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The Forum > Article Comments > Sydney: from world city to 'sick man' of Australia > Comments

Sydney: from world city to 'sick man' of Australia : Comments

By Wendell Cox, published 6/5/2009

The 'Great Australia Dream' of home ownership is in the process of being extinguished, particularly in Sydney.

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When will they ever learn ?

A large part of the reason housing is so expensive in Sydney and
relatively in other cities is that back in the 1980s the government
forced lending institutions to lend against both the applicants income.

The result was that twice the amount of money was now available.

Economics 101.

What happens when the amount of money in a particular market is doubled ?

It was and still is a bonanza for developers.
It also forced up the first birth age of mothers.
Posted by Bazz, Monday, 11 May 2009 3:26:05 PM
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<Economics 101.

What happens when the amount of money in a particular market is doubled ?>

Well, if the supply of housing is flexible wrt demand, and the cost of building a house is $X, it isn't very hard to work out what happens. If everyone decides to buy a house, the price initially rises. This then creates an increased profit incentive to build more dwellings. The cost of building may well rise with the increased demand for tradesman, but eventually this will lead to more tradies lured by a good income. Eventually, with an increased supply of housing, you would expect rents to drop, meaning lower returns. As the decision to invest in housing is compared with the returns from other investments, a poor investment return could well push down prices.

What is happening in the Australian property market is quite different. The supply of new housing is severely restricted by government regulation. Demand is being driven by high immigration. And councils are now moving to further limit the number of renting occupants in a dwelling, which would impact further on rents.

Were landowners allowed the right to build low cost dwellings which meet health and safety requirements on their property, Australia's housing affordability crisis would quickly end.
Posted by Fester, Monday, 11 May 2009 8:35:32 PM
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If we had a Commonwealth government that had a court that allowed ordinary people to enforce Commonwealth laws, against State and Local Governments then the sick city of Sydney, would suddenly recover.

Paul Keating’s government enacted all the measures necessary to fix Sydney completely, remove the housing shortage, get the homeless off the streets, and restore it to a vibrant successful city, except one. That one piece of legislation that makes government in Canberra useless, is s 39 Federal Court of Australia Act 1976. The Judges of the Federal Court of Australia have made another, and while Order 46 Rule 7A Federal Court Rules remains on the Statute List, lawyers rule. There is no shortage of land, just restrictive trade practices. There is no shortage of good Statute law, just a monopoly on enforcement that makes them irrelevant.

We do not have a democracy in Australia at all. We have an aristocracy that completely thumbs its nose at the federal Parliament. Fix that small pressure point, and let democracy flourish, and Sydney will become a model city, in every way
Posted by Peter the Believer, Tuesday, 12 May 2009 6:36:51 AM
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I think Fester missed the point.
No matter what the other factors that are involved in setting prices,
the fact is twice as much money *per house* is available because of
taking both incomes into account.
Posted by Bazz, Tuesday, 12 May 2009 7:58:46 AM
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<No matter what the other factors that are involved in setting prices,
the fact is twice as much money *per house* is available because of
taking both incomes into account.>

Bazz.

Having women in the workforce means a bigger economy. There is more money for everything, but does that mean that everything is twice the price, or does it mean that more goods are available? You need to learn a little more about "economics 101" yourself. This link on supply and demand might help:

http://www.investopedia.com/university/economics/economics3.asp

<B. The Law of Supply
Like the law of demand, the law of supply demonstrates the quantities that will be sold at a certain price. But unlike the law of demand, the supply relationship shows an upward slope. This means that the higher the price, the higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at a higher price increases revenue.>
Posted by Fester, Tuesday, 12 May 2009 6:29:36 PM
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