For once, Joe Hockey absolutely nailed it. Commenting on yet another claim about a housing bubble in Australia this morning, the Treasurer said:
“Australia fundamentally doesn’t produce enough houses to meet demand. It is just an infinite mantra for international commentators, for analysts based overseas to say ‘well, you know, there’s a bit of a housing bubble emerging in Australia’. That is rather a lazy analysis, because fundamentally we don’t have enough supply to meet demand.”
He’s exactly right. Desk jockeys in London and New York and commentators in publication like The Economist love to insist that Australia is in the grip of a housing bubble that will eventually collapse like in the United States and smaller countries like Ireland and Spain.
The problem is, as Hockey says, housing price growth in Australia is driven not by inappropriately lax monetary policy or inappropriately lax lending standards or poor regulation, but by our failure to build enough houses to keep up with population growth.
Once upon a time, housing supply was an item on the COAG reform agenda, but it slipped off around 2010 and has never reappeared. Hockey was one of the few politicians who mentioned it after that. Many of the problems lie with state governments — and to their credit, both the NSW and Queensland governments in the last two years have removed first-home buyer incentives for buying existing houses and expanded incentives to build new housing. But the serious problems lie with land release, property development rules and the cost of providing basic infrastructure.
Moreover, there’s one problem that lies with the Commonwealth: tax policies that encourage investment in existing housing stock rather than building new stock. If Hockey were able to achieve even a moderate change to those policies in the wake of the forthcoming tax review, he would be making a solid contribution to fixing the problem he so succinctly identified today.
“the serious problems lie with land release, property development rules and the cost of providing basic infrastructure.”
Do not understand/do not agree with these points. Melbourne has 25 years of land available, there is no shortage whatsoever. Property development rules are far from onerous, they protect good planning and environmental protection and nothing more (except for some NIMBYism in the nicer suburbs – otherwise there are infill developments going up all over established parts of Melbourne). The cost of providing basic infrastructure – is this something that ought to be even more subsidised by the general taxpayer than it currently is? Infrastructure demands for schools, main roads, hospitals etc from population growth are massive, and met by the government. Should they also be paying for the local roads and drainage caused by the development? i don’t think so.
The Chicken Little of “Economic Crises” – lecturing on the curse of mantras?
Very cute?
It is not a lack of housing – walls with a roof, plumbing & electricity – but 2 megacities with almost half Oz’s population and thus the seats that receive the vast majority of political atention, read $ub$sidie$.
If urbanoids payed the true cost of supplying them with pristine water to flush toilets and wash cars & concrete driveway, then sewers to flush it into the sea (to supplement the marine nutritional cycle as proclaimed by then MWSDB when Sydney’s outfalls were extended in the 80s so stop swimmers being aware that theywere just going through the motions…) not to mention vast supahigways and sardine crammed commuter transport then perhaps the villaged and rural towns would resume the role they once had, decent living conditions rather than the gutter children fighting as Lawson bemoaned in Clancy of the Overflow.