TED BAILLIEU PROMISES CHEAPER HOMES (FOR THE DEPRESSION?)
Cuts in stamp duty would be welcome, but they’d need to be complemented by a federal land tax, as advocated by Ken Henry’s “Australia’s Future Tax System” for property prices not to rise. Henry’s panel recommended a federal land tax ought also replace State payroll taxes and the stupid array of State land taxes, with their thresholds, exemptions, multiple rates and aggregation provisions.
Master Builders Association boss, Brian Welsh, doesn’t seem to comprehend a single rate, all-in land tax would help keep a lid on escalating property prices. [Would you pay more, or less, for a block with a land tax of $1000 on it, as against one without such a charge, Brian? Why do you accept the propaganda-like misinformation spread by real estate institutes in this regard?]
Since the 1970s, as rates and land taxes have been allowed to be wound back in response to ‘economic rationalists’ who can’t understand the difference between economic development and real estate speculation, we’ve experienced higher and higher land price escalation – significantly above and beyond our population growth .
To attribute these increases to a shortage of supply of land is exactly how US real estate agents were trying to explain high property prices just before their residential bubble burst. And it is a bubble, for God’s sake! Only neoclassical economists crassly seek to explain Australia’s real estate bubble in terms of ‘supply and demand’.
Seems to me the Master Builders Association (MBA), the Housing Industry of Australia (HIA), and the Urban Development Institute of Australia (UDIA) are far too close to their State real estate institutions. The Real Estate Institute of Victoria (REIV) wants to be rid of land tax because the fees of the agents it represents increase when selling prices increase. Higher prices equal higher commissions, so the tears they shed for the plight of home purchasers are just crocodile tears.
Surely, many real estate agents should be able to see that they would be better off in the longer term, too, if the real estate inactivity that characterises extended periods of property price deflation is removed? No more bubbles, no more busts?
If the MBA, HIA and UDIA are really serious about keeping development happening in an environment of steady house prices, Australia ought to be making the switch from damaging taxation, growth area levies and up-front development charges, to levies on land, as recommended by Ken Henry’s panel, if we are to keep the lid on land price increases and chase rampant speculation out of real estate markets.
But this won’t happen if you builders and developers keep hanging out with the REIV.
By the way, I’d like to know if the Property Council of Australia (the representative body for building owners and managers) was serious when it came out in favour of a land tax just before the release of the Henry Review recommendations. That was an excellent initiative, but you’ve gone quiet on it, guys. Ructions? Shouldn’t be any. It makes sense.
Always happy to speak to any of you about this. We have data on which you’re obviously missing out! Why not let us explain how to respond to the GFC to you?