Prosper Australia

photo credit: night86mare

Fred Harrison will be proven correct with his apt title Boom-Bust 2010. With the Brumby government stepping up to the plate by offering further gravvy to the property lobby train with the $6000 increase in their First Home Owners grant, Natalie Craig reports that this will create another stampede:

REGIONAL builders say first home buyers are now waiting until after June 30 to sign contracts in order to get $36,500 in government hand-outs.
…
“We’ve seen a drop in demand probably in the order of 50 per cent,” Mr Fitz-gerald said. “The first home buyers were rushing in before June 30 to get what they could … now they’re wanting to hold off and get contracts in for the next period.”

The grants would still be “a great thing for real estate agents” and the construction industry…

When the Federal handouts stop on Dec 31st, this may be the signal for the land boom to final unravel in 2010. Unfortunately by then this will have seen over 180,000 young people manipulated into propping up the housing market at it’s virtual peak. Yesterday we calculated that this will see an annual $28 million dollar wealth transfer per year for the next 25 years from first home owners to the well-heeled property and banking industries.

Wealth divide anyone?

The only way to speed up affordable housing is to reduce the price of land. We can do this efficiently by placing holding charges on land so that developers like Mirvac don’t drip feed property to the market like they admitted on record. Find out how here.

photo credit: Cosmic Kitty

With auction clearance rates plateauing at 54% for the 3rd consecutive weekend, property pundits are doing all they can to avoid doom and gloom perceptions. The market has ‘found a new level’ is the positive spin.

Let’s hope most First Home Buyers are biding their time wisely, watching and waiting for the looming swell of sellers. Sellers are desperately trying to maintain their market power by refusing lower bids at more realistic levels vis the earning capacity of the buyer.

Concerns must be raised at Rudd’s move to billow first home owners with cash via the expanded FHOG. Will these buyers feel suckered when they realise they have bought at prices 30% higher than they should be?

When Christmas approaches and the sharemarket drops below 3200, sellers will be keen to replenish their cash flow, accepting bids at more realistic levels.

But the big questions is why should buyers have to bide their time during one of the worst housing crises ever? Why should sellers have so much market power when housing is supposedly a human right?

By increasing holding charges on land, the ability of sellers to dominate the market is reduced, encouraging all sites to be used productively, rather than withheld for speculative profits. Then our freedom is enhanced and pesky taxes can be culled.

photo credit: mdumlao98

Prime Minister Rudd’s $10bn ‘economic security strategy’ is another blinkered response. A decade of record economic growth has done little for the aussie battler. Record prices for iron ore have cascaded into the deepest pockets in the nation, where hard working miners pay thousands of dollars in rent, soaking up much of the gains. David Ricardo’s ‘Law of Rent’ will always see economic growth benefit land owners disproportionately to hard working individuals.

The announcement of the First Home Owner Grants pt2 (FHOG) is simply shocking. Yet again the property lobby is being propped up. Just when prospective buyers were hoping land prices would fall, the ALP gives another handout to those who already own a piece of this precious earth.

This will ensure the recession is deeper and longer than feared because the cause of the world financial meltdown, the land price bubble, has been given a helping hand again!

If everyone receives $14,000 then land prices go up $14,000 at least. In 2001, when the scheme was first announced, land and housing prices jumped $32,000.

The result will see a new and enhanced wealth gap. Younger generations will again be left paying record rents, already more than twice what any other generation has paid. Julia Gillard’s ‘War on Poverty’ (announced January 08) has become just that in namesake.

Today we hear of the need for Breakfast Clubs in schools. Now that rents will be maintained at sky high levels, less money will be available for food and other necessities. One wonders whether the credibility of politician’s will reach a record low in the current climate.

Saturday’s Age article on Melbourne’s rental growth outstripping all other states is reflective of current government policy at all levels – local, State and Federal. When combined with record immigration levels, property flipping will continue unabated.

Prosper Australia spokesman Karl Fitzgerald was quoted in another Age article on Home Buyers Lose out in Tax Change. We would have preferred a longer commentary covering the topic from this perspective:

The fillip to demand prevalent in Swan’s housing budget of $2.3bn will more than compensate for the comparatively small tightening on GST that the property lobby faces. The half a billion earmarked for infrastructure under the Housing Affordability Fund will result in higher land prices that alone will dwarf the closing of this GST loophole. The lack of supply side policies is the real criticism of this budget. Swan has failed economics 101 with the First Home Savers Accounts, creating additional buying capacity for first home owners with the $1.178 billion proposed. This capacity will be capitalised into higher land prices.
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