The cause of high house prices is demand out stripping supply.

The answer is either to reduce demand or increase supply.

As daggett has pointed out, the population is increasing, so too is demand. The only solution to reduce prices is to enable supply to exceed or at least meet demand.

The main constrictions on supply are the local councils whose political agenda is to protect existing owners, and whose policies delay new developments by an average of 2 years.

The proposed legislation to fast track development should help.

Dear Cuphandle,

If you're an ordinary home owner, and if your rising site value leads to a Rates bill beyond your income, you can usually apply for part of the bill to be deferred until the property is next sold or bequeathed. Failing that, you can borrow against your rising property value -- as others do to pay for holidays and plasma TVs.

If you find these suggestions outrageous, your agenda is not to stay in your home, but to pass it on unencumbered to your heirs at its full appreciated value -- and, by implication, cast off the tax burden onto others who, although subject to the same law of death and bereavement, will never be able to bequeath or inherit property.

Fact: The only people who are forced from their homes by rising property values are renters who can't afford the rising rents.

You claim that you get nothing for your higher Rates, but admit that the Rates increase is related to a 100% rise in your site value. Do you think the latter rise is "something"? If so, see my comment at http://www.abc.net.au/news/stories/2008/07/02/2291821.htm . If not, I hope you don't object to policies that would drive your site value down again.

In complaining about the costs imposed by governments on developers, you forget that the rezoning of land as residential, together with the provision of infrastructure headworks for new estates, increases the prices that developers can get for their holdings, whether developers hand back any part of that increase or not.

If you think the essence of living in a democracy is the opportunity to "purchase and own a Freehold Property", I hope you admit that the third of the population who don't have that opportunity are not living in a democracy. And if you respond by lecturing those people on how they should increase their capacity to buy property, I point out that if they all followed your advice, they would drive up prices further, thereby defeating their own efforts -- and making you complain even louder about your valuation and your Rates bill.

For those of you out there who obviously seem to have missed the point of the gist of my message, (or alternatively are just too thick to see the point,) I will reiterate:....what is to be gained by everyone concerned wringing their hands over the subject of insufficient affordable housing, when we have Governmental bodies who can simply jack up the Unimproved Valuations and aided and abetted by Local Councils can ultimately Rate people out of their own homes after they have spent a lifetime paying TO OWN IT!....again I ask what is the point of the whole exercise, or haven`t you people run up against this problem as yet? .....no doubt that when you do we might see a change in a lot of people`s attitudes!

I shudder with despair when I hear the word ANZAC and hear people and the establishment voicing sympathy over the loss of so many of this countries finest citizens in false-flagged wars, when in reality all those lives were sacrificed uneccesarily, simply for the appeasement of the Capitalist system and the preservation of the status of some of the worlds wealthiest citizens!

When we are being denied the democratic right to purchase and own our home outright, without fear of the cost of an ANNUAL (unjust) RENTAL charge being applied by ever greedy money-grubbing authorities, ultimately removing from our possession what is rightfully ours, we have to ask exactly what did all those diggers die for?....( and I am sure it was not to prop up dishonest administrations and corrupt politicians!)

I am sure that Mugabe would be eyeing off this country as the best place for him to retire and to carry on his nefarious and despicable activities, secure in the knowledge that those that will be around him here are just as despicable as he himself!

WE WONDER WHY SO MANY YOUNG PEOPLE ARE TURNING TO DRINK AND DRUGS?...time to take a long hard look at yourself Australia!

The government doesn't need to spend any more public taxes to entice people to buy , merely incentivise the system to achieve the desired outcomes -- taking a different approach they should gradually cut the capital gains/negative gearing to nil over the next 8-12yrs could consider housing in a broader perspective, along with access to public transport and access to amenities.

We need more sustainable housing in areas close to employment, not on the metropolitan fringes, new high-density homes could easily be built in the inner areas in place of existing low density housing. The combination of blind conservatist attitudes and inadequate medium density planning procedures are clearly not working, are unsustainable and should be abolished.

It would patently simple for the government to compulsorily acquire land (as they regularly do for roads), first survey all of the inner (traditionally working class) suburbs that have been neglected by underdevelopment and lower population density.
All sites would then be cleared of roads and housing for communal redevelopment into carefully masterplanned (ideally not by mindless developers) high-density cluster housing for new home-buyers. This kind of radical approach would be be hugely advantagous ecologically, socially and economically as well as solving the problem of the escalating demand for housing, which thus far outstrips all supply and vain attempts to combat ever-growing unaffordability.

In areas zoned as residential, all properties should be assessed for annual land taxes/rates based on their estimated value divided by their population density (for example, a $2M suburban house on 1000sqm with two registered permanent residents, tennis court / swimming pool, would be taxed ten times what a $1M 200sqm apartment with two residents in the CBD would pay). This more equitable solution provides an incentive for people to shift toward smaller housing (or live with exponential costs for their mansion), while putting a dollar value on unsustainable NIMBYism, and would help cut down on vacant rental property. Similar measures could be applied to vacant land.

Cuphandle -- you may be better off looking at Reverse Mortgages than risk losing your house.

grputland:
Why should we be faced with ever increasing UIV`s, after all is said and done, not all of us are speculators or born and bred Capitalists!

Whoopee that the increase in Unimproved Valuation makes my property worth so much more, but does that matter one iota if I have no intention of selling the place and just want to live as modestly as possible and be left alone!

Why should everybody be encouraged to Reverse Mortgage what they have spent their life achieving,....leaving little or nothing to be passed on to children or grandchildren purely to sate the appetite of the Local Government Authorities to accumulate surplus funds!....( and I believe that my Shire had accumulated in excess of $3 Million Dollars in the bank prior to Beattie`s "forced" Amalgamation!)

I think that we would be hearing you squealing if the establishment was virtually trying to take something away from you that you had spent a lifetime battling to "secure"!

I would suggest to you that one day you may be an Old Age Pensioner and have to try to survive in a world that seems to thrive on the principle that "Greed is good!"

BN:

I agree that people need an incentive to invest in NEW homes, as opposed to established homes. And if the reward for investing in new homes is to serve as such an incentive, it must be given ONLY for investing in new homes, not established homes. An "incentive" without a matching condition is not an incentive, but a gift.

My article proposes at least one new carrot, namely deeming every investment property to be earning 4% of the site value for tax purposes. That means that if your property earns more than 4% (e.g. because you have built housing on it and sought tenants), you pay less tax than under the present system.

Another possible carrot is described at http://putlandletters.blogspot.com/2007/07/labors-blind-spot-on-housing.html (3rd paragraph).

That said, carrots are not essential: a suitably selective stick makes a perfectly good incentive.

rehctub:

Yes, if an investor buys a home from an owner-occupant, the latter MIGHT then build a new home -- and might not. Giving the investor an incentive to build rather than buy increases the likelihood that a new home will be built.

Hasbeen:

If you own a rental property (site plus building), the risk of damage by tenants is one that you bear as owner of the building, not as owner of the site. It is therefore an excellent argument for taxing you ONLY on the site value -- not on the building value or on any rent that you get for tolerating tenants in the building. My deeming proposal does precisely that. Any other tax reform that encourages owners to seek tenants may also be understood as compensation for the risk of bad tenants.