The choice is between stopping the rise in housing prices now (by cutting back on immigration, negative gearing and even limiting the ability of corporations to invest in housing as a home for pension funds etc.) or allow the population growth to continue until the environment, and hence the economy, are ultimately destroyed. The game cannot continue forever. The sooner we solve the housing crisis by stabilizing our population the better.

"But if governments could summon up the courage required to abandon a strategy that has been so conspicuously unsuccessful, and redirected the money which currently serves only to inflate the demand for housing and thereby push up housing prices, instead to increasing the supply of housing, they might actually succeed in making housing more affordable and increasing the home ownership rate."

Since market price operates to clear the market, the only thing government interventions can do is cause gross surpluses and shortages, which is what has caused the GFC.

Of course everyone needs shelter, but that is not by itself a reason for home ownership. In many countries most people rent long-term. There is no reason of policy why we should rent the money, rather than renting the premises.

The main reason for high demand for home ownership in Australia, over and above the demand for shelter, is for investment. And the main reason for this particular form of investment, is because government permanently inflating the money supply makes savings non-viable as a way of providing for retirement, and because every other form of investment and entreprise is so heavily regulated and licensed, and requires such a high level of record-keeping as to make them impossible for most people to cope with.

The main reason that the supply doesn't meet the demand is because government is simultaneously stimulating demand (permanent inflation; handouts for first-home buyers), and restricting supply (stamp duties, laws favouring tenants at the expense of landlords, GST, income tax, planning codes, environmental codes...).

To suggest even more interventions to try to correct the unintended outcomes of prior interventions is perverse but typical.

Instead we need the courage to call these ham-fisted failures for what they are, and demand the abolition of all government interventions in the housing market. Only then will we be able to supply housing to all members of society as best we know how; the rest is destructive and deluded state-worship.

'The sooner we solve the housing crisis'

Is there really a 'crisis'?

'laws favouring tenants at the expense of landlords'

Come again. Do you live in the UK?

Good analysis.

Delivering stable family life & directing capital allocation away from property speculation towards productive business is common sense.

Despite the best efforts and recommendations of both the 2004 Productivity Commission First Home Ownership report and 2008 Senate Select Housing Affordability report, little has changed. The big drivers of price – over generous tax concessions for second-hand housing in particular, landbanking, irresponsible bank lending and high immigration levels are yet to be addressed.

It is unlikely any incumbent govt will deliberately try to fix this problem.
Will future generations have any empathy for those who deliberately created this situation

Good analysis!
We will see a correction sooner or later due to demographic trends and our own "credit crisis".
Funny how a free market is OK when profits are high, but taxpayer bailouts are in fashion when the time comes to pay the piper.
The actions of our governments are clearly no longer incompetence...it really stinks of corruption.
Why are *all* our banks "too big to fail" so as to justify massive taxpayer bailouts?

A very accurate and honest appraisal Saul. It never ceases to amaze me how many first time buyers think the first home buyer grant is a positive thing. What is the benefit of an additional $7,000 if you end up paying $80,000 or $90,000 more for the property due to the increased competition? The fact is that Rudd and Plibersek are using first home buyers to prop up a very over-inflated market, and they are promoting an ever-growing debt culture in the process. The first home buyers grant - combined with the easy credit of the past decade - has all but destroyed housing affordability. The only way that average-income earners can afford to purchase an average house nowadays is to take on unthinkable levels of debt.

Good insight
One of the problems is the policy of urban consolidation and zoning that prevents subdivision. Inflation is a result of Government landbanking land, that should have been allowed to trade on the open market. This practice prevented competition, and prices have skyrocketed resulting in the inflation that is now evident.

If NSW Planning has done such a good job, then why is this State in such a mess. Is it the Planners or who is to blame? I have yet to notice any plans that have worked out as originally costed or planned.

Even blind Freddy can see that the Governments and estate agents are responsible for the present shortage of housing.

The Governments unwilling, more than incapable, to produce a national immigration policy comprehensive of housing needs, and the Estate Agents, who facilitated by the advent of Computers in the 90ties, combined into a single body (the Real Estate Institute of Australia) which, with branches in each of the States and Territories, has monopolized the exchange and renting of real Estate since the 90ties.

Before such time an Estate Agent charged a percentage on what a sale would fetch; An Estate Agency was a business based on the ability of the Agent to find a buyer on a limited advertising budget.

The affiliation to the novel Real Estate Institute meant rigid compliance with this body’s rule as condition of ‘being an estate agent’; hence came the crucial rule of charging sellers with advertising expenses.

So happened that housing became a no-risk business and the realm of the lowest rogues in the country, closely associated with politicians who used ‘grants’ to prop themselves in their balancing acts and Media Barons, whose profits are greatly dependent on display advertising.

Sir, we who are concerned, we who heard Housing Minister Plibersec at a venue for homeless in Melbourne say that by 2020 all will be sweet apple, would have appreciated if you Economists were to find for us the amounts in $ of real estate that changes hands, the amounts that goes into the pockets of estate agents and the media and all others who hang on the Housing business. Your figures so far are confusing.

In regards to Michael from Adelaide's comments at the top of the article, stopping immigrants from coming to our country would prove much worse for the economy,creating a massive skill shortage and lower than manageable unemployment. The influx of people to our shores can be a great thing, it will have an effect on housing prices as well.
But State and Federal governments need to keep the supply of land coming and not allow developers to strangle the supply in a growing property market. I think the main issue to a lot of the property price booms is the control developers have over the way their land is released. When all they need to do is reduce less than the demand to over inflate prices.