Prosper Australia

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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The Swan Federal budget was limited in its’ vision, giving with one hand in the old welfare game but taking away with the other by providing further subsidy to propertied interests. Whilst it is widely reported that the wealthy were hit by means testing, fellow Georgists were busy joining the dots between the $40billion worth of major projects and its’ effect on land values.

It must be remembered that your tax dollars will finance infrastructure that increases land values, making it harder for renters to get into the property market. The government is investing your money but giving the return on the investment (the higher land values) to people with the most land. Its about time the government start collecting the return on its investment by collecting the site rental on land. Then it wouldn’t need to tax our income as much.

The largest migrant intake in 60 years added to the smiles of those in the know. More people means more demand. With the government only promising 50,000 new homes, the excess demand will curtail the effects of the global credit crunch.
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March 08 figures reveal that loans for first home owners dropped to just 16.4% of owner-occupied approvals. Yes 16.4%! The Great Australian Dream is being dominated by baby boomers and/ or speculators. Those that most need a roof over their heads are the last in the queue. Why is this so?

Loans for new dwellings dropped a massive 11.5%. The building industry must be extremely worried with this trend. Job losses come next. Interest rates are hurting.

Negative gearing on all second investment homes must be addressed in the first Swan budget. If this policy was designed to improve the supply of housing, at the very least it could be limited to only new housing. Best of all would be to abolish it and the First Home Owners Grant.

If a Site Rental on all land was implemented, we wouldn’t have the ridiculous situation we have today where small business owners and first home owners, traditionally the Messengers for future opportunity, are penalised, whilst speculators in the fruits of the earth are subsidised by the productive sector’s tax funded infrastructure.

Today’s report on the Melbourne 2030 urban growth boundary cries out for a comment from Prosper Australia members. Melbourne University academic Rob Moodie rolled out the usual suspects in recommending that dwellings per hectare improve on the urban fringe, that there be a smaller, more intense concentration of transport hubs and lastly, the latest bureaucratic decree, that all new developments have a set percentage of housing set aside for low income people.

What is needed is an analysis on council rating systems and how this has contributed to today’s problems. CIV rating penalises home building and encourages the waste of land, in effect subsidising the land banking speculators that have held ‘doughnut’ suburbs like Braybrook and Sunshine to ransom. That’s the real supply issue. If 20% of all new developments are restrained for low income earners, what will stop the developer upping the price for the other 80% to cover this profit shortfall?
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Wednesday’s release of the much anticipated Eddington report has seen many questions asked on the viability of the road tunnel. Analysis of the cost-benefits report show that whilst the rail tunnel will return 1.20 for every dollar spent, the road tunnel will barely come out ahead. $18 billion is required to cover the Eddington plan. Struggles are expected to fund the East-West road link with the lack of exit ramps in the city. Kenneth Davidson commented on Wednesday’s Renegade Economists radio show that this is a typical ’salami strategy’ to diffuse criticism of the plan and then include the on/off ramps later.

Nowhere in the report was a discussion covered on the economic benefits infrastructure provides to land values. Those lucky enough to own land near an on/ off ramp (or a new train station/ improved services) will be delivered a windfall gain in land values. With the massive infrastructure deficit Victoria, Australia and the world are facing, one wonders how high tolls are to be an effective funding tool with examples such as Sydney’s Cross-City tunnel rendering new services unusable. As this letter by Gavin Putland points out, infrastructure models promoted by Macquarie Bank based on tolls must be reformed to include land value capture funding.

Check this extensive list compiled by the Scottish Government on how land value capture can in fact totally fund infrastructure provision. Minnesota has also recently announced a land value capture study. Make sure you read the Minnesota piece - top investigative journalism.
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