Dear Fester,

I think we're at cross purposes: greenfields vs. brownfields.

As Stev cited the pro-sprawl Demographia website, I thought he was complaining about restrictions on greenfield developments beyond the urban fringe. Such developments are in the hands of an oligopoly, leading to credible reports of hoarding and "drip-feeding" to keep prices high.

In contrast, your references to preserving the "character of the area" and restricting supply from "small subdivisions" make me think you are referring to council-supported NIMBY campaigns against infill development.

If you are suggesting that infill developers are more anxious to get on with the job than greenfield developers, I agree.

You wrote: "Give landowners back their rights and the housing crisis will fix itself."

So how do you give them the right to build? For one thing, you need to get council rates on site values alone, so that building is not penalized. For another, you need to reform stamp duty so that it doesn't impeded the transactions associated with building. For another, you need a politically and economically viable method of financing the infrastructure improvements needed by new developments, so that strain on the existing infrastructure will not be cited against them. My latest submission on that can of worms is at http://www.parliament.vic.gov.au/osisdc/inquiries/UrbanGrowthBoundary/Submissions/OSISDC_UGB_sub70_Prosper_Aust_12.10.09.pdf (8 pages). It floats the idea that restrictions on outward growth might become redundant if infill growth were sufficiently encouraged.

Gee, just a bit sensitive about your numbers there aren't you!

"Coincidentally, land rent has also grown to 32.5 per cent of GDP." Is there anybody else saying this? You don't actually tell in the article how you got this figure and whether you can back it up. Maybe instead of insulting the person who queried your figures you could explain yourself

"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)."

Those rents are all private sector rentals.

I derived the figures in the same manner that Dr Terry Dwyer got his figures, Lucy. It's explained in detail in "The Taxable Capacity of Australian Land and Resources" if you'd like to do a search. I touched upon the method in the report on land price bubbles, "Unlocking the Riches of Oz". I didn't want to get into technical in an opinion piece.

BTW, you say they are all private rents. They are actually total public and private land rent. Sure, most land rent is captured privately, but they weren't privately-created. The point of my commentary was that they are publicly-created and if we captured more of them we could slash taxes, get the economy moving, and keep the lid on the rate of land price escalation. You're against this?

Ah grputland… I knew you couldn’t resist….

hook, line and sinker

I will actually only benefit from the post-tax capital gain

So, why do you assume I benefit from the pre-tax capital gain?

Do you feel the state shares “responsibility” for their parasitic “leeching” off of the capital gain, in which I take all the “risk” and they take none?

Now to capital gain

No gain in guaranteed and we all know market realizable values go up and down.

I take and bear that risk, as mentioned by David Jennings

My tenants take no risk.

They RENT the right to utilize a house commodity, for a known and agreed cost, fixed per the lease and suffer no front end investment exposure.

When we consider the rental return on property yields average 5% pa, that 5% as a weekly rent, represents 1/1000 the purchase cost.

I would suggest that is a reasonable deal.

Because, if it was not a “reasonable deal”, I would not have a queue of alternative tenants wanting to offer me a better deal.

“This is true of the market for a commodity that is continually produced and consumed”

Rental housing is a commodity,

which is continually produced and

continually consumed, by the week.

Every week people consume “housing rentals”, there is also movement in who rents, some new renters, some old renters moving out and into their own property or others dying just like any other "Market", with lots of "buyers and sellers"

There is no difference between housing and wheat or currency exchange or pork-bellies.

“fixed stock of something that can't be produced”

That, in the context of housing, is such an absolute misrepresentation of fact, to the point

It is a LIE.

House stocks are not fixed, there exists a whole industry busy building, renovating and redeveloping houses and land blocks.

Bryan Kavanagh I demand you identify where I suggested I receive “compensation” !

You make no comment to my alternative reasons for your price spikes

I suppose responding to REALITY is tougher than writing fairy-floss?

You “demand” ‘Col Rouge’, eh? Oh, well, I’d better answer then! Just follow the argument, Col. David Jennings asked “And if the prices drop who is going to subsidise Col for his loss?” OK, so you don’t want to be compensated. Excellent! That puts you one up on the banks. (See, Col’s happy, David – he doesn’t want to be subsidized when his land values fall!)

But, you think the cost of money has a lot to do with the spiking of real estate bubbles, do you, Col? Maybe a few individuals make their decisions on that basis, but how cheap were REAL interest rates when inflation’s recently been low. [I think they call that ‘sucker bait’.] And how do you account for the spiking of real estate bubbles both when money’s been cheap and when it’s been dear (as in early ’70s and ’80s?). A decent knowledge of real estate bubbles shows that the cost of money matters little at the macro level; it’s the advantages perverse tax systems give to real estate investment over production in the long haul that will override the cost of money.

As far as world wars affecting my chart of Australia’s land values divided by GDP, Col - of course! Thorstein Veblen-John R Commons' ‘Institutional School’ of economic thought holds, correctly IMO, that world wars are a consequence of a preceding period of speculative economic behavior. It certainly doesn’t arise in a vacuum. At http://thedepression.org.au/?p=1616 I’ve blogged that I foresee WWIII when we’ve again failed to utilise the revenue system to resolve economic depression. War as an ‘alternative’ has long been seen as the ‘only way out’ for the aristocracy and property speculators.
But that’s so much more “fairy floss”, again, isn’t it, Col?