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.