Following on from my previous post, there were some stories in the weekend papers about the housing affordability crisis – such as this one in The Courier Mail saying “housing affordability in southeast Queensland could be squeezed to crushing point“, and this in The Australian saying “Sydney and the boom states of Queensland and West Australia facing crippling house and land shortages that could make it impossible for many people to buy homes.”
Both stories are based on a study commissioned by the Residential Development Council, which is “the Property Council of Australia’s specialist industry forum for Australia’s leading residential developers.” By astonishing coincidence, this study commissioned by property developers says that the housing affordability problem is due to not enough land being released for development, along with the taxes placed on the sale of real estate, such as Stamp Duty. Even more amazingly, there is no mention (in the media coverage at least) of how tax breaks for investors might also have a part to play in driving up prices.
Some various quotes in this version of the story in the Gold Coast Bulletin confuse me a bit more. According to the newspaper coverage, the property developers’ report warns of a disastrous shortfall in available housing lots. A property analyst says “”We need to explore new areas of potential development. The canefields are a prime example.” Yet the President of the Real Estate Industry of Queensland (REIQ) says “the developers own vast tracts of land”, the problem being “they can’t develop until the infrastructure gets to the land”, which sounds more like their problem being the timing for the release of residential land (and perhaps who pays for the infrastructure), rather than being unable to slice up more agricultural or bush land for housing developments.
Of course, the laws of supply and demand operate as much in the real estate market as in any other market, but I think the real problem – in most areas at least – is not that there isn’t a big enough supply of houses available, but that the market is grossly distorted by tax concessions such as negative gearing and the big capital gains tax discount, which means people buying real estate for investment are pricing out people trying to buy a home. The high purchase prices also lead to higher payments for renters.
In the article in The Australian, the NSW Planning Minister Frank Sartor states that there is actually a surplus of lots available to developers, but there is weak demand. I don’t know the NSW housing market, so I’ll have to take him at his word, but I presume he would know the figures. Frank Sartor is hardly known as anti-development.
If the housing market and most housing policy wasn’t geared so much towards people trying to make money out of real estate through capital gains and instead was focused more on ensuring people could afford a home, then the supply and demand factors would not be so distorted. Mind you, so many people have now arranged their financial affairs around real estate, as well as borrowing large amounts on the equity of their house/s, that it would be very difficult to take out all the distortions like negative gearing without causing a lot upheaval and hardship.