Lots of thought provoking stuff in this article.

I must admit I never really thought much about the supply side of housing affordability before. The idea, promoted by various politicians, that taxes were to blame for lack of affordability always seemed a bit dodgy. Most buyers would have taken taxes into account when working out what they could afford to pay - if the taxes were removed, they'd probably just say "great, now I can afford to spend a bit more!"; hardly a recipe for lower prices.

And of course, lowering prices is the only way to improve affordability. Lowering interest rates just made debt more affordable, not the actual property, and was possibly even counter-productive. But how many homeowners and investors, who paid top dollar for their houses, would welcome strategies like releasing more land, that might lower the value of their prized possessions?

Caught between opposing interests, I suspect the politicians wil do what they do best - talk a lot and do nothing.

Dead right talk is cheap but that is what the people what not solutions, so the people will keep being obedient to their masters and nothing will change.

www.tapp.org.au

Interesting issue.

Sydney has long since achieved the size (about 1 million) that is critical to producing its own economic momentum independent of the economy of the rest of the state. And now it continues to concentrate wealth from the rest of the state even when the result of that concentration results in serious diseconomies of scale.

We must recognise that State governance is a key driver of wealth concentration and break up these unitary state models that have completely outlived their use by date. Two or more regional states will create head office type jobs in new capitals and take some of the unsustainable heat out of Sydney, Melbourne, Brisbane and Perth's growth.

What every major city in Australia needs most is more time to deal with their compounding problems and devolution is the best way to deliver that additional time and space.

And once each metropolitan and regional economy has it's own state government we can begin to implement an interest rate policy that is state specific. At the moment, whenever the Sydney real estate market overheats we get high interest rates in Broome, Albany, Cooktown and Tamworth where the least of their problems is an overheating realestate market, but it too will be choked off anyway.

In fact, this consideration of the wider consequences of interest rates generally means that the Sydney and Melbourne markets are allowed to go too far before applying the breaks while the regions get the brakes too soon.

This is a very blunt instrument that could be made far more precise with structural political reform and state based interest rates. Nothing will take the heat out of metropolitan housing markets like an interest rate differential. Nothing will decentralise population faster than an interest rate differential.

It is about time some of you growth crazy economists took some notice of Hamilton and realised that the world has only finite resources and that some day in the not too distant future, things will grind to a halt.

The land, like many other things, contains a finite amount of nutrients and, in spite of modern technology, will ultimately run out of its ability to produce food to the ever burgeoning population. We need food on the table, we cannot subsist on software or clever machines, or even lawnmower clippings.

To mis-paraphrase some of the text "According to received wisdom, enquiry into this complex field suggests our cities will slide into a phase of slow decline. In the wake of drought, the Stern Review and now the IPPC fourth assessment report, climate change will sweeps all before it."

Now, lets discuss the problem of house affordabilty. I wonder has someone had a look at the size of today’s houses compared to times past. Back in the fifties, before the authors were cognisant, a young couple on one wage, contemplating matrimony, was satisfied with a twelve square house in which to raise thee children. Today, they want a twenty five square house with all the trimmings. It is no wonder house have become affordable, people just want too much. It has got nothing to do with interest rates, monetary policy, taxes, levies etc.

To be continued.

Land prices are probably having too great an effect as well, but putting a brake on the size of the population would have large effect on demand, therefore lowering prices. Releasing more land, is not going to be the panacea that some would have us believe. We are going to run out of that too, at the present rate of population growth, and in addition, the supply of additonal infrastructure will increase in cost at a geometric rate.

Now is the time to start taking concrete steps to stabilise and ultimately reduce the population before our civilisation diappears as others have done before us, some perhaps for similar reasons, including failure of the food supply and major droughts.

The shortage of affordable housing is caused in part by private investors avoiding supplying low income housing. If it costs $120,000 to build a modest house on your block of land and $135,000 to build a McMansion why would you build a modest house where your rental return will be capped by the earning capacity of the tenants, when for a little bit more money you can charge more rent and be more confident the tenants will not default on paying rent.

Perhaps we also need to review current domestic housing building practices which seem to be less efficient than techniques used in modern high rise construction.

Can't see the virtue in subdividing market gardens located close to population centres for yet more suburban housing.

Its time to grit our teeth and house more people in high density housing. Why was the block in Redfern such a disaster and the expensive high density housing on Sydney's waterfront seems to work?

Some areas are being strangled by the inability of low income workers to live in the areas in which they work. For example Manly has about 2000 rental flats. Manly Council runs a commuter bus from the central coast for their workers. Its difficult to get shop assistants, nurses, teachers to work in Manly because they have to travel in for work.

There is discussion of investors through their superannuation funds building low income housing.

You have all got it wrong.
The housing unaffordability started with the government ordering the financial
institutions to lend on two incomes.
When you put twice as much money into any market prices rise to take
up the available money.
Any first year commodities trader could have told them that.
So you borrow on two incomes, surprise surprise, you need two incomes
to pay the mortgage.
No wonder women are having their babies in their 40s !

As far as masses making for the cities, don't worry that won't go on much lomger.
In fact it will start up in the other direction as peak oil starts to
kick in. There is simply not enough energy to produce the necessities
for six plus billion. There is a serious risk that there is not
enough energy to produce food for 6 + billion.

Look into energy transition and see what hopes there are for the
poorest countries to reach the western standard of living.
Our problem will be how far down we will have to go before
stabilisation occurs.

VK3AUU, urban development takes up about 0.2% of Australia, so there's not too much danger of running out of land.
Billie, Australia has the cheapest domestic construction costs in the western world, and in the non-residential and multi-unit sectors it can cost anywhere from two to five times more per square metre to build than domestic residential construction (partly because of IR issues).
The fact that rich people can be successfully accommodated in apartments whereas poor people can't is common to all of the Anglo societies. Also see Bill Randolph's paper on the specific problems of poor kids in flats: http://www.aracy.org.au/AM/Common/pdf/2006_ChildFriendlyCities/2006301006%20Children%20in%20the%20Compact%20City.pdf

VK3AUU, you might be pleased to know that the latest stats on average house size show a slight reduction (after decades of continued growth in the average size of new homes); this repeats the US experience where the 'small home' movement has taken off (to the extent of being given a name).

Sydney is not a single property market and different parts are moving in different directions. House prices in outer-Western Sydney are still dropping (partly due to interest rate rises, but partly also because the boom/slump cycle occurred later there than the inner suburbs), while prices in many inner-ring suburbs are now going up. Rents are increasing, but still only represent 2%-3% gross annual return and would have to double before they represented a decent return on investment. Most investors presume this low return will be offset by capital gains. Unfortunately an oversupply of flats in many areas has lead to falling prices. Changes to superannuation rules mean that many investors are selling investment property, further reducing prices.

The council area I live in has about 10,000 dwellings. Current state government plans slate us for 8,000 extra dwellings by 2030. There is no industrial land to rezone and the area is already the third-worst council in Sydney for park area per capita. Traffic is already at a standstill in peak hour and trains are getting near capacity. I simply cannot comprehend what virtually doubling population will mean to quality of life.

Mind you, having seen the North-East and South-East release areas, I can tell you they are some of the most productive farmlands in the country. Greenhouses, hydroponics and intensive agriculture close to Sydney markets mean they are energy and water efficient. To plough them under for housing seems absolutely criminal to me.

I wish the answer was as simple as "freeing up the land supply". One reason blocks in release areas are so expensive are the developer levies. The levies pay for infrastructure (roads, power, water, public facilities, parks etc) required by the new development. Land releases in the 1950s were cheap, partly because no services were provided. People moved into raw new areas and waited 10 years for a sealed road or 20-30 years for sewage. I suspect that approach wouldn't work now....

Whilever we have high immigration rates Sydney will continue to groan at the seams. Housing affordability will go down, as will quality of life.

Alan Moran of the Institute of Public Affairs, said that “building costs have been stable”. But where does Alan Moran gets his information because it is obviously at odds with industry reports on increased building costs?

We have built properties on a number of occasions over the past 20 years and it only takes a brief look at Rawlinson's Construction Cost guide to see that the cost of materials in particular has risen mush faster than inflation over the period. Likewise the cost of skilled labour has escalated. The estimates for an approved plan for a site rose by more than 20% over months.

Maybe Mr Moran is talking about the cheapest units (future slums) and three bedroom 'starters' in new subdivisions where quality and materials are constantly being trimmed. The tradework is disgraceful, with thousands of complaints to building standards authorities every year.

As a person having buildings built I can attest to the ramping up of local, state and federal taxes that have directly and indirectly accelerated the cost of residential housing. If anyone doubts this, have a quick look at the windfalls to councils from increased development application fees.

There is also the contribution of government taxes to the high costs of owning and maintaining a house.

Property owners are convenient milch cows for extra tax revenue. The very sly method of splitting up some taxes into composites ensures that government can continually ramp up charges without being called to account for it. Splitting rates bills into various water, storm water, sewage, fire levy and other components which can be raised individually is an example.

My final point is that so often the people who moan about about housing costs are the very people who are demanding more and more government services that have to be supported through extra taxes. The link between (say) lobbying for 'traffic calming' concrete islands costing hundreds of thousands of dollars and increased government charges for housing development might not be so evident to some whingers, but it is there.

OC617 are you with the housing industry?

Its too simplistic to say that urban development takes up 0.2% of Australia's land. Not all of Australia's land is suitable for urban human habitation. Do you want to live at Lake Eyre, The Simpson Desert, hell you probably don't want to live inland of the Great Dividing Range.
Unfortunately the most fertile well watered land is under competition for urban development.
The proposed Anvil Hill coal mine has such a large allocation of Hunter River water that market gardens and communities downstream at Maitland and Newcastle are under threat. If the mine accidently releases its noxious wastes back into the Hunter River then about 1 million people will be poisoned.

Actually, Billie, now that the Gold Coast and Sydney are switching to desalinated water, there is no reason why a large metropolis couldn't be located in the Nullabor, or at Lake Eyre.

Come to think of it, why isn't Adelaide investing in desalination instead of always trying to cover their continual growth by forcing farmers out of business?

No one has ever been able to adequately explain to me how freeing up land on Sydney's fringes will significantly effect house prices within 20km of the city, which is where most people want to live.

Increasing the supply of land 40km west does little or nothing to the demand and supply equation in Marrickville, for example.

There is no economic reason why house prices in Sydney have to be affordable for the average wage earner. London and New York show house prices can remain obscenely high. As long as there are enough rich people to buy the supply of houses in the inner suburbs (and there are), house prices can stay "too high". It's simply supply and demand.

The real problem is our population in NSW is too centralised. No one wants to live in Mudgee because the jobs, the lifestyle, are in Sydney. If we can shift jobs out there and expand existing regional centres like Newcastle and improve transport links, Sydney won't seem like the only place it's possible to raise a family.

Idiot.
We Can't "Free up" coastal land, or land with ocean views, since this is already gone.
I assume you mean "freeing up" the not-so-great land, the land reserved for conservation, or the land set-aside for the future.

The population is growing unsustainably, one minor affect is land price increase, other more important affects are; extinction, fisheries collapse, water crisis and pollution.

Guess what, Your article is stupid.
Your opinions are invalid, irrational and dangerous to my country.

"Release" more land, i.e. bulldoze it for mc mansions.

And what happens when all that land has been "Freed up" (destroyed) what benefit to the economy, or the unemployment rate ?

Zero.

You must be a blubbering retard, I am ashamed and insulted to share my country with such a worthless fool, How did you learn to write?, let alone express your muddle-brained ideas on an internet forum.

People who come together to form Intentional Communities will find that a well designed house that is energy efficient and aesthetically pleasing, well within their means. This is made possible through grants and incentives together with economies with materials and construction.
The present-day concern about “Housing Affordability” is predicated on a 3br brick- veneer house on a quarter-acre block, on the outer edge of the suburban sprawl; with all that implies. Taking on a heavy mortgage, and its servicing, imposes a life of petit-bourgeois semi-poverty. This is not an attractive proposition for the upcoming generation. It doesn’t have to be like that.

Communications and technology in the twenty-first century offer choices other than those hangovers from the Industrial Age. Intentional communities are putting Life back into the country. It is within this context that cooperating communities can provide houses that are economical, energy-efficient and aesthetically pleasing;(together with room for a pony) at a fraction of the cost of a house in the suburbs

How many people on here believe that expensive housing is the only reason for people fleeing Sydney?

Both my wife and I have spoken to people where we live and, to many on the internet who also moved out of Sydney. Expensive housing was part of it however, a major element that kept arising was that of 'white flight'.

White flight being; white Australian's leaving Sydney due to the fast increasing ethnic crime rates, especially crimes against the white Australian. As gutless politicians refuse to pull ethnic inline with local laws, the white Aussie is being criminally vilified.

To fix housing problems, we must curtail the immigration intake. Really, why must we pull in over 100,000 immigrants per year when we have young families ending up on the street for limited housing and, a lack of water for those already here?

Moploki, your post reads like you haven't had a bowel movement for three weeks. Get some roughage and then get some manners.

Grn, if there is a regional seat of government, or three, outside of NewSydGong then a whole host of head office jobs will follow. And only then will the drift of country kids to the metropolis be reversed and people move from the city to good career prospects in the regions.

The only successful decentralisation efforts in Australia have involved self governance. That is, Canberra and Darwin.

And it really is time to ask why it is OK for 200,000 Northern Territorians and 330,000 Canberrans to have self government but it is not OK for 480,000 in the Riverina (700,000 with Sth Coast), 400,000 in New England and 550,000 in NSW North Coast.

And compared to the ongoing cost of metropolitan congestion, any duplication of services in regional governments is chicken feed.

Perseus,
If the states were removed and the state government powers were
divided between the Commonwealth and the councils in an appropriate way
then your aims would be met.
There would be an increase in shire council activity in minor
infrastructure such as roads, water reticulation, power reticulation,
social services, planning etc etc.
The commonwealth would cover long distance transport such as shipping,
rail, and defence, foreign affairs, law courts, health etc etc.
All the things where we get bombarded with, "Thats the Feds/States responsibility, no ours".

It might mean that some councils would be amalgamated to form larger
regional councils.

Housing Affordability Problem ? Where is your faith? Where is your trust? The Market will take care of everything! People "fleeing" Sydney's Market ? Seems perfectly natural to me! And I detect a Trudge rather than a Flee ...... I live in Brisbane these days, and there is about a State electorate a year coming in from the South. We are having no problem coping with that (apart from water supply... and that is Nature's fault, not Peter Beattie's). In fact that population drift is what is going to "make" Queensland, and it is great for all concerned. More demand for everything from people who are able to pay their way - the Baby Boomers and Sea Changers. As for Sydney and Melbourne .... why would you want to live there anyway ? They seeth with the machinations of the ambitious, tremble with the thrashings of the anxious, and echo with the screams of the downtrodden. Any individual who has not yet achieved a Harbour View lifestyle should cut their losses and head for Dubbo or Broome or even Ross, where the holiday will feel as good as a change ....
Stretching prices on the supply side will only go so far before it twangs back in the faces of the greedy. There has always been an exquisite balance in the housing market in Australia, based on the cold hard fact that it takes two to make a deal. And it is all in the hands of the master deal makers, the estate agents ...... who are addicted to BMWs and Bluetooths. Entering the housing market has never been painless or easy - but it has ALWAYS been worth it. And the New Trend towards the Provinces promises to be the next Discovered Solution ..... for the lucky ones with the sense to surf just in front of the crest.