Well that was sad, PK.

No attempt to support your view, just a dummy-spit and a snide assertion that because I use logic, I must vote Liberal.

It is not my "belief" that I presented, but an observation based upon sound economic theory.

And it is certainly not "delusional triumphalism" to call it as I see it. What a strange phrase to use...

You may well be right that "the Federal government's policies, not the state government's policies on land releases, are the more important in gauging effect on property prices".

But given your overall approach to economics and cause-and-effect, I can't see myself automatically trusting your judgement on the issue.

Have a great day.

Pericles - my last email was aimed at Col, not you - especially the remarks of mine that you referenced in your post of last night, so apologies for unintended offence.

My problem with your approach to this thread is that it's a narrowly focussed view: 'it's a simple matter of supply and demand economics'. It's not. It's a debate about the effect of government policy on the housing market. You've tried to assert that supply and demand rule supreme despite government policy. That's tosh, as I believe is demonstrated by the last paragraph of my August 30 post.

You keep asserting that because houses continue to be bought and sold, they are by definition affordable (true in a narrow sense) and by extension, there is no problem with housing affordability. That's also tosh and ignores reality.

According to that view, the next time someone mentions to me the difficulty of getting a foothold in the Sydney property market, I should say 'I don't know what your problem is. Other people are managing to buy houses. And people in Point Piper are not having any trouble offloading their mansions. It proves houses are affordable. The problem must be you'.

And on the subject of Government policy, Mr Howard should not worry about interest rates rising. He should get rid of negative gearing. He can say to homeowners 'don't worry about the high interest rates or your house values falling as a result. It'll be OK in a few more years'. He can say to property investors 'well, you've lost negative gearing, but don't worry, hang on to your investments, they will eventually increase in value. Someone who knows something about economics and logic told me so'

Somehow I don't think any of that will wash, Pericles. You can post a reply if you wish, but I'll leave it there and keep myself fresh for another thread.

Ludwig "..fact that land prices are highly inflated?"

Are they? Maybe 20 years ago, land prices were seriously "deflated" and the market has merely found its equilibrium again.

Market forces are market forces, they are neither good not bad. As you would know in a "perfect market" no buyer or seller can exert a particular influence over the prices in the market.
Unfortunately, with state governments holding back land for political purposes (regardless of the excuse) such actins do have a significant effect on land supply which, faced with an increasing population and thus an increasing demand (people have to live somewhere), means the price will increase to levels which some would deem are now "highly inflated".

PK "I'm not going to waste any more time..." good, we will not have to bother correcting your erroneous thought processes.

As for your last post,

We live in a country which values individual freedoms. That freedom includes personal choices into land and property ownership and participation in the real estate market. That precept of western society means housing prices will always be a matter of "supply and demand".

Thank God we do not live where the "state" tells us where to live and decides no one is allowed to buy property. It has been tried in the past and found to be more corrupt and less efficient in delivery of housing to everyone.

I see no merit in making "special rules" for "housing" with regard to the accounting treatment of taxable gains and losses distinct from any other type investment or income generation (negative gearing).
Those who suggest such, invariably, lack insight into exactly how property returns are generated and how beneficial (or in fact, insignificant) tax influences are on a medium / long term real estate investment returns.

Col, you do have a point about inflated land prices, ie they could be interpreted as being deflated in the past, if you accept the current situation to be normal. So I guess we need to look at it on a relative basis.

But the fact remains; the market is and probably always has been seriously distorted by the ‘strategies’ of developers and governments, and I cannot see that it would be any more seriously distorted if governments were to introduce strong financial measures or laws to reduce the cost of house and land packages for first home-buyers and to discourage or prevent profiteering.

We agree that the much freer release of land would basically bring prices right down. But we strongly disagree that this is the approach we should take. I guess we’ve about reached the end of this discussion?

Market distortion?

Please explain?

Tradey

I see market distortion as anything that changes the simple supply and demand affect on prices, or anything that attempts to alter the ‘natural’ rate of supply or demand.

If real estate moguls push for high immigration or promote population growth in their particular city or region (which they do all the time), then I’d call it market distortion.

Ok, so there’s nothing particularly wrong with that. In fact you’d expect an industry to practice strategies to maximise its continued prosperity. But I’d still call it a distortion because it is not a neutral supply and demand situation.

However the really significant distortion comes from governments that pander to expansionist profit-driven agendas instead of doing what they should be doing, which is countering this constant pressure and looking after the long-term good of the community.

One of the greatest criticisms I have for my local council, which has been in place for many years, is that they promote rapid population growth and espouse it as being entirely positive when there are considerable downsides.

This is a massive distortion of the real estate market.

So no matter how effectively governments were to work in the opposite direction – towards stabilising population or towards making house and land more affordable, it could not be more of a distortion than this.

Hope this helps