A rather disingeneous and self-serving post indeed.

Its because of the writer and his developer mates that their lapdog governments are holding back land releases in order to keep housing prices artificially high.

Also in this self-serving piece, he totally ignored the significant and most significant fact that the billions funneled to the propertied classes in investor subsidies and tax breaks would also have driven demand higher for housing.

Also the fact that the property and business lobby consistently, both overtly and covertly lobbies for immigration numbers to be kept high. Our very liberal immigration policy is that way because a lapdog government wants to please its rich masters, not out of any real humanitarian instinct, that's the red herring to keep our eye off the ball, same as racism is the red herring used to abuse critics of excessive immigration.

I'm not on the gravy train, so I can tell it the way it is, not the way the ruling classes want us to believe it is.

Governments, Estate agents, Bankers, Media barons, Solicitors and assorted parasites are the cause of our national housing disaster.

Governments have failed to produce a national housing policy that suits the needs of normal and migrant population increases, and kept the privilege of granting alms to sections of the populace thus distorting the house market normal flow.

The Estate Agents who, since the advent of computers in the 90ties, combined into the Real Estate Institute of Australia and now control the property exchange and leasing with an iron fist. The Estate agents who worked on percentage-only so grabbed the chance to charge selling expenses, thus stepping from business men to mafia men.

The Banks grabbed the power to change their terms at any time thus having its clients at the whim of their greed.

And Media gets money hand and fist with larger and larger display advertising.

Solicitors also dip for the strenuous job of changing the name of a title certificate.

And finally the ACCC neutered and the normal course of justice shunted into unhealthy tribunals.

All this and the toll of 1% exacted for exchanging a parcel of shares becomes 17% to 19% for selling your house to move to another; so far for the freedom of the country.

And if all this were not enough, we have Economists yapping day after day on the causes of house shortage and as yet unwilling to call inflation robbery and using the same term for house shortage.

Just another load of garbage where someone pretends everything is unaffordable by comparing the price of a house to someones income and ignoring the major cost component of house purchase, namely the interest on the housing mortgage.

Wendell Cox article perpetrates the same basic LIE

Houses are just as “affordable” as they always have been but with lower interest rates, the price:income relationship increases (halve the interest rate means people can afford to borrow twice the amount for the same monthly cost).

So to the notion

“Australia has long held dear the ideal of a classless society, of equality of opportunity and ‘a fair go’. But are we now witnessing a new class structure, defined by those who own property (and quite a bit of it) and those who don’t?”

We all have the right to own property.

Those who do not are merely exercising their right not to.

If they can rent at half the price of a fully funded mortgage, then they are ahead on an income basis.

Those who CHOOSE not to see beyond the immediate will never understand the advantages of SACRIFICING current consumption to obtain a future, tax free, capital gain, by buying a house.

And those who choose to perpetrate up politically motivated lies about the affordability of housing should hang their heads in shame

I struggle to understand why so many claims are made about 'rental costs' being so high now, when in fact, they have dropped in relative terms.

My first house was in an outer brisbane suburb which, in 1983 was worth under $40,000, yet, it rented for $80 per week. That's around 10.4% gross return on investment.

Today, that same house, which is moderate, would rent for around $350 per week and is worth about $350,000. That's little more than a 5% gross return.

So, if rents had kept pace with values, one should be paying more like $700 per week.

How can rents now be seen to be 'less affordable'?

"I struggle to understand why so many claims are made about 'rental costs' being so high now, when in fact, they have dropped in relative terms."

My struggle is in understanding whether housing affordability deniers are suffering a major deficit in intelligence or morality.

Ross Elliott, I can only thank you for your articles. As one struggling with the issue of affordable housing, it is people like you, harping the point that help calm the dire fear I have of what is to come.

I am embarrassed to be in the position I find myself in. No safe, affordable housing means you can not plan, budget or aspire to the freedoms this country considers to be "fair-go".

You find yourself unintentionally bullied by services who generally do not understand the issue and tend to believe those homeless, or near homeless people lack capacity. This is in fact a discrimination. Reversed, the lack of capacity is in the market to supply a basic need to specific sectors. It is a economic and social problem causing greater problems for social or civic well-being, a casual element underlying other issues pressuring the stablity of society. ie: Casual and underemployment as well as unemployment .... a vicious catch-22, unsustainable life- cycle

For women, non-affordable housing is a risky business.

I sometimes do not understand others who write what what they do on this forum. As I attended the Forgotten Australians and Former Migrants gathering in Canberra last week, I was shocked at the amount of people I met feeling worried, insecure over the issue of their own levels of near homelessness. Rising rents mean owners everywhere are capitising on the markets over the social equity issues required for the greater social and economic good.

Australia needs to get a handle on this issue fast else it will burgeon near irreversible....

http://www.miacat.com/
.

The problem of over inflated shares and property originates in our Global Reserve Banking System that is allowed to create money from nothing thus hyper-inflating the prices of commodities.

We in the West have had an average inflation rate of 3.4% over the last 100 yrs.Inflation is compounding like interest,so just 3.4% can depreciate a currency by 40% over 10 yrs.Over 100 yrs we have lost 96% of our currency value ,while the creators of this inflationary money(banks and Govt) have made an equivalent gain.

What price is the depreciated dollar in your wallet? It probably is equal to the over inflated price of your house.

Thanks Ross,

Couple of things:

1. assume we remove all “exorbitant levies” and state/local govts relax policy, then theoretically we have a drop of say “$100,000 per dwelling”, correct?

So Mr &Mrs Hapless FHB, who could previously access say 400k (inc all fees, current levies etc) in debt will walk into a bank tomorrow and suddenly the banks will lend that income earner (income unchanged), $100K less.

Why would they do that?

Banks are a business, out to generate as much debt as possible.
And hats off to them, they have done a remarkable job.
Aus is now one of the top nations for private debt.

Iceland and US move over.

2. we should not forget what came out of the 2004 First Home Ownership report (inc RBA submission) and 2008 Housing affordability report :

Productivity Commission Inquiry Report No. 28, 31 March 2004 FHO http://www.pc.gov.au/__data/assets/pdf_file/0016/56302/housing.pdf

A good house is hard to find: Housing affordability in Australia 2008: http://www.aph.gov.au/Senate/committee/hsaf_ctte/report/b01.htm

From RBA FHO submission 2003:

12. . . we find support for the view that investors have been contributing disproportionately to the increase in housing demand over recent years, with the effect that affordability, especially by first-home buyers, has been reduced. . .

22. . . most sensible area to look for moderation of demand is among investors. the taxation treatment in Australia is more favourable to investors than is the case in other countries.

http://www.rba.gov.au/PublicationsAndResearch/SubmissionsToParliamentaryCommittees/productivity_commission_first_home_ownership.pdf

Shelter in Aus is now deemed to be a business . The govt dream seems to have two groups - landlords and renters. Until this perverse way of treating the most basic of essentials, shelter, is corrected, the debt culture encouraged by govt policy will continue to drag down productivity and lower the living standards of the bulk of the population.

“Limited new land supply..(puts)..price pressure on supply” implies that turning on the land tap would lead to an increase in housing affordability.
But the new housing market is only a very small percentage of the overall housing market.
Don’t developers work out how much they can sell their finished product for and use this as the basis for determining how much they are willing to pay for the land, after determining their costs and a profit margin commensurate with the risk?
To the extent that this is true, most of the super profit ends up in the pocket of the land vendor.
Many of these land owners effectively get tax concessions by paying notional rates on their landholdings based on existing use, rather than highest and best use.
This is equitable because people might otherwise be forced off their property by unaffordable taxes.
However, when they sell up they obviously do so at highest and best use value and pocket the difference.
This is where it becomes inequitable.
Such super profits should attract a special tax which would claw back the concessions that the owner had previously received.

“It’s also hardly a coincidence that the rapid escalation of child care in Australia can be roughly traced to the point where house prices started to escalate out of proportion to incomes”
But which came first, the chicken or the egg?
Is it possible that the increasing number of double income households is not a symptom, but a cause of housing unaffordability?
It seems to me that if you’ve got 1.8 times as much money flowing into (dual income) households, the price of housing is going to be bid up, to the obvious detriment of single income households.
Did women start working to pay off the housing debt or did women start working because of changing societal expectations?

People demand bigger rooms and more of them than they did in the past.
How does housing affordability look when such qualitative changes are factored into the equation?

"The causes of the decline in housing affordability are now better understood ... But now the price pressures on the supply side created by state and local government planning policies ..."

But now, get this:
"Limited new land supply ..."

Cities in most countries use far less land per household than Australia. The problem isn't limitations on the amount of land used for housing, it's the restrictions on putting more than one household per quarter-acre block.

I don't think land availability is the issue. Most people do not want to live far away from the city. Prices in south-west sydney do not rise in parallel with the inner west. There is only a limited amount of land within a reasonable distance of the CBD. To accomodate an expanding population, we can either 1) build large houses further away from the city like the US, or 2) build smaller houses/apartments close to the city like UK. Australians appears to have gone for option 3) borrow as much money as you can afford, drive up prices and only take options 1 and 2 as a last resort. Government policies on CGT, land levies etc. don't help either. Inflation free growth and interest rates cannot last forever, hopefully this will end with whimper rather than a bang, as I think a lot people will be up the creek if there is a rapid rise interest rates.

HermanYutic,; However, when they sell up they obviously do so at highest and best use value and pocket the difference.

Well, not quite, at least not in QLD.

You see if the land exceeds 2 Ht and, was purchased post 1982, then there is capital gains tax on the balance of the land over and above what constitues the 'principle residence', 2 Ht.

So in essence there is a 'special tax' and it is one that catches out many an unseasoned land owner once they sell and the dust settles.

Perhaps another contributing factor to high prices are the lenders, esspecially 'non bank lenders' who have made borrowing money so easy today with their lowering of deposits and, mortage insurance.

After all, from a sellers point of view, the less people have to personally contribute, the higher the amount of potential buyers there are. This may also have helped to inflate house prices.

20 to 30 years ago, it was un heard of the apply for a home loan if you had less than a third deposit.

Ric Battelino, RBA deputy governor:

"First, Australians are on average spending a lot more on each new dwelling. Real
expenditure on each new dwelling built is now 60 per cent higher than it was
around 15 years ago . This is due to improvements in quality and
increases in size.
Graph 5
• Second, a high proportion of dwelling investment is in the form of alterations and
additions – i.e. upgrading existing houses rather than building new ones. Almost
half of all dwelling investment has been accounted for by alterations and
additions in recent years.
• Third, a higher proportion of the new houses built are simply replacing existing
houses that have been demolished. We estimate that between 2001 and 2006,
around 15 per cent of new houses built replaced houses that had been demolished;
10–15 years earlier, that figure was less than 10 per cent.
• Fourth, a significant proportion of dwelling investment appears to have gone into
holiday homes or second homes. Census data show that the number of dwellings
built has exceeded the increase in the number of households by a large margin. As
a result, the ratio of the number of dwellings to the number of households has
been rising over time; as at 2006, there were 8 per cent more dwellings in
Australia than there were households. Presumably, most of this surplus reflects
holiday houses and second houses"

So the RBA thinks that we're spending a lot more making new houses bigger and flasher (prices go up).

That we are spending up on making existing houses bigger and flasher (prices go up).

That many new houses are simply being built to replace older houses that in many cases may simply have not been big and flash enough (prices go up as vast sums are pumped into the existing stock rather than increasing the stock).

And that more people are buying holiday homes.

The RBA sees fit to not simply ignore these powerful contributing factors - why do so many others seem determined to do so?

New Australian houses now the biggest in the world:

http://www.smh.com.au/national/home-truths-australia-trumps-us-when-it-comes-to-mcmansions-20091129-jyva.html

Perhaps Clive Hamilton (now the Greens candidate for Peter Costello's old seat) had some good points when he wrote "Affluenza" - Australians in greater numbers than ever before have become addicted to opulence.

It also seems to me that a much bigger portion of Australians have decided that they wanted to live the capitalist/investor dream and become rich through the vehicle of housing investment. When a relatively small number of people engage in this, it doesn't make much difference. But when large numbers of people pour huge sums into making houses bigger and more expensive because (a) they desire a palatial residence and/or (b) they buy cheaper houses with an eye to rennovating them (half of all the money invested in housing in this country of late has gone into rennovation) and flogging them at a profit, then there is only one direction that prices can go - UP.

Maybe we can split ourselves into two classes here - the "aspirationals" and those in the lower part of the income spectrum who can no longer afford to buy a house because the aspirationals have succeeded at pushing prices through the roof. After all, if you are into housing investment, you want to see prices go up.

So all the "clever individuals" - most of whom aren't really acting as individuals but are simply following a mass trend - are so focussed on their own desire to feel wealthy that they do not realise or perhaps do not care that their collective actions have harmed people in the income strata below them.

Some people would have us believe that if regulation and red tape were removed, prices would fall. The evidence suggests otherwise.

I think we should call a spade a spade and admit that Australians themselves must carry a lot of the blame for this situation.

I am not a banker, real estate agent or land developer, nor have any connections with such.

This article hits the nail on the head, and it's an easily provable - just compare the price of land (per metre) with and without the Urban Boundary. The rural land within 5km is HEAPS cheaper, metre for metre, even after development costs.

http://www.loosethenoose.net - how the state governments land zoning is strangling young familie

I get tired of reading and about this "Australia, land of the fair go". And how things have changed. It never has been. Read some history. When was a penal colony ever a fair go. The idea is touted by those bent on swindling you out of every last cent you earn. The convicts were slaves and nothing has changed, except that they let us out for 10 hours a day.

Stewart,

The points you raise are important factors, as I said previously.

But it does not assist our understanding of the situation to simply ignore other important factors. By simply ignoring the factors that the RBA, the ABS and others have highlighted, we get no closer to a solution and may even become part of the problem.

It is clear that a significant number of Australians have become more materially aspirational than previous. The fact that our new houses are now the largest in the world and that an ever-increasing portion of us own second houses (or rather in most cases, second mortgages) strongly indicates this. The extrordinary boom in finance for rennovation, the craze in investment housing, the fact that we are knocking down more older houses than ever before only to build something grander on the site - these all speak volumes about the driving forces behind this.

If there is a powerful drive for greater affluence, simply relaxing zoning laws is likely to be limited in effect - large numbers of people WANT grander housing which is naturally more expensive.

I was stunned when I recieved a valuation on my litte shoebox - if this ordinary working couple's household income had grown at the same rate as the market value of our house has increased over the same time, we would be bringing in something in the range of a quater of a million dollars a year by now.

It is NOT realistic for anyone to argue that the average income has grown at the same rate as house prices - unless they know something that the RBA, the ABS and economic commentators don't. Unless what I have personally experienced and witnessed is just a figment of my imagination.

If a significant portion of Australians are determined to simply keep pouring ever increasing finances into maker houses ever bigger and flasher and therefore more expensive, the bubble is unlikey to burst and bring prices down to realistic levels without a severe recession, as has occurred in the US.