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Blog: bubblepedia blog
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Created by dan
 on Thu 01 of May, 2008 [09:47 UTC]Last modified Tue 30 of Mar, 2010 [12:53 UTC] (39 posts | 16518 visits | Activity=2.00) The single tax movemement / Georgism / earthsharing / geoism
I'm a Georgist.
There, I've said it. I was going to just leave it at that, but I'll give you a bit more: There is a movement over 100 years old that goes by a few names: The single tax movement/ Georgism  / earthsharing / geoism.I sent my 30 dollars off to Prosper Australia today, so I will be a card carrying “geoist” soon. Why today? I don't know. I have been increasingly dismayed by government spruiking and bubble blowing. I was also very disappointed in the response to Prosper's petition which you can find on the site. I hate the name Georgism and it has to go. I'll think of a better name for myself later, unless someone else comes up with one, although when it comes down to it, I think the best name might be "capitalist". (in the sense that I think private industry, labour (work) and production are good things to be encouraged. Not in the sense that I am a good guy on a team against some bad guys called communists). Maybe we should be geocapitalists. I don't know. I started bubblepedia knowing there was a nuttiness about and wanting to display it, and allow the few sane people to meet and discuss and document it. Since then I have seen that there are things that we as a society could at least try to make our lives economically more stable and to take the tax burden and disincentives off wealth creation, and onto wealth destruction, overuse and hoarding. Here it is in a nutshell: Pay for what you take, not for what you make. Some things are better done together rather than alone - schools, roads, hospitals, so taxation in some form is good. There are a few different things we can tax though.
Now, a few things like land and coal and radio spectrum cannot be increased by any amount of work or cleverness. Hours worked, the quality of work (through education) and factories and shops and crops and livestock and computer programs and trucks and buildings (labour and capital) can be increased to the benefit of us all, while land and minerals cannot. What would it look like if we threw out the whole tax system except for a few taxes on smoking and other naughtiness, and replaced it with a tax on unimproved land and resource values, aiming to recover for the people a large proportion of the rents these things could achieve? Well, for a start land prices would be low and stay low. Low prices – that would be good. Like clothes and food: low – good, high – bad. But there is far more that would flow on from there. Like efficient use of finite resources, allowing more rapid growth of expandable parts of the economy. Like less urban sprawl. Like not choking production and capital and the housing of people by making land available to them without having to pay off a speculator first. Like having an incentive to build (no tax on the building, only the land), and land to put the buildings on (nobody hanging on to unused or partially used land). Imagine a world in which there were another ten percent of clever professionals to learn to do useful stuff. I pay about $3000 per year to clever people to keep as much of my income as possible in my hands. Imagine if I could invest that in something productive that might even employ the same people to make stuff we could use at a profit. The amazing thing I find is that if you talk this over with people one on one, they very often agree with you. Even when their only financial plan consists of one bet for ten times their net worth that it will never happen, they can see that we would all be better off. There is the occasional person who thinks it would be unfair to make it harder for their aged parent who can barely make ends meet but lives in a two million dollar house so they could never afford the land tax. I'm over worrying about that. Why are they barely making ends meet in a two million dollar house? What's the plan? Does it involve barely using something there is supposed to be a great shortage of in the hope it's price gets even sillier? Are their kids and grandkids having any trouble finding a place to live? For a long time I have thought that those of us with independent minds would have to wait until the end of the bubble, possibly right down into a negative bubble before enough people would start to look for ways to stop this madness from happening again. I had the idea that we needed to keep thinking about how to implement sensible stable policies so that we could implement them when the bubble blowers have completely given up a decade or two from now, and our grandkids could enjoy the stability and prosperity. But today it looks like governments are going to mulch the kids to put down the parents' feeding tubes. We have a government actively trying to make houses more expensive with billions of dollars worth of house price boost grants and far more billions wasted on continuing the mortgage backed security bubble loan market. There is not even a pretence that the opposition would have done otherwise. No special government loan book to keep productive industry alive for us, no no. We have high prices to defend. Does anybody seriously believe they will just capitulate and let prices fall without bankrupting us first? It's always less than three years to an election. As I look at the news blogs, and talk to young people I sense a far more palpable anger out there now than at any other time. Maybe it's time for people to start thinking hard about the efficiency of our tax system and whether it causes or at least does not prevent some of the ludicrous shortages we have generated. What do you reckon?
Got a letter
Clancy Yates of the SMH wrote to me;
I'm writing a story about mansions around Sydney that have been empty for a long time, despite the housing shortage. Looking to find a few strong case studies to use as example. I' be interested in talking to you today for the story, and I understand you've spoken to Sunanda Creagh in the past. Is there a number I could reach you on? I guess this is the sort of thing I had hoped the maps in bubblepedia would help with. The number don't convince anybody, so maybe looking at empty houses will. Ah well. Here's my reply; Hi Clancy Yes, it's a mystery isn't it. The census says we have been increasing the dwelling population rate at 141% of the rate of increase of the human population. We have been increasing the number of empty dwellings at 270% of the rate of increase of the population. Yet we believe there is a shortage of dwellings. There are telling quotes and the census stats from the USA and here in this page:http://bubblepedia.net.au/tiki-index.php?page=HousingShortage The easiest empty houses to find are the permanently empty ones in the web ads with delusional prices on them. For example I have personal experience with this particular house price gambler; http://www.domain.com.au/Public/PropertyDetails.aspx?adid=6204721 Since buying this house in 2007 for $2 250 000 (http://www.onthehouse.com.au/buy/property/30034295/) the owner has; 1. tried to sell it a number of times including auctioning it without renting it out. 2. rented it out for $1100pw for seven months to someone who left in disgust at his inability to maintain the house 3. agreed to rent it to me for 1100 per week (before I knew about his attitude to maintenance), 4. bailed out with ten days notice because he had financial problems and had to sell it at auction (again) within four weeks (leaving us homeless for a couple of weeks while we found another house to move into having given notice at our last one) 5. Auctioned it and not sold it 6. had it for sale empty for months for $1 950 000 - 300k less than he paid for it. 7. Put it up for rent for $1 200 per week. 8. slowly dropped the asking rent to $1 050 per week now. There are many examples like this near me that I have not followed as closely as the one I nearly moved into. In a couple of minutes I can see it's easy to find a number that I know have been "to let" for almost a year; http://www.domain.com.au/Public/PropertyDetails.aspx?adid=6183543 http://www.domain.com.au/Public/PropertyDetails.aspx?adid=6260663 http://www.domain.com.au/Public/PropertyDetails.aspx?adid=6136399 I'm even currently living in a house that was like this for so long that the entire neighbourhood has become used to using it's yard as a park. Clancy the apparent shortage of real estate in this country is caused by the same thing as the apparent shortage of real estate in the US and UK and Ireland and Canada and Spain and everywhere else this crazy house price gambling mania has touched. Houses tend to be taken out of the pool of houses available for use as dwellings when they serve a dual purpose as gambling chips in a casino as well. There is an infinite demand for gambling chips when "everybody knows" they rise in "value" at ten percent or more per annum. Once the mania is over, they can be used as houses again. Think of it. You can get $1000 per week for that house. So after maintenance and rates you can get about $700 per week. So at an investment yield of 5-10% the house is worth from $350 000 to $700 000. But this guy would rather keep it empty than sell it for 2.5 to 5 times what it is worth just because he paid even more than that. That's the madness that creates an apparent shortage. Life is more complex than to just say look there's a shortage because prices are high. The trouble is that people buy, or hold, or tend not to sell assets that they think will rise in price. The shortage will not be fixed until prices have fallen to sensible levels. Then nobody will want an extra house or even their own house because they might loose money. Then there will be a housing excess despite years of building far slower than population growth. I'm sorry I don't have a huge list of empty houses to give you. There are a few in the maps on my website, but I think the members of the site feel basically hopeless in the face of a government and RBA that are trying to keep the bubble going forever. (and media - a 3.7% rise in prices in one quarter does not mean phew, we've dodged it, off we go again, back to the mad belief that house prices will rise 15%pa for ever without 15% pa inflation). all the best Dan Anyway, give him a ring at fairfax with examples of crazy empties if you like.
Update: Home Price Ratios
House prices have fallen 6.7% nationwide according to the latest ABS figures. I was wondering how the price ratios (per this thread) had changed. So here's an update:
 It's an improvement, but still well above trend. I expect this reversion to mean to continue over the years ahead. The really interesting bit comes next. Employment (as opposed to unemployment) only started to rise at the beginning of this year. If total incomes decline faster than home prices, the ratio will rise even if nominal prices are falling. Havok. Another helpful tidbit stems from a discussion--okay, an argument--I was having elsewhere. Sick of constantly being forced to provide the data and then the analysis to prove each of my opponent's points wrong*, I provided only the data. The discussion concerned the extent to which two-income households have replaced single-income households (obviously related to the affordability of the home price bubble). Here's my interpretation/summary of the data:  Hmm, now that I think about it, there is no good reason for my excluding single-parent families. I'll try to fix that some time.
reference for a landlord
23 Waring Avenue Caringbah is a lovely house. And I'm happy to provide a reference for it's panicking house price gambler.
 It's got a deep waterfront with a jetty down a path through some bush. The house has striking dark wooden floors an open fireplace and balconies galore. The front's a bit too taken up with bit of driveway which can be forgiven because the rest is so good. If a little birdy had since told me that his last tenant moved out because he refused to fix the flooding problem in the garage, well, I couldn't be absolutely certain that was true... What I can be certain of is that a few months ago he agreed to rent the house to me, claiming to be a long term investor, I went through the whole rigmarole of finding a truck that could do the move etc etc, and with a little over a week to spare he backed out. According to the agent he had to sell it within four weeks, he was in financial trouble and he was auctioning it. It meant we had a week to find a place which we managed, but we still ended up having to stay with relatives for a few weeks while this place became available. I found the dishonesty outrageous and the inconvenience more than annoying. Of course he did auction it, passed it in, and now has it for sale for 1 195 000 .*And of course for rent , for 1 200** per week, somewhat more than he agreed to rent it to us for.Well, if anybody out there is thinking of renting it, may I suggest inspecting the garage on a rainy day and not leaving any kind of a deposit until you have a signed lease. you may want to put a no open inspections clause in the lease. To head off the bi-annual auction experience too.
In the unlikely event he manages to sell it for the asking price, his capital loss would be 300 000 or 13% in 27 months. Added to his transaction costs and holding costs - only stamp duty, money rent averaging 7 or 8 percent, and rates (no money wasted on maintenance here) - and minus the 30 odd thousand he did collect in the seven months he bothered to rent it out, his loss is about 600k, 25%, or 5k per week. Ouch.Of course if he was a debt funded house price gambler, his percentage losses would be greatly magnified. For example, if he had only 600k to start with... I wonder if he earns money as fast as he is burning it providing such a good service to the well to do Hobbits of the Sutherland shire?
There are dozens of houses like this one to let, and many of them have been to let for many months. Surely he's joking asking a higher rent in this economic climate? Is the rental ad just so that he can sleep while claiming his interest expenses against his tax while he is waiting for the equity fairy to reawaken and make his house price always go up again?
Funny RE agent ad
The countess left the RE section open for me at this ad. After I berated her for even thinking about it when we can finally see the return to sanity far off in the distance, she showed me the ad:
Yeah mate, or maybe the prices have just tanked.
another jaded letter
I sent this off today in response to the article about the RBA reassuring everyone there is a shortage of housing. I'm feeling a bit like marvin the paranoid android though - it's all so depressing
How reassuring to read that the RBA believes "Australia's tight housing supply has helped the country avoid the worst effects of the global financial crisis". (Tight supply props up house prices Chris Zappone) With developers going broke unable to sell their stock, homes unable to be sold, desperate increases to home buyer grants to try to prop up prices, and empty house populations increasing at three times the rate of human populations, it is not easy to see why they accept the diagnosis of a committee of builders and their bankers that we need even more houses. What are these "worst effects" anyway? Sensibly priced houses? Should the unthinkable happen and house prices come to reflect their value as living environments rather than gambling chips that always go up, the solution is obvious. We must announce a Food and Clothing Supply Council, made up of major suppliers of food and clothing, and support their story of food and clothing shortages so people can get on with borrowing to gamble on food and clothing prices. Then we can get on with the main game of importing fancy cars and minding each other's children that we call economic growth.
Labor's Maxine Mckew can tell there is no bubble and it is the best buying in a
Just when you though this country could not have got it's head further up it's own backside the great Maxine McKew? appears on the ABC show Q and A.
Now, until I saw this I had a bit of a soft spot for Maxine. She's the former ABC journalist who unseated the sitting prime minister John Howard at the last election putting icing on the cake of his well deserved humiliation. In her own words she is doing her political apprenticeship. She appears to have taken to it like a house price gambler to burning money. MAXINE MCKEW: OK. No, Housing Minister Tony Plibersek has been clear about that, that it does have the used by date of June 30. That is very clear, and it's designed so that, in fact, the stimulus is there for people to bring forward a purchase. And as John said, it's been spectacularly successful in bringing those first home buyers into the market at very low interest rates and the most affordable housing in a long time. And I was talking to McGraths? in my area, in the north-west, and they're saying now you've got first home buyers being able to get a unit for about $350,000, to $380,000 in an area, say, like around Epping - a bit higher $500,000 to $600,000, and houses are going even before the auction date. So there's good sales there. But certainly Tanya has been clear that all things will be considered in housing, but at the moment, there is most certainly that used by date of June 30. So get in there. Are these jokers serious. We have here a parliamentary secretary and a dodgy lender discussing how great it is that prices are at least being kept high for a while in the bottom end of the housing market, and how wonderful it is that the government is able to "help" first home buyers to buy just before they take away the grant and let it all fall down. Maxine has a share of an investment property. I'll be watch with interest to see when she sells it, although she may not - she may just share the delusion along with the rest of them. Oh dear. You can watch the full show here . The nonsense starts at about 25 min.Bubble john Symond definitely deserves the last word on this one though:
130% tax deductions as government loses the plot entirely.
Now, as the stimulus package mkII filters through our collective consciousness we find out how mad the world has really gone.
Businesses can claim an immediate 30% deduction on the purchase price of any capital item bought before 30th of June. So over the life of the capital item, they can claim a 130% deduction. Doctor's sports cars are capital items though. In the first year you can claim 48.5% but only if you buy this financial year. Amazing! It's like they are planning to destroy the demand for cars next year. Now I have quite a nice two year old car that I drive around between work places. Stupidly, I do a lot of kms. So it turns out if I change it for a newer faster more expensive imported car ... it'll cost me less. AAARGHHHH. How the hell does getting idiots like me to import an expensive car sooner help us? There is a 40 thousand dollar imported capital item I have been thinking of buying for a while though. It would only pay for itself, and not really earn me anything. It would just make the quality of my work a bit better without earning or costing me much. I hate the way this deduction with a deadline adds a bit of urgency to the descision. I don't like feeling manipulated and I think I am as likely to react by not buying it at all if I go past the deadline before I decide.
How to protest? Buy a safe and fill it if there is one more bailout attempt?
 Patrick's been asking how to protest . There is a growing sense of outrage in the US at the bailouts - bailouts for gamblers in suits, bailouts for gamblers with mortgages.Why should the prudent savers who rent have to pay to keep prices high? Yet as you can see from patrick's blog, there are few useful suggestions. Whinge on a blog (like me)? Write to a politician? Hmm. Are you going to write to the ones with multiple houses or without? Their bailouts have been only the same size as ours in proportion to their population. Where is the outrage in Australia? Why am I earning far below a true market interest rate on my savings just to protect the 20% who borrowed more than they could afford to repay to pay more than a house was worth? What's with the free money for nearly everyone? What's with me through my government paying increased first home owner's grants and supplying credit to dead developers to keep house prices high so that I cannot buy a house for a rational price? Politicians have spectacularly failed to lead, preferring to be led by a mainstream brand of economics which is basically a form of cargo cult science. It has the trappings of scientific academia with professors and degrees and academic papers, but few or no useful falsifiable hypotheses come out of it and its predictions and designations of what is good and what is bad are as heavily relied upon as they are consistently wrong. What can those of us able to think for ourselves do? Seriously, interest rates are so low now that you are effectively earning your return from the inevitable price deflation of the assets you are not buying. Sooo.... who needs to keep their money in the bank? The couple of percent interest you stand to gain before tax might be well worth giving up in protest if you consider the effect of many people doing the same on the banks' ability to continue to lend money to house price gamblers. My money belongs to me, and I can do whatever I like with it. Two percent simply does not compensate me for two things. Firstly, I'm providing the very finance that allows the bank to make the ongoing loans for bubble priced houses. And secondly, there remains risk in banking even with the government guarantee. I'm sure if our banks collapse when the inevitable implosion comes the government will allow me to continue receiving statements saying that they owe me money. What I am not sure about is that they will let me actually take the money out and use it. Maybe choosing to make your savings vehicle cash in a safe, or tax intentionally overpaid or prepaid, anything but cash in the bank is the best protest. Is this a call for economic vandalism? Absolutely not. I just can't think of any other effective way to protest against the economic vandalism that is my government spending my taxes and my children's taxes trying to prop up the biggest house price bubble in our history.
In this day and age, are there any winners in Housing?
When this pricing madness ends, will there be any winners?
Ms.Dose-Hyphen and I took in a local auction this afternoon. I was curious on this one; it was a nice-neighbourhood but old knockdown advertised in the detonate or renovate opportunity we are all familiar with. I was curious to take in this auction because I wanted to see if anyone would be interested in this type of property. Because of its condition it would / should get some younger couples interested, if only because of the relative low costs of a house needing that much work in a “nice” suburb. It would also have a few builders, I assumed. There were lots of people in attendance. Mostly older folks. Probably neighbours. The auctioneer went into the standard prattle about good primary schools and parks and I’m thinking “that would have been nice for most of these interested parties….25 years ago.”, but there were a few couples with young kids. Hope for them, perhaps. The auction started awkwardly, as they do these days, but eventually there was one younger couple bidding against a builder. $570, 590, 610, 615, 616, 620, 621, 630…and that was it for the young couple. It looked to be over at $630 but suddenly another builder got involved. This gent had zoomed in just before the auction, overdressed with success in that tragic way some men manage so easily. So there we were, watching one builder outbid another builder. They got to $660 and that was that. Congratulations, eye-rolling and clapping all at once. As we were walking away it struck me that these two men outbid the younger family for the right to knock down the house and build a million-dollar house in its place. It also struck me that government was working very hard to maintain this situation, putting a floor under house prices with grants, preferential tax treatments and all the related fiscal flotsam, but the people who needed schools and parks would in no way be able to enjoy this particular street. The only winners today seemed to be the spec builders. Of course there will be benefits to the builder’s labourers, in that they get a wage. That’s not my point. When builders arrive to knock-down auctions in Audi Q7’s and BMW 5’s it is easy to be jealous, or mad, or both. I wonder what goes through their minds when they outbid the very same people they will need to sell their houses to? I wonder how much the current effort to save house prices from dropping encourages their bidding mentality. I wonder if they know anything beyond building…what is going on in other markets or the relationship between credit and price? Are these two builders pawns, perpetrators, or victims? Will the house they build on that lot be sold to a retired couple for healthy profit, will it be rented for a healthy loss, or is the builder at an initial stage of giving generously to the young low-debt couple who’ll next buy it from them at a distressed price? In this day and age, are there any winners in housing?
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on Thu 09 of Jul, 2009 [22:52 UTC]
on Sat 14 of Feb, 2009 [12:42 UTC]