23% of NSW land owned by speculators (26/01/07).
Amongst the usual doom and gloom of the media attacks upon land tax we find the interesting stat that 23% of NSW land is owned by those lucky enough to own more than one piece of the planet.
What are the figures around the country? Is this why housing affordability is such an issue? Put together the pieces of the puzzle for yourself.
House prices have pushed us into the top 20 of unaffordable cities in the world. After seven years of boom, the legacy of this government, elected by ordinary working people, will be a city owned by the elites.
It need not be so. House building is a competitive industry, and with proper foresight on trade skills, costs will always tend to rise only in line with wages and the general price index. (more…)
“The Great Australian Dream is being threatened by speculative forces rather than interest rates” said Prosper Australia spokesman Karl Fitzgerald today.
The Howard Government’s expansion of negative gearing in 1996 put the blow-torch on young people’s hopes. The halving of Capital Gains Tax in 1999 added fuel to the fire. This has seen housing prices double in just ten years.
Further, constant lobbying by the real estate sector sees an unending attack on State Land Taxes. State governments have consequently cut land taxes to abide by their campaign contributors.
“Are speculator’s rights to profit greater than future generations hope for a house of their own? Land is a unique asset that should not be speculated upon.”
“Trends in taxation policy nation-wide have given the market the ability to tee off on property speculation. Now institutional money is seeing the long-term returns from property as too good to pass up. Their entry into the property market threatens the essence of the Great Australian Dream.” Mr Fitzgerald said.
“At the heart of this argument is the constant propaganda that more housing investment is needed. Ask any agent how many vacant houses are in their suburb and they may sheepishly tell you ‘quite a few’.”
“With capital gains leaping ahead at 9 – 10% p.a and rentals returning barely 4%, why would a wealthy property investor care if 20 – 30% of his portfolio of housing stock is vacant?”
“Because these properties aren’t on the rental market, the real vacancy rate is much greater than reported” stated Mr Fitzgerald.
“Land tax is the mechanism to encourage property onto the market. Rental income must then be earned to make property investment economic. This added supply pushes down prices. It is the one tax the wealthy can’t avoid. Economists are unanimous in calling it the simplest, fairest and least distortive means of public revenue raising.”
Prosper Australia calls on the government to limit speculation in this unique asset by reforming Land Tax and reducing handouts to property investors via negative gearing & capital gains tax.
Mr Michael Janda’s advocacy of land value taxation as a means of lowering the tax burden on both workers and entrepreneurs is well advised. As Adam Smith recognized, there are only three factors of production – land, labour and capital – and only one of them does not flee or stop working or breeding when taxed.
In the modern context, land values cannot be shifted offshore to escape taxation (in contrast to nebulous and artificial concepts such as “income” or “capital gains”). Shrewd contemporary observers such as Samuel Brittan of the London Financial Times have recognized that taxing land values to reduce taxes on capital and labour can allow developed Western countries compete better against emerging low-wage economic giants such as India and China. (more…)
Re. “The crisis in our housing markets” (yesterday, item 2). David Imber is right to point to the self-seeking publicity from the real estate industry. I’d like to add that the emotional term “home” and the more neutral one “house” disguise the fact that the largest component in domestic property prices is often the land.
Travelling through country Victoria over Christmas I saw many houses in agent’s windows half or even a third the price of otherwise equivalent properties in my city, Canberra.
The reason that the city properties cost more is simply demand — that is, their value derives from the proximity of services and employment, not the hardware that goes into their construction. House prices are rising, too; not because of better hardware, but because of demand.
What we need to do is to slice off this unearned value increase and return it to the people who created it (the Australians who provide the demand and the services), not allow it to slip unremarked into the pockets of “property developers” and “investors”.
Despite the logic of this solution, do you think it will happen?
No way — almost every legislator in this country has property investments and is counting on pocketing some unearned value for themselves — the parasites. The Tenants Union is probably one of the few places to look for unbiased policy advice in this area.