No matter how affable and polite I try to be in comments on his pieces my learned friend insists upon keeping my comments in moderation and then suggesting some evil intent upon my part. So after he suggested that I should address his argument I could not help thinking that the time has come to give his post a dose of the old fiskorama treatment: So without further adieu lets look in detail at what precisely Jeremy is arguing here.
Pretending to care about The Houseless Generation
Yep, that is precisely what our learned friend is trying to do. 😉
Even politicians have noticed that there’s a bit of disquiet about the ongoing transfer of the nation’s wealth from the young to the old, the poor to the rich, that is the “housing market”.
This is a bizarre opening gambit, The young and the poor have no significant part of the nations wealth to transfer to anyone.
But they don’t want to piss off the boomers who’ve spent a decade and a half addicted to the sweet sweet heroin of low-taxed investment properties, paid for by ever greater numbers of struggling young people locked into permanent renter status. But you can’t take baby’s toy away – he’ll scream and scream until he’s sick.
Somebody should explain to our learned friend that Capital Gains Tax is only avoided if the property that is being sold is the owners residence for at least a year. Investment properties do attract the tax. so It would seem that our learned friend would penalize anyone who sells their residence to buy another place to live with a large tax bill. His argument has not changed much over the years that he has been banging on about house prices though he was not complaining when he had a house of his own to sell. In fact he was very keen to get the best possible price for the property in question
So, try to undo the damage – reduce the huge CGT incentives for those with equity in an existing home to use the housing market as an investment tool, the costs of inflated prices being passed on to the generation who can’t possibly hope to beat them at auction? We can’t do that! That would make a lot of greedy boomers – those who can’t see past their own unearned property-based wealth – very angry.
No wonder he is a member of the Green (with envy) party 🙄 Only someone who wants to punish thrift and wise use of personal resources would run this line.
Could there ever be a better example of the politics of envy? Baby boomers like yours truly have a different attitude to financial priorities, we pay or bills first before buying luxuries on tick, many work hard to build up investments for their future. That is not greed, most people that I know who have investment properties are not the greedy capitalists that our learned friend thinks that they are they are just ordinary people who want to make their savings work for them.
So this is what we get instead of real change:
Crackdown to help first-home buyers
THE federal government has admitted its new crackdown on foreign investors is an acknowledgement that Australian first-home buyers are being priced out of the market.
The tightening of foreign investment rules require temporary residents to be screened and get permission from the Foreign Investment Review Board to buy a property, sell their property when they leave Australia and build on vacant land within 24 months or sell.
There have been anecdotal claims of foreign investors – especially wealthy Chinese families – ‘stockpiling’ Australian houses and leaving them idle, and of outbidding young people at auctions.
Easy politics: look like you’re doing something by bashing those who can’t vote. (Although not all that helpful, because the Liberals can for once honestly say “that was our policy in the first place”.)
Here is a clear example of people who are definitely competing with the locals at auction for the houses in question being excluded from the market, which has to be a good thing for the locals who may wish to buy and our learned friend can only whine about it.
But let’s be clear: foreign investment is not the reason why the market has got so out of control. (That’s why they can only mention “anecdotal claims”.) Rather, the other way around: with Australian city house prices inflating well ahead of any other investment, no wonder investors from everywhere have rushed to get a piece of that action. And those prices have been inflating ever since Howard’s late nineties bribes to the building industry to make up for the GST: halving CGT and the first home buyer’s grant.
Markets for housing have never been under control so our learned friend is in error to imply otherwise. The price of real estate is alway determined by one most important equation and that is the relationship between the number of buyers and the number items for sale. Things like taxes and government incentives like the First home buyers Grant are really a very small part of the equation. Our learned friend would have you believe that tax regimes are the be all and end all of the matter.
So, a couple of points:
As long as capital gains tax – tax on income that you don’t actually do anything to earn other than sit on something of value, like a property – is less than income tax, investors will push the prices of houses up beyond what actual new home-buyers can afford. CGT needs to be comparable with income tax, so that ordinary workers are not further subsidising the lucky people with property.
The first home buyer’s grant needs to disappear completely – it only inflates prices beyond its value. It was always a very poor piece of policy that transferred public money away from the young and to those who already owned investment properties;
Increasing land availability won’t solve the problem while investors still flood the market – they’ve still got a disproportionate amount of money to spend, and will;
We do need to encourage the building of new homes, rather than the fighting over existing ones – but this will not solve the problem by itself. Population growth, which has been gradual over the period, did not propel this boom – flooding the market with investors did.
If we don’t somehow burst the bubble, we will have a generation that simply cannot buy a home, unless they’re in the very top tier of earners or they inherit property. We will have an unprecedented divide between the rich and the poor in this country;
Crime rates will rise – owning property is one thing that greatly reduces a person’s propensity to engage in crime. It gives a person something to lose. It gives a person respect for the value of property. It is a massively stabilising effect on a population. Take that away, leave increasing numbers of people in homes they don’t own, over which they have no control, that they can’t upgrade, out of which they could be kicked with three month’s notice, with ever increasing rents, and what do you think will happen?
Homelessness will also rise. The increased rents also mean that, without dramatically increased welfare payments, we’re going to have an ever-growing homeless problem. Centrelink payments simply won’t cover renting anywhere near a city – expect crimes of desperation to get out of hand. Law And Order politicians will respond by locking them up – we’ll have to build more prisons, at great public expense and injustice, and it will become ever more dangerous to walk the streets of our cities.
The inflated property market might make homeowners think they’re wealthier, but it’s not money they can use (except to take out another loan) – in fact, they’re punished with higher rates. The only people who really benefit are those with more than one property, and those inheriting property. And they do so at the expense of everyone else.
The more out of hand the problem gets, the harder it will be to solve: you can’t push prices back without really screwing over those young people who just took out enormous mortgages to buy a small shack in a swamp in remotest Cranbourne – and it’s not like all that pretend money that’s floating around on people’s rate certificates is actually available to them to use. And of course, the financial industry has locked itself in, to great advantage, but if prices were to fall they’d immediately call it a financial crisis and demand that we, the public, bail them out again. It’s going to be a long, slow road fixing this mess. And the first step is raising CGT, so that it’s not less than income tax: the existing system penalises those who work for a living as against those who sit back and just sit on property. It should be the other way around.
Australia’s birth rate will decline, as the Houseless Generation finds itself in increased poverty, unable to find any security in housing and unable to find housing adequate for raising a family. Couples will put off having kids till even later, and will consequently have fewer of them.
Existing home-owners who got themselves on the ladder in time and don’t care about anyone else’s family should consider this: do you want your kids living with you ’till they’re 40? They’re not going to have much choice.
I think this is one of the most critical issues facing Australia today. And none of the major parties have the slightest interest in doing anything about it – they’re too busy pandering to boomers’ fears about SCARY IMMIGRANTS.
My learned friend loves playing the race card, he does it on a regular basis. But what are we to expect from someone who wants to accept all comers and reject none at all who come a knocking in leaky boats. The Australian people are among the most welcoming and generous on the planet but we want to offer our largess on our own terms and not have it demanded. That said I agree that housing the people so that they have security of tenure and a place close to their employment to live is important. There is no reason to make it a case of the “boomers” against everyone else, I know as many of my fellow boomers who have never managed to buy their own homes and they never will I fully support the building of public housing in our cities.
The Liberals under Howard gave us the problem in the first place – and the ALP is too gutless to actually tackle it in any meaningful way.
How in all fairness can my learned friend make this claim? It is the state governments who control public housing and it is municipal councils who control building approvals. Oh thats right he just had to invoke the Ghost of the Howard government to play to his gallery of latte sippers.
My fear is that by the time the Houseless Generation becomes a powerful enough voting force to be listened to, it will have absorbed the status quo as The Way It Is, and be so resentful that it will resist giving the next generation any easier a time than it had. And we’ll be stuck with this fundamentally broken model, and poisoned society, forever.
I will concede that as long as demand exceeds supply in our cities we will face an ever increasing afford-ability problem when it comes to housing but where I disagree with him is his insistence that the tax regime is the most important element of the problem and I disagree with his contention that the mum and dad investors who have a rental house or two are all some sort of evil slumlords who deserve to be the recipients of government action to punish them for investing in houses with their hard earned money.
It’s a crisis, no doubt about it.
Housing afford-ability may certainly be an ongoing problem But a crisis?
Hmm I don’t think so
Minions of the left are most fond of declaring all sorts of things to be one sort of crisis or another but their constant over use of the term succeeds in doing only one thing and that is to devalue the word. The housing market is tough for all new entrants but then it always has been and mucking around with things like the tax regimes or removing grants for first home buyers will not make that much difference while the population in the big three cities of Australia keep growing as fast as they have been over the last few decades.
I do really wish that housing was more affordable for new entrants to the market in the big three cities of this country But whining about it won’t make a difference any more than pretending that a paltry seven grand available only once in your life time will either.