M in A:” If you stopped population growth and abolished negative gearing you would see prices fall rapidly and the housing crisis would be solved.”
True. Govt technique is to increase debt (and thereby GST revenues) by adding extra consumers to equation.
If long term infrastructure costs were considered, immigration numbers would be reduced to more sustainable level.

Runner: my mobile phone cost under $100, plus a $20 yearly pre-paid.
How can anyone reasonably relate an annual cost of $20 pre-paid phone deal to a 25-30 yr mortgage debt of over $300,000?

Rehctub: “Truth is, if you take away the incentives to invest, investors will simply invest elswhere, not the property market and the 'renters' will have nowhere to live.”
Rehctub, What, do you think renters are not capable of buying a home if the tax system were fair? It is the current lop-sided system that sheets home massive advantage to investors. Until this is addressed, I expect to see more RE speculation by govt ministers (amongst others).

TheMissus: “The government keeps giving some incentive to keep house prices high.” True, there are at least 2 reasons: 1. govt is protecting their own RE portfolios, and, 2. they want to walk through shopping malls without getting lynched.

Foleo: “you are asking future generations to fund your current lifestyle”. True, this seems to be the motto of free-loaders.

This is at the centre of the problem. Policy makers in Treasury rubber-stamping tax rules that exclusively benefit investors out of all proportion to their input. I use the word ‘input’, but really watching the antics of amateur investors (out to make as much of a loss as possible by negative gearing) is so ridiculous it is almost funny.

Question: Why is negative gearing allowed on second hand homes in the first place?
No employment is created through this form of subsidised debt, just greater amounts of debt. It is a joke.

My hope is that enough people tackle this waste of our collective energy head on. Future generations deserve better.

"Not Capitalism Not Communism

Distributism is the third way, and it is proven to work.

Capitalism and Communism put property and the means of production into the hands of the 1%. Capitalism by monopoly and Communism by state ownership.

Distributism puts both property and the means of production into the hands of the majority.

If a distributist government was in power, human needs would be regarded as human rights. Food water shelter, the basic needs of life would be supplied by manditory property ownership.

An 18 year old leaving home would be allotted a piece of land as first home builders grant. Thats right, a direct land grant with no greedy corrupt developers involved. He would then apply for a no interest loan or at cost loan from the government bank, to build an independant off the grid eco house. Once this 18 year old has built his house he has freehold title that can never be taken from him, thats his home for life if he so wishes.

Foreign ownership of Australian domestic dwellings would be banned, as this artifially inflates house prices.

Ownership of more than two domestic dwellings would invite massive taxation on rental incomes. This will stop hoarding of domestic property, and artificial inflation of house prices.

There would be no limitations on commercial property ownership, just domestic property won't be a means of investment. Housing is a human need, not a means investment.

People should be able to pay off there homes within 10 years, not spend a lifetime paying off the shelter above their heads. A distributist government would encourage maximum housing ownership, and energy independant housing. Solar subsidy, rainwater tank subsidy.

The major cost of living is just the shelter over ones head, which is disgraceful in this day and age.

Cont....

...Cont'd

Housing should be an easily and naturally realised thing, not something to be slave to the commercial banks for the rest of your life."

This piece is not my creation but I found this comment on some other forum, which I agree with.

Pericles, I'm sorry Australia is losing the plot (even more than USA) with working longer hours. I even further heard it confirmed this morning while listening to Radio National and the mentioning of unpaid overtime that many workers here do (too much work and keeping up appearances). I've been to Europe recently and they don't seem to live for work like we do. And a parent having become forced to work - I don't see much difference to the Russian women working like slaves in the factories "having no choice". Really.

We need more time for ourselves for outside work productivity, and live the broader picture that life has to offer, don't we?

*and the mentioning of unpaid overtime that many workers here do*

I heard that too, Constance. So how much time do you think,
your average office worker would spend, surfing the net, answering private
emails, chatting with others in the office about just about anything,
sneaking out for a smoke, checking out OLO, posting tweets or
keeping up with Myspace etc?

Foleo; So, do you do it for the tax relief, perhaps, or the capital gains?

Well, both in fact and, as the likes of you are so kind enough to continue renting and pay higher and higher rents, simply because you winge about everything rather than concerntrating your efforts on buying your own house, my rental house gains equity, becomes 'positively geared' and I buy another one. Cheers! I'll think of you when having a beer tonight.

Now I am of the 'baby boomer' era and, one thing we do differently to you 'gen y's' is that we build an assett base so that our own kids will at least have something left to them when we pass on. Pitty help your kids, if you have some!

They will most likely say something like, 'wow, what a swell guy he was. He left us this 'plasma' on an interest free deal', what a legend!

Now that I've had my fun, it's time for some facts.

Developers 'at large' work on 'margins', that's it!

The esculated costs in land is all due to external charges. Council fees, government fees, head works fees, over the top wages paid to many contractors, company complience costs, etc, etc. Don't blame the developers as they simply buy and sell land.

Leela; Question: Why is negative gearing allowed on second hand homes in the first place?

Because capital gains tax is piad when the assett is sold. Take away this tax and you can take away NG. Then you will see a huge increase is house prices.

You gen-y's have forgotten one thing. You have to work for what you want!

Yabby, never let the truth get in the way of a good story mate!

Housing “affordability” is a function of

A house price
and
Since the vast majority of houses are debt financed – the interest rate paid on the borrowings

I would note that the graph, which accompanied the article omits any reference to interest rate and in that way is a deception, either incompetence or cynical.

No one can debate housing affordability or its unaffordability without reference to the primary cost of purchased (or investment) housing, being the interest paid on the borrowings taken out to support its purchase.

So what is the difference and what supports the gap between house values versus building costs in the 1970/1980’s and today… simple

Prevailing borrowing rates were 12%+ in the 1970/1980’s and half that today.

Thus halve the interest rate and all other things remaining equal, like supply or available stock for sale, the affordability is half what it was and the demand/supply price can double to bring affordability back to the 30% (=/- 3%) of gross income.

Since house prices are determined by the influences of supply and demand
Some factors affecting supply and demand:
1 population (immigration)
higher immigration increases demand and thus house prices
2 planning / building regulations
Policies like “Melbourne Green Wedges” limit the number of available building blocks, constricting supply and thus the pent up demand (caused by the restriction) increases prices.
3 buyers grants – directly increase prices by sponsoring “demand”
4 negative gearing, without it, house prices will, in the short term, reduce but so will rental housing (as investment is removed) or the rental rates will increase to cover the tax benefit shortfall. In the longer term, negative gearing benefits the tenant not the investor (Michael_in_adelaide)

Blairbar “Well if housing is unaffordable how come houses(and land) are being bought?”
Absolutely right.
One should ask “affordable” relative to what: house prices in USA, Bulgaria or France?

Pericles “This article is, not to put too fine a point on it, a crock…. This document is flawed”
Agree

Constance you are as wrong as the article “extreme capitalism” what a crock your observation is due to interest rates.