The real issue forcing land prices up are the huge economic rents available to land speculators. The constant attack on State Land Taxes ensures a continuing trend for such taxes to be weakened, sending the signal to the marketplace that hoarding land is appropriate. With Jeff Kennett’s move away from Site Value rating to Capital Improved Value (CIV) rating, land speculators can invest in land, sit on it and wait for property to naturally grow in value. The combination of these 2 factors has seen a growth of vacant land in inner urban areas in Melbourne. The reduced supply of land from this speculative trend would apply greater pressure than Melbourne’s 2030 boundary. The huge upward trend in land prices happened well before the 2002 announcement of 2030.

This trend surely started with the 96 Negative Gearing reforms and was enhanced by the halving of Capital Gains (2000). A combination of these policy changes have given speculators free reign around Australia. A decent holding charge on land is needed in the form of a well designed Land Value Tax, as Julian Disney recently commented on. Why should investors be encouraged to make ‘unearned’ speculative gains rather than profits from productive activity? Who really gained from the First Home Owners Grant? Removing Developer contributions, whilst not an ideal policy, would further enhance those already dominating Australia's Top 10 wealthiest.

More urban sprawl with such trends in petrol pricing? Is that what we really want? Philadelphia's phenomenal turnaround is evidence of how effective a decent holding charge can work in encouraging infill development

My first home was puchased for $11,000.My income was $60 per week and I had saved half deposit.
Three years later I purchase a second home for $20,000. within months that home was worth $25,000
The reason for inflation was international spectulaters.
To day the federal government is forcing prices up with negative gearing plus allowing overseas investors into the market

Property in Australia is over valued by far leaving a massive drop to be felt when the time comes. At this time, the earth will break open leaving many people falling down an abyss of created by greed.

One can blame governments for the price of land but not fully. The baby boomer generation have gone to all lengths to buy up one property after another. They ways they go about this should be illegal.

For example, I was speaking with a fella in late 2004, said that he was thinking of no longer being in the Rent/Buy system of houses. He said that he buys cheap houses but due to Sydney investors, he can nolonger compete with them as they offer about $50,000 on top of the going price without even looking at the house.

This has driven up the value of houses in Central Queensland by so much that many who were saving to buy their home, can nolonger afford to. Instead, are forced to stay in the rental market which has also begun charging exorbitant amounts.

There are also those who are now dipping into their retirement investments to survive this market that Howard tells us is fantastic. My Landlord has to sell this house now because of the local council who increases the rates massively every year without returning anything, the increase in interest rates, other expenses going through the roof.

When this bubble bursts, the fall will be bigger than that felt by Keating's "recession we had to have". It is only being held back by the increasing welfare payments being handed out to the middle class for without it, the middle class would become the lower class or homeless.

Alan Moran is partially right. He correctly claims there is a disparity between supposed wealth levels and savings levels, most of which is due to a monstrously artificially high price of land.

However he is incorrect to assume that this is entirely due to stringent zoning rules which reduce the supply of land. This does indeed play its part. But the other factor has been the ill-considered reductions in land tax by the State government and moves from rates derived from site rental to capital value by local governments.

Both of these actions punish people who are productive, constructive,
improve their homes and provide employment. They encourage investment in land over labour and capital, with not one new job created or one new good or service from these so-called investments.

Who can seriously be surprised at the results?

This notion that high home prices due to state goverment land rationing is gaining a lot of traction is conservative circles.

It's misleading. Federal policies are more important to house prices than state policies.

House sales are dominated by established housing, and new houses are a small factor in the overall market. The proportion of new homes bought and sold and their relative scarcity is not an important factor in house prices - it's old houses that are the main game.

House prices are subject to rise and fall, but the long term trend is a rise in excess of CPI. Why? It's because Federal government taxation policy encourages private property investment, contributing massively to demand and forcing prices up = largely at other taxpayers' expense.

The latest steep rise in house prices on the eastern seaboard from 2001-2004 can be traced directly to 3 Federal Government policies - the halving of capital gains tax in 2000, the introduction of the 1st home buyer's grant, and the maintenance of negative gearing tax advantages for private property investors. This led to the situation where by 2003, there were an unprecedented 1 MILLION property investors in Australia. They included taxi drivers, cleaners, people who could not really afford it, helped into the market by low interest rates and urged on by the burgeoning investment advice industry telling baby boomers how to plan their retirement.

Result - overheated market reaching unaffordable levels resulting in inevitable stagnation and decline in prices. People mortgaged to the hilt, unable to get out without a loss, now being attacked from behind by interest rate rises fuelled by Howard's ill-advised tax cuts. First home buyers still priced out despite the grant which has done nothing but help fuel price rises.

No wonder Howard and his apologists want to blame Labor state governments for the mess that is the property market - but if you want to lay blame and look for a solution, look to the Feds first.

Land releases are a small and insignificant cause of rising house prices.

There are three vastly more significant causes, all the fault of the federal government:

1) Ridiculously generous CGT benefits for housing investors/speculators.
2) Negative gearing, even for existing houses.
3) Interest rate increases.

1 and 2 completely distort the allocation of capital whilst 3 increases the cost of capital.

1 can be fixed by removing favoured status of capital.
2 can be fixed by allowing time-limited negative gearing for new homes (say 3 years).
3 can be fixed by voting out the Howard government.