Login

user: pass: Remember me [ register | I forgot my password ]

Signup Passcode

itsnotdifferenthere

Search

in:
Entire Site Wiki Pages Directory Image Gals Images Files Articles Forums Blogs Blog Posts FAQs

Online users

40 online users

altakoi 

Last Images

Forum: Australian Bubble Forum

Forums->Australian Bubble Forum->Government's next move

NM	Government's next move
	I suspect that the action of the property market is turning into a significant political headwind for Rudd, and that this will become more apparent as the next election looms. Our own Government’s abject failure to secure affordable housing for average citizens in the face of high immigration and lofty “Big Australia” visions cannot be excused. The unfolding social disaster of plummeting housing affordability is now obvious to all and something will have to give. If I was in Mr Rudd’s shoes I would make Affordable Housing a major focus for the coming election. Government holds the key through planning and land release, and a Labor Government should in theory have the political alignment and support for decisive intervention should this be demanded by the voter base. This has happened before in other countries and I see no reason for why it couldn’t happen here and now, given enough political support. By way of example I submit Sweden’s “Million Programme” of the 60s and 70s, where the nation was faced with a catastrophic shortage of housing as the colossal Boomer generation entered adulthood: http://tinyurl.com/yc4ramn The result was aesthetically questionable but a social disaster was averted the nation was set up for decades of growth and prosperity. The Australian version may involve large-scale construction of medium density housing around suitable commuter hubs, with Government acting as Developer and properties auctioned to private owners on completion. I expect that a national program for housing development would be overwhelmingly well received, with few credible arguments against it (other than from large property developers, aka “Land Bankers”). FHBG-type interventions have proven beyond doubt to be counter-productive and are unlikely to be repeated - the only remaining option (as far as the public can see, correctly or not) is to increase supply. A large-scale residential housing program would not only moderate property prices but also boost employment in Labor’s core constituency and lay a credible foundation for Big Australia, future skilled immigration programs etc. Carefully conceived and correctly pitched, I think this could be an election clincher for Rudd, particularly if (as many of us suspect) the world economy enter a second phase of softening in the coming year. Take it apart folks.
	on: Sun 07 of Mar, 2010 [00:04 UTC] reads: 3112

Posted messages Messages 10 20 30 All Style Plain Threaded Headers Only Sort Newest first Oldest first Find author message zaph  Re: Government's next move on: Sun 07 of Mar, 2010 [00:34 UTC] > I suspect that the action of the property market is turning into a significant political headwind for Rudd, and that this will become more apparent as the next election looms. Our own Government’s abject failure to secure affordable housing for average citizens in the face of high immigration and lofty “Big Australia” visions cannot be excused. The unfolding social disaster of plummeting housing affordability is now obvious to all and something will have to give. > > If I was in Mr Rudd’s shoes I would make Affordable Housing a major focus for the coming election. Government holds the key through planning and land release, and a Labor Government should in theory have the political alignment and support for decisive intervention should this be demanded by the voter base. This has happened before in other countries and I see no reason for why it couldn’t happen here and now, given enough political support. By way of example I submit Sweden’s “Million Programme” of the 60s and 70s, where the nation was faced with a catastrophic shortage of housing as the colossal Boomer generation entered adulthood: > > http://tinyurl.com/yc4ramn > > The result was aesthetically questionable but a social disaster was averted the nation was set up for decades of growth and prosperity. The Australian version may involve large-scale construction of medium density housing around suitable commuter hubs, with Government acting as Developer and properties auctioned to private owners on completion. > > I expect that a national program for housing development would be overwhelmingly well received, with few credible arguments against it (other than from large property developers, aka “Land Bankers”). FHBG-type interventions have proven beyond doubt to be counter-productive and are unlikely to be repeated - the only remaining option (as far as the public can see, correctly or not) is to increase supply. A large-scale residential housing program would not only moderate property prices but also boost employment in Labor’s core constituency and lay a credible foundation for Big Australia, future skilled immigration programs etc. Carefully conceived and correctly pitched, I think this could be an election clincher for Rudd, particularly if (as many of us suspect) the world economy enter a second phase of softening in the coming year. > > Take it apart folks. > smells like public housing - and you know how most people hate public housing anywhere near them. it's going to sound cynical but most people who own don't want affordable housing. all they're interested in is that there are more zeros on the end of a valuation of their house. affordable housing is not a vote winner author message pennypacker  Re: Government's next move on: Sun 07 of Mar, 2010 [02:01 UTC] NM your idea is what they should do.. but even if it was not treated as public housing, I agree with zaph's conclusions. We should be asking ourselves, 'what will be the governments next move to maintain unafforability?' - Foreign ownership: allow offshore investors to buy any property they want, not just new builds (It would work but would be unpopular with the electorate) - Superannuation: a scheme to allow super investment into properties without SMSF - Grants: fairly certain that there will not be any more grants, but you never know - Loan holidays: a temporary measure, already in place to some degree but could be ramped-up. Allows a crash to be deferred until after the election. - Shared equity: challenging because it might be difficult to find banks willing to take the risk. - Loans: encourage borrowers to go IO for a few years? Allow borrowers to switch to 50 year loans? As you can see there is no shortage of ridiculous ideas that the government can use when things start to go pear-shaped again. This list is just the tip of the iceberg. author message aardvark  Re: Government's next move on: Sun 07 of Mar, 2010 [11:12 UTC] "If I was in Mr Rudd’s shoes I would make Affordable Housing a major focus for the coming election." Good thoughts NM, but I think zaph and pennypacker got it right. Goggled 'PM housing affordability' and found out that govt cannot be accused of being clueless (excerpts below). 1. They still believe homes are ‘affordable’ as they will act to ensure it “remains affordable into the future”; 2. “the Henry Tax Review is examining tax issues as they relate to housing”, even though govt is actually now withholding findings of the Review; 3. “capital city strategic plans by 2012 that meet national criteria for . . housing . . ” "Treasurers to tackle housing supply and affordability Brisbane 7 December 2009 The COAG today tasked Treasurers with accelerating and expanding on work underway through COAG, making housing a priority for microeconomic reform for 2010. Every jurisdiction recognised that addressing housing supply is central to the challenge of ensuring housing remains affordable (1) into the future. The policy development process will build on a number of measures already in train aimed at increasing the housing supply: • blah, blah . . • blah ; and • the Henry Tax Review is examining tax issues as they relate to housing (2) Blah, blah, blah . ." http://www.pm.gov.au/node/6375 Labor could not care less about affordability until 2012 when a plan titled 'Never Never Plan on Maintaining Housing Unaffordability' will be released : "Capital city strategic planning systems Brisbane 7 December 2009 State and Territories will have capital city strategic plans by 2012 that meet national criteria for transport, housing, urban development and sustainability. (3)" http://www.pm.gov.au/node/6374 Labor does not care about housing affordability, pretence of care yes, actual care, I doubt it. author message aardvark  Re: Government's next move on: Sun 07 of Mar, 2010 [11:46 UTC] As a irrelevant footnote to previous post - Out of curiosity, checked the link given by NM and wondered what was cost of apartments in the Swedish experimental suburb of Hammarkullen. http://en.wikipedia.org/wiki/Million_programme. Found none there, however, found a Swedish RE site (spent one minute there) and seems Sweden has some reasonably cheap property. Check this out: http://www.viviun.com/AD-144055/ It even comes with a ‘big dog pen’. I could buy the villa tomorrow with little debt. If at some time in the future decided to remind myself of Ponziville, Australia, I could simply buy a $250,000 ‘big dog’. That way I end up in an equivalent debt situation to what is expected here. author message dan  Re: Government's next move on: Sun 07 of Mar, 2010 [11:55 UTC] Interesting thoughts. Roll an ongoing bubble forward in your mind another ten or fifteen years, and imagine prices rising five or ten percent above inflation for another ten years, and all the attitudinal stuff that goes with that. — Oh you fourteen year olds are idiots you should have got in thirty years ago like me — etc. So then we are talking about the average house price in Sydney being one to 2.5 million dollars with the average wage being still 65k or so (in today's dollars - I don't care how many dollars something costs, I care how many loaves of bread, chocolate frogs and movie tickets it costs.). It's pretty clear to me that by then people will fall far more starkly into the three camps that are already arising. The first and smallest is the 5% who are like me. I just couldn't care less any more. We drove by a house we vaguely considered renting today, then saw a few nearby that we could buy reasonably easily. We also saw another long term empty that we quite like. We know prices might rise or fall in the near term. We also know that we need accommodation in changing quantities for the next thirty or forty years and that not moving house very often in that time would be nice, and not having to get past a pimply thin tie wearing high school dropout just to call a perfectly sensible electrician would be good. But not a million dollars good. You can buy a nice new merc for a tenth of that. We are happy just to watch the show, and live a happy nice life. I have great work, help my children with homework, go for bushwalks and sails and am setting up a business. No millstone required thanks. The largest, but rapidly shrinking group is the group who were really clever and bought their first home between 1920 and 1997. These people so very cleverly chose their time of birth and through sheer genius did exactly what everybody else was doing at the time and have made it big. Many of them know they are going to continue to make it big in exponentially increasing amounts forever. The third, middle sized group are rapidly growing and did not choose their birthdate as well as the second group, but still know they need to get in and are not proper human beings without owning part of the surface of the sphere. This group three are the group to watch. Group two had better hope they they slowly join the ranks of the 'can't be bothered' well off like me. If they don't, then every year there will be another quarter of a million people stupid enough to have been born only 20 years ago and another quarter of a million stupid enough to have been born 30 years ago ...etc. All of whom have not become proper human beings by owning a patch of dirt. How long do the second group think the unsustainable can go on? Lets pretend thirty years. This implies that everyone who is thirty today will have made sixty and house prices will be 2.5 to ten million dollars in today's money with rents and salaries the same. The majority of them will still not own houses. Sure a few will be brain surgeons or successful Ponzi scheme operators and will have bought themselves studio apartments in Maquarie Fields. Are the majority really going to be spending every weekend tramping around to open granny flats and looking at million dollar lean-tos in Wilcannia, dreaming of using the 250000 first home owner's grant and commuting only seven hours each way to their job cleaning empty houses for eighty-year-olds in Sydney? Sorry guys, there are two options. They all either just laugh at group two and let them sell the houses back and forth among themselves paying stamp duty to pay for our schools and hospitals like me, eventually getting sick of broke landlords who can't maintain a house and start doing political things about shoring up the tenancy rules. Or, far worse for group two, they still believe their eighty year old parents that houses are wealth and they are worthless good for nothing ipod loving bludgers until they own several no yield gambling chips and start to use their growing numbers to influence politics. If it goes on for thirty more years group two will be far and away the majority, and they will be a force to be reckoned with. Perhaps a few questions will occur to them. Like, why should house owners not have their (by then) enormous wealth calculated in taxation and welfare decisions? If they don't fix that one and bring prices down gently, their subsequent questions will be be very ugly indeed. I think we are already near the sticky end of many of these questions. I charge eighty year olds less than two year olds, as is conventional in our society. Why? Many eighty year olds own houses worth ten times the average wage, more than the parents of two year olds (who also pay them their pensions) can hope to save in their lifetimes. Maybe I will stop. I certainly would preferentially go to a cinema that charged 'seniors' (who include my 500k per annum and no tax thanks to super rules that are now gone father) the same amount as me. Would an independent politician running as a one issue candidate - the I will do anything to get house prices down party - get a foot in? Maybe not today. Maybe never if the economy improves despite the recent government action against our interests, but if the bubble goes on another fifteen years, I guarantee there will be politicians running on those lines. People like me could retire into parliament when they can't be bothered working any more, and try to break the mold and do something good for the nation. author message pennypacker  Re: Government's next move on: Sun 07 of Mar, 2010 [12:20 UTC] That is a f***ing kick-arse post author message squirrell  Re: Government's next move on: Sun 07 of Mar, 2010 [22:50 UTC] Dan, great post. Disagree with one thing. i do think a one issue "I will do anythign to bring house prices down" politician would gather enough votes to have some voice in our politicial system. Lets face it, its the number one issue for the majority of sub 35s, and there are plenty of boomers who are concerned about their kids ... they are not all bad, albeit very lucky even i they dont acknowledge that. author message homes4aussies  Re: Government's next move on: Mon 08 of Mar, 2010 [04:14 UTC] Dan Watched the movie "Cool Runnings" the other night and one line caught my attention - "if you are not enough without one, you will never be enough with one" Maybe we should get some t-shirts printed with that on the front. And then on the back a picture of a house and the words "going cheap - rent this for half the cost of buying it!) author message homes4aussies  Re: Government's next move on: Mon 08 of Mar, 2010 [04:24 UTC] BTW, your comments re: politics are spot on. There is absolutely a tipping point here - the longer this bubble is perpetuated, the more people affected by it will enter the stage in their lives when they are prepared to become politically active. I noticed the other day that Andrew Bartlet is running as a Green for the seat of Brisbane. No doubt the seat has the high renter household population characteristics in common with the seat just the other side of the river - the PM's seat of Griffith! Andrew Bartlet has been a strong voice on housing and there is a fair chance he will make it a corner stone of his campaign - perhaps they thought of running him in Griffith, but wanted to maximise his chances of getting into parliament. Will be interesting to see whether the Greens put forward a good candidate against Rudd, or whether his coalition opposition candidate will try to run on the coat tails of any housing related campaigning by Bartlet (likely if they see him gaining traction on it). Getting interesting anyway - BTW, I probably would vote for Bartlet if I was in that electorate (though I would ensure that my preference did not go to Labor - unless of course Rudd starts to get fair dinkum about housing between now and the election.) author message squirrell  Re: Government's next move on: Mon 08 of Mar, 2010 [06:06 UTC] the other thing that will have a tipping point component is the economic impact of high debt v high assets. When a bubble occurs you have 2 groups in the housing market: - those who bought pre bubble and are enjoying the price rises withut having to finance it - those who bought most recently and send more money to the bank each week (which is increasingly going overseas due to lower savers v debtors ratio). If the bubble has only been going a few years, then MOST people are the beneficiaries from the additional debt/hard work/longer working hours of the few.When this is the case, the "net wealth" of our households look good because a few have taken on large debt, but EVERYONE sees their assets grow. Likewise our current accoutn deficit is not so bad as the debt borrowed from overseas has only been borrowed by a few. And the lessened expenditure from the recent buyers is outweighed by the increasingly rich boomers. But what happens when the bubble has been going for 10, 20, 30 years. Even if prices only stagnate relative to inflation, it is easy to see that those who take on high debt to buy a house will become the majority of homeowners. We would start to see a reversal of "net wealth" even without a price correction for the simple reason that MOST homeowners now have high debt relative to their parents. We would see a similar deterioration in current account deficit (lets face it, this will get even worse, the more debt people take implies there is less and less Aus based savings to tap into). Likewise the wealth effect of rising prices would no longer apply because it is restricted by high debt levels. So even if we dont see a price correction, surely the weight of less and less consumption by more and more in debted households in a low asset inflation environment (assuming household debt levels are finite) is going to be a bigger and bigger millstone around the neck of the economy. This may seem pretty obvious, but if we nealry hit the wall 2 years ago when maybe only 20% of mortgagees had obscene levels of debt, what will it be ike in 5 years if 50% have this debt, 10 years 65% etc etc etc. This in my opinion is the greatest calamity facing the economy. author message pennypacker  Re: Government's next move on: Mon 08 of Mar, 2010 [08:41 UTC] Squirrel I had a similar thought some time back. This is why the longer a bubble drags on, the worse it gets, even if prices are not growing but just treading water - because it is only possible to buy at today's inflated price (obviously). author message jh  Re: Government's next move on: Mon 08 of Mar, 2010 [22:36 UTC] Paid maternity leave? author message hamish  Re: Government's next move on: Tue 09 of Mar, 2010 [13:40 UTC] I agree with what sqirrell is saying, high and rising house prices are, and will slowly smother the rest of the economy, as more and more after tax income gets swallowed up by mortgage payments, as more and more people join the the bubble. I think Sydney could be experiencing that now, it's had very high prices for a decade now, so there are an awfull lot of households carrying big mortgages, and it's also been noted that NSW has become something of a laggard on the nations economic performance. The equity fairy could be all tapped out in Sydney. author message homes4aussies  Re: Government's next move on: Wed 10 of Mar, 2010 [03:19 UTC] Great thread, and I neglected to compliment NM earlier for kicking it off with a great post. In a way this follows on from Squirrell's post (with which I agree.) Was just reading an article about this Mortgage Choice First Homebuyers Survey which is getting a bit of airplay at the moment because they are saying that 32% of respondents would give up on buying a home if interest rates rose another 50 basis points. I'll sidestep the obvious point that if 0.5% is enough to put them off, then they can not afford to buy in any case - just like the 75% of boosters who had a deposit of 20% or less. But the part that caught my attention was that 72% of respondents cited "setting themselves up financially for the future" as their motivation for buying in the next 2 years! This is where the RBA's bubble supporting spin of the last few years is blown away - their main argument for high house prices is that it is a discressionary spend - people are choosing to spend more on housing and less on other discressionary spending. But here is yet more evidence - if it were needed - that most people are buying houses not because they know that they are throwing money away, but the opposite, that they think they will make a mozza from it (and the delayed gratification will supposedly lead to higher levels of discressionary spending in the future, on the BMW, the round the world cruises, etc, etc - yeah right)! No, it is indeed a ponzi built on the expectation of ever increasing prices. And those leveraging up - either to buy or withdrawing "equity" - while prices are nearly 6x household disposable income will have a very lean decade ahead. About the best that can be hoped for by a bull, in my view, is that house prices are somehow maintained at this multiple to disposable income. An increase in this multiple beyond these levels is pretty much beyond the realms of belief, including from CJ as I note from the latest press release for "his" indices in which a few quotes feature. So the big jumps in prices - which the spruikers will say was due to two income families - not easy credit - are over. From now on the only winners of a continued ponzi - real or perceived - are the baby boomers who bought pre-bubble and are in a position to cash out (ie sell IPs or significantly downsize their home). The remainder of homeowners - those that bought their first home during the bubble and/or significantly upsized during it, and those that leveraged up to buy IPs or other non-performing assets - will get down to the grind of actually having to pay off that real debt. But of course, all of this is academic - it's a bubble, and it will pop - regardless of whatever carrots the Government might pulls to entice late comers. author message erutangis  Re: Re: Government's next move on: Wed 10 of Mar, 2010 [13:24 UTC] > But of course, all of this is academic - it's a bubble, and it will pop - regardless of whatever carrots the Government might pulls to entice late comers. Now come on - H4A. It's irresponsible and deluded of you to go around telling people housing is in a bubble! author message homes4aussies  Re: Government's next move on: Thu 11 of Mar, 2010 [00:56 UTC] Erutangis, thanks for pointing me to that article - I've been a little less active of late (illness in the household tends to do that....) I left the following comment on the blog but does not appear to be loading for some reason (perhaps it is not active anymore???) “Many people quote the episode in 2003 where the Reserve Bank tightened monetary policy, said a lot about housing prices which were escalating quickly at that time, people were becoming very buoyant, and Ian Macfarlane had a lot of what we have called open-mouth operations, saying, ‘You’ve got to calm down.’ There were a couple of quick rate rises, which would have needed to be done anyway under the inflation target but we possibly did them a little earlier than was absolutely necessary. But that episode I think successfully helped to just calm down, AT LEAST FOR A WHILE (my emphasis), a housing market that was getting a bit overheated.” Glenn Stevens, testimony to Finance Committee House of Reps, 18 Feb 2010. Nobody in their right mind would ever expect the RBA Governor to say outright that we have a bubble in anything. And the RBA has given the appearance at times of doing its best to provide soundbights for property spruikers. But occasionally they go off script and say what they really think. It is clear from this comment that Stevens believes we have had a chronically very frothy housing market. In my view the most irresponsible thing that can be done is convincing more people to enter the bubble at this late stage - either directly or by providing spruikers with the material to affect emotions especially of young Australians. Having said that, I agree that measures must be taken to increase supply. However, my understanding of disposable incomes of the last 12 months is that they were massively boosted by Government stimulus measures, and with their gradual withdrawal disposable income was flat in the final quarter calender 2009. And finally, I have not seen any recognition at all that Ross Garnaut adopted the tag "The Greatest Bubble in History" for our housing market in his latest book. author message homes4aussies  Re: Government's next move on: Thu 11 of Mar, 2010 [03:07 UTC] Anybody who does not get the Fujitsu Consulting reports on mortgage stress should do so. This from the latest (up to 3 March 2010) - AND when reading this, bear in mind they are modelling just a 0.5% increase in mortgage rates by December 2010 (which is below market expectations and those of most I have heard speaking of late - but they may well be right, because of the factors their own data uncover). "Over 40% of the 255,000 First Time Buyers who entered the market in the last 18 months are experiencing some degree of Mortgage Stress, and by December 2010 it is likely to have risen to 49%. We estimate by December 2010 673,000 households will be in some degree of discomfort and those in severe stress perhaps as high as 290,000; this translates to around 35,000 defaults annually. The risk factors are linked to higher interest rates coupled with effective falling net incomes and rising costs of living." author message NM  Re: Government's next move on: Fri 12 of Mar, 2010 [12:54 UTC] Footnote: Fast forward 40 years from Sweden's "million Programme" and we find that apparently things are "different over here" over there as well. The below taken from one of the leading Swedish rags: Property Prices at Record High Property prices continued their climb in February, despite the threat of tightening lending to new home owners. As a result prices are now at record high. “We can detect no concerns regarding interest rate hikes or the possibility of a bubble at this time and our assessment is that the property market will continue to be strong going forward.” says Lars-Erik? Nykvist, CEO of (a leading property agency). “The market is driven by a property shortage and record low interest rates and demand continues to outstrip supply.” Different country with very different economic history, demographics, taxation system, industry, attitudes to home ownership - yet the story is tediously familiar. http://tinyurl.com/ylb2dx3 author message HolderOffer  Re: Government's next move on: Sat 13 of Mar, 2010 [01:26 UTC] Different governement (state, not federal), but have you seen what they are proposing? http://www.smh.com.au/nsw/private-land-to-be-seized-for-housing-20100311-q1l0.html Either a good thing; as they may be more inclined to let propoerty prices drop if they are intenting to buy them. Or, a terrible thing; as they will hand over taxpayer money straight to property investors. Investors who can see the areas that might be subject to forced acquisitions, will land bank (buy but leave vacant) until they collect inflated prices from govt. Who would benefit here? Developers, and..... nope, thats it, developers would benefit. author message aykch  Re: Government's next move on: Sat 13 of Mar, 2010 [02:16 UTC] I am a renter and have a family of four. I have been reading the bubblepedia for over three years. I cannot image how ridiculous the high price of the house today in Australia. Indeed, I am extremely disappointed on the government’s irresponsible policies for the property market, especially the negative gearing and the invitation of the overseas investors in the property market, also irresponsible to the younger generation. Guys, see how the rich people from China laundering their conspired money by investing in the Australian property market. I am happy that there is such a blog for the discussion of the real estate issues. However, I have the feeling that discussions and sharings do not help in alleviating the high price property problems. Can we have any actual actions for pushing the politicians to do something, or is there any possibility of setting up a pressure group, petitions? author message NM  Re: Government's next move on: Wed 07 of Apr, 2010 [05:36 UTC] Wow - coverage of the rate rise is certainly painting a black picture of housing affordability, compounded by falling building approvals and a construction industry in the doldrums. Public sentiment regarding rising property prices appears to be turning for real. Elections are looming and there's votes to be had.

Show posts: All posts Last hour Last 24 hours Last 48 hours