isn't in desperate need of adult interaction. However it is most unfair to advocate restricting the employment of mothers to work that can be done from home - I used to be a research scientist b.c (before children) which does not transfer well into my kitchen!

I do agree with D-B though that once you have children things change somewhat and you have to make compromises. Personally I have given up paid work and do volunteering instead as it is flexible, keeps me busy and keeps my skills up. However it does nothing to help with the mortgage!

I live in Townsville, North Queensland, we have 1,000 homeless families out of a population of 200,000 people. The average house price has skyrocketed from $180,000 to $300,000 in the past 5 years.

As housing prices rise so do the rents charged, the average rents are between the $250-$300 per week mark. Many families are single income earners, on around the $500 per week mark, thus sometimes half of their income diappears on rent, the other half left to cover living expenses, childrens education, clothing etc.

The homes are nothing special, mainly low set, small 3 bedroom with little room to move, a normal home on a minature scale, $300,000.

We have families sleeping in tents, under bridges, in run dowm hostels, caravan parks etc. Ah yes the market will solve all our problems. Winston, personnaly I think it's a communist plot......

Shonga, without any disrespect to the problems of the homeless in Townsville, the reason that house prices there are increasing is because people are buying them. Also, the reason for the increase in rent is because people can afford it.

Living in a country of increasing living standards, as we do, the natural pressure on housing prices is upwards.

If the government were to engineer a reduction in the national pay-packet, which they can easily do by extracting more dollars from the productive sector of the economy and then spraying it against the nearest unproductive wall, then housing would inevitably become cheaper.

However, I doubt very much whether this would be of any assistance to Townsville's 1,000 homeless families, or the other 5,000 who would have joined them as a result of the intervention.

"The market" is not going to solve the problem of homelessness, any more than will government intervention in the market. It is a problem that is separate from any specific pricing issues, whether food, shelter or overseas holidays.

Shonga,
This appears to be the result of a long term problem with income levels in respect of rental prices in Townsville. I say that because 5 years ago (you mention that this is the result of skyrocketing prices in last 5 years), there were at least 3000 households in Townsville who were living in housing stress. That is they were in rental income that was not affordable relative to their level of income. Given that was the case it is no surprise that there are a high number now out of housing. The local council there was quite aware of these figures with regard to housing stress in 2001. What a shame there was no forward planning in this regard. Surely those figures back then should have rang some alarm bells that emergency housing would soon be required.

Coraliz,
Yes logicly you would think so, I became so concerned that I wrote to the State Housing Minister, to ask why more public housing wasn't being built to accomodate these families. The response was that the Howard Government prefers the rental assistance scheme, so it has cut Queenslands' public housing budget by $400 million dollars, along with cuts to the States in Health funding of nearly $1 billion in 2004, it has left me wondering what other funding has been cut to State services, however at least we know where the money is. Of course the cuts to the States has accumulated in a $14 billion Federal Government surplus.

Pericles, I think that you are wrong to say that government policy cannot assist with homelessness. It cannot completely solve it, but it can help minimise it. In about 1984 the federal government reduced negative gearing on investment properties. The flight of capital was so sudden and the impacts on rents so strong that it was soon obvious that a housing crisis was looming. The government had to reverse the policy and reinstate negative gearing to the chagrin of those who would like to see property investors paying full freight. Won't happen in the foreseeable future. Also, each state government and several charities with tax free status operate housing programs. For better or worse, these are all that keep some people off the street. Go to a country where there are few or no such policies and programs and you have to stepover prople sleeping out everywhere.

PK, I read the words, but I have trouble with the logic.

>>Pericles, I think that you are wrong to say that government policy cannot assist with homelessness. It cannot completely solve it, but it can help minimise it. In about 1984 the federal government reduced negative gearing on investment properties. The flight of capital was so sudden and the impacts on rents so strong that it was soon obvious that a housing crisis was looming.<<

So how, exactly, would a retention of that policy, and the instigation of a "housing crisis", have assisted the homeless? Please, take me that one step further and help me understand your point.

As I see it, if building houses for rental becomes unattractive, property developers would simply take a long vacation - Aspen, perhaps, or St Thomas - and the stock of housing would stagnate. A proportion of owners, those with negative equity and no chance to recoup, would go bankrupt. Rents would tend to increase, given the disappearance of stock.

You have been adamant that government intervention can assist, but seem to be realistic about the consequences ("housing crisis") that would ensue.

What am I missing?

Well, Pericles I believe you have answered your own question. You acknowldge that if investors leave the market, shortage of supply tends to push up rents. Is it conceivable to you that this might make rents unaffordable to a section of would be tenants? And that homelessness might be the result for at least some of them? Having done some work with homeless, I recognise that there are various causes of homelessness. Housing affordability is certainly one of them, though. An affordability-induced rise in homelessness was a spectre that was enough to spook the government in 1985 to re-introduce negative gearing, and as I recall it, was specifically mentioned in the government's explanation.

This is Alice Through the Looking Glass stuff, PK.

I make the point that the government can only meddle in a way that increases the problem.

You say, no, "I think that you are wrong to say that government policy cannot assist with homelessness. It cannot completely solve it, but it can help minimise it."

When I dispute this, you say "You acknowldge that if investors leave the market, shortage of supply tends to push up rents. Is it conceivable to you that this might make rents unaffordable to a section of would be tenants? And that homelessness might be the result for at least some of them?"

Well, yes, PK, that was rather the point I was trying to make.

But let me try one more time.

In what way can the government intervene in the market, so that the plight of the homeless is ameliorated?

or perhaps

How in your opinion does government intervention, through abolishing negative gearing, improve the lot of the homeless?

or perhaps... you get the drift?

Pericles: Not sure where point of disagreement lies. I have argued that government policy CAN influence the housing market. Negative gearing and relatively low CGT are clearly policies that are keeping investors in the market and these policies are therefore policies that influence the property market and the price of residences, and, I would argue, in an important way. Other government policies increase the supply of affordable housing for lower income renters and this also has some effect on the real estate market and also tends to reduce homelessness. Can we call it quits now?

Great article - three cheers for Damian Jeffree!
I agree that houses are excessively overpriced. So much so that current times are a little Orwellian: everyone is 'equally' worse-off, (rather than equitably), in comparison to mortgage lenders.

Yet even the mortgage lenders are feeling removed and driven by consumer demand for their competitive margins. Like the 'tax-collectors' of Palestine, they are mere managers of an anarchical system, from which they are expected to take profits. Palestine was under the thumb of Roman imperial rule. Taxes were not exactly for the public good; nor did they fulfil claims for private ownership. The same is true today.

The exacting of mortgage-installments is not for the public good, nor does it enable private ownership except on paper. Rather, slavery and servitude to the idols of struggle and over-work are enabled by a mortgage. What will the next generation believe to be their inheritance? They are likely to reject anything less than what will enhance their personal and relational freedom.

Political initiative will not come from politicians. Well at least not until there is enough groundswell of public opinion.
Let us wake up. There is no harm in raising the alarm bells. Our economy is not suspended by a housing bubble.

Rather there is a spiritual economy at stake. The reason for why people have the strength to contend with vast indebtedness is that they believe it is the best way to achieve that illusively empowering space in which to rest and raise relationships of love.