So I am a parasite for having a couple of investment properties which I rent out for the equivalent of 80% the competetive holding costs

Please tell me, who is the bigger parasite

me for subsidizing my rental tenants

or the tenants?

Oooh look prices to GDP peak in 1932….

that would be due to the collapse of GDP, following the “Great Depression” more than escalating land prices.

a trough in 1910s and 1940s… well, fighting “world war” tends to detract folk from buying housing.

I remember post 1989, people fled from housing investment in droves, needing to pay living expenses in the “Recession we had to have”.

Since then prices seem to have escalated.

I say "seem to"

simply scratch beneath the surface

Prevailing Interests rates between 1996 and 2007 falling, falling, falling

Making investment viability competitively more attractive and thus prices climb.

and Bryan, falsely claims more difficult housing affordability, as supposedly reflected by increased prices to earnings and to GDP.

Listen Bryan, any ‘affordability’ calculation, which ignores the price of money (the interest paid for mortgage debt), in a debt financed housing market, is deliberately perpetrating a fraud on the public who might rely upon it as truth.

If you want to see a flat line for housing prices and constant “affordability”, it is simple.

Constant borrowing rates, constant GDP performance and stable housing production.

However, if you happen to live in the real world, you will find all those factors fluctuate and when they fluctuate, so to does both the “price” and “affordability” of housing.

The real skill is to anticipate when the fluctuations will occur.

Then, some see such “speculation” as immoral.

I, on the other hand, see speculation as a stabilising influence in any unstable market place…

because those who act “counter-cyclical” to the market, reduce the extent to which the “sheep” get fleeced.

There is not much more I can say about this bit of “intellectual fairy-floss”,

other than, Bryan you need to improve your comprehension of basic economics before you next attempt.

I await your next "effort"

Dear Col,

You ask:

> So I am a parasite for having a couple of investment
> properties which I rent out for the equivalent of
> 80% the competetive holding costs
>
> Please tell me, who is the bigger parasite
>
> me for subsidizing my rental tenants
>
> or the tenants?

Well, by your own admission, you pay 20% of the holding cost and get 100% of the pre-tax capital gains, while your tenants pay 80% of the holding cost and get 0% of the pre-tax capital gains. And somehow you're subsidizing them!

What? Your capital gain could be a loss? OK -- so would it be fair if your tenants got 80% of any gain and bore 80% of any loss, while you got 20% of any gain and bore 20% of any loss? No? Why not? Because interest rates might vary? OK -- suppose you could fix your interest rate by paying more, so that you bear 30% of the holding cost. Should your tenants then get 70% of any capital gain and bear 70% of any loss?

> I, on the other hand, see speculation as a stabilising
> influence in any unstable market place…
>
> because those who act “counter-cyclical” to the market,
> reduce the extent to which the “sheep” get fleeced.

This is true of the market for a commodity that is continually produced and consumed - like wheat. The speculators provide an inventory service, buying the stuff when it's cheap (raising the price) and selling it when it's expensive (lowering the price).

But when you have a fixed stock of something that can't be produced - like land - the only possible effect of speculators is to raise prices by adding to demand while supply remains fixed.

That said, property investors CAN add to the supply of HOUSES (not to be confused with land) and should be encouraged to do so. But the present tax system is much kinder to property investors in their capacity as owners of land than in their capacity as providers of houses.

And if the prices drop who is going to subsidize Col for his loss? At least he's taking the risk by buying in the first place. And how can you meaningfully talk of pre-tax capital gains ... its going to get taxed! Which obviously affects what he gets. How exactly is somebody who is paying for the property or properties getting a free ride?

This article has some serious flaws. Does anybody really believe that private rental income makes up 28% of our GDP?? Did anybody notice how the publication date of Terry Dwyer's article is 2003 but the diagram suggests the figures go to 2007? Then of course I noticed the words "Based on" .... hmm. I think Dwyer's work has been used slightly out of context.

The only problem with my figures, David Jennings, is your misunderstanding of them. The figure for 'rent' in my break-up of GDP chart since 1911 is NOT private rentals, it is the total annual rental value of all of Australia's land, residential, commercial, industrial and rural (freehold and leasehold). And this figure is NOT 28% of the economy, but 32.5%; 4% of GDP representing that part of rent that is captured to the public. If we took much more and abolished income taxes, we wouldn't have recurrently bursting real estate bubbles followed by recession (or, in this case, economic depression.)

If Ken Henry's review is intellectually rigorous, it should come to the same conclusion.

And Col Rouge deserves to be compensated when his property values fall? Oh? I thought banks were the only parasites that expect to be compensated by taxpayers when they undertake bad commercial decisions?

I apologise for attributing a statement of Benjamin Franklin's to John Locke.

"Removing zoning restrictions won't stop developers from hoarding land while waiting for prices to rise."

This statement is false as it completely misses the effect of development restrictions. The main effect of having severe development controls and an obscure development process is to restrict landowners from subdividing. Such a process can quickly increase supply independently of developers hoarding land. One local government got very worried about the potential of subdivisions to make things a bit tougher for the developers a few years back, so they introduced a range of new restrictions. The claim was that the restrictions were to preserve the character of the area, but the effect was to greatly restrict new supply from small subdivisions. And the claim of preserving the character of the area now seems ludicrous, with a large number of large and revolting developments since approved.

Give landowners back their rights and the housing crisis will fix itself.

To David Jennings. Why do you dispute the figures? If you want to be taken seriously, you have to do more than blow raspberries at those prepared to put the work in, and then share their results. Where is your work, and results?