Prosper Australia

photo credit: eb0la

An interesting read in today’s Age: Palatial Spreads Kept Empty? That’s Rich

Ghost mansions and land banks are sometimes held by those planning a tennis court or swimming pool. Other people are waiting for their children to grow up. Many are speculating that the price of Toorak land will only rise.

“Some of the houses we look after, they don’t even want to rent them,” Mr Savas said. “They don’t want the hassle of a tenant.”

And that’s the rub of it. The capital gains are so great, the economic incentive to rent out the right to a roof over our head is written off. The defensive maneuver to snap up a neighbouring property is also a deft tax shelter. Titles are merged and as principle places of residence are exempt from Land Tax, the tax gain the Solomon Lew’s of the world benefit from is more per annum than what many earn in a year. This is manifested in a higher land valuation for the property.

From this comes the ability for investment loan re-financing as the leveraged value of the location increases. Thus the wealth gap. Thus the urban sprawl.

“As far as investment goes, land in Toorak is as good as you are going to get, and it’s probably the only suburb you see land banking except for in outer Melbourne.”

Talk about a defensive move by the real estate lobby – take a drive through most major new developments or any former government land sold to developers to ‘improve land supply’, and you will see vast tracts withheld to drip feed to the market such that land and housing prices are kept high.

Imagine if a restaurant could remove 1/3 of the food off it’s menu and force people to beg prices upwards? Land is the only monopoly where this can happen.

Why does the tax system actively support this?

photo credit: pyjama

People often grasp our message through simple examples. Imagine a friend buys one of these pictured beach boxes for $12,000 in 1994. Meanwhile, you work hard, doing overtime, saving money, being a solid citizen.

During the middle of Victoria’s worst day on record (last Saturday reached 46 degrees celcius) your friend decides to sell his beachbox. It’s just a wooden box on crown land. However, it is situated in an exclusive location.

He sells it for $171,000!

This results in a staggering $149,000 gross profit. Over a few drinks that night he tells you “My accountant can do backflips through this tax system! I pay only 12% in capital gains tax, so this bottle of Dom Perignon is just a drop in the ocean compared to the windfall profit of $120,000 I just ‘made’.”

You look deep into your glass as you total up your hard earned savings of barely $20,000.

Natalie Craig reports that this is what happened last weekend. A property speculator made more profit than two hard working aussie battlers on average wages do in a year – just by shuffling paper. This is what our tax system prefers. Buying and selling rather than hard work and saving.

Will governments and the loose tax policy that benefits speculators be put under the spotlight? Will this tax policy be held responsible for it’s role in drowning the global economy in the GFC? Or will they allow banks to take the hit for them? Let’s get to the source of the problem before many more bailouts occur.

We yearn for the day when people can look after themselves due to the cheap access to land and a simplified tax system. Then any creative person can quickly make their contribution to society. The $120,000 windfall profit should see the vast majority of it going to the government to fund the abolition of damaging taxes like payroll, GST and income tax. By charging a 10% Site Rental on all land we can quickly ensure this happens.

Dont forget to subscribe to our youtube channel, we should have more pieces going up in the near future.

photo credit: betta design

The $840bn bailout of US banks provides the US Treasury with a unique opportunity. Will the as yet unnamed new Federal agency (which we will call the Bailout Agency), charged with the responsibility for selling off the bad debts of risk-bending bankers, use this money to reduce the chance of future boom-busts to occur?

This could be a reality if the whopping $840bn dollars (more than spent on 5 years of the Iraq war) was used to switch the 3 million odd sub-prime borrowers over to a Community Land Trust model of land ownership. The Trust could become a department of the Bailout Agency.

The new system would see the former sub-prime lenders paying a yearly Site Fee to the Trust based on the earning capacity of that site. This would allow land valuers, those who many argue are the front line to the realistic economy (vis the desk loitering economists and their mathematical models) to adjudge what someone on an average wage in an average location could earn in that locality.
(more…)

photo credit: nicksarebi

Council Rates are again in the headlines, with affordability pressures crunching into a large number of rates payment defaults. How ironic is it that the charges that can assist in curbing the speculation induced affordability crisis (that caused so many defaults in the first place) are shot down in flames by this article?

Holding charges on land such as Council Rates (more effectively placed on Land as Site Value Rating rather than the distortive CIV) and Land Taxes (ideally scrapped in its present form and levied at a flat rate on all land) are the most efficient mechanism to unfurl the potential withheld from the community by speculative activities such as land banking and ghost owning of investment properties.

Fortnightly payments on council rates would certainly be a good step forward. Additionally, yearly valuations should be mandatory by all councils, so that such steep rates rises aren’t used as battering rams to shoot down this highly effective mechanism of self funding. The move towards Site Rental is the most important council reform needed.

Council Rates are a measure to ensure the prime locations are put to their best use. We need to inspire stories showing how these same pensioners face a higher rating burden (due to their improvements) than their neighbouring land banker.
(more…)

With Oil soon to hit $120 a barrel, public interest is building on the role speculators play in pushing prices higher. India’s Solution for Oil Prices: Ban Speculation by Banning Trading quotes:

“Buying stakes in overseas oil properties is proving much cheaper for India than purchasing crude on the open market. In some areas where India has purchased stakes in oil fields, it is pulling light crude oil — the kind that sets the benchmark oil price — out of the ground for less than $40 a barrel, Mr. Srinivasan said.”

We aren’t supporters of regulation. Using economic analysis we can see that any price above the $40 India can pull light crude out of the ground is economic rent. Thus in many situations, speculators are accounting for two thirds of the price of oil. We propose that the government can eradicate speculation by adopting a more effective revenue raising system. If a resource rental was charged per barrel of oil then resource hoarding would no longer be financial. The resource rental acts as a holding charge, set at approximately 5% of the value of the resource. This rate would soak up the economic rent and deter the buying and selling of oil.
(more…)

by Karl Fitzgerald

as published in Arena Magazine, Feb-March, 2008, Edition 93

In a period where the twin crises of global warming and the wealth gap are attacking society from both sides, policy makers are continually limited in their effectiveness by a two dimensional approach to economics.

Land prices have increased at 4 times the rate of GDP and dwarfed wages growth by 1000 to 1 since WW2 (The Poverty Inquiry to end all Inquiries, Tony O’Brien, Figure 1, p5) . Such damning statistics beckon the ALP to take a hard look at the economic fundamentals undermining union wage demands. For Julia Gillard’s ‘War on Poverty’ to be successful, policymakers must look outside the square.

2008 marks the half way point in our promise to halve world poverty with the Millennium Development Goal’s 2015 deadline. With the wealth gap accelerating in both Developed and Developing countries, a serious flaw is evident in modern economics.
(more…)

With the recent passing of the highly respected Georgist Clyde Cameron, we feel it is timely to look at the wisdom of his core beliefs:

EXTRACT FROM AN ADDRESS BY THE HON.CLYDE R. CAMERON A.O.

But now it is an oversimplification to say that the lessons of the Maritime Strike of 1890 were the sole reason for the formation of the Australian Labour Party in the following year. In South Australia; the seeds of discontent were sown on 28th December 1836, when the first white settlers came ashore at Glenelg. Among them were unemployed working men in search of work in the new colony.

South Australia was the only Australian Colony that did not at any stage rely upon transported convicts for cheap labour. And yet the real cost of employing what passed for free men was very much less than the cost of housing., feeding and guarding convict laborers in New South Wales, Victoria, Western Australia and Tasmania.

South Australia was able to prove that wage slavery can provide cheaper labour power than any other form of slavery. Slave owners have the responsibility for feeding and housing their human beasts of burden and of keeping them healthy enough to perform a full day’s work.
(more…)

The front cover of today’s Herald Sun has a huge photo of Horse Stud owner Steve Spiteri (looking hard done by!) with a caption: ‘Thanks Premier: Steve Hits Paydirt’. Yesterday’s announcement to rezone all land residential within Melbourne’s 2030 boundary has made landowners, typically land bankers and the occasional farmer on the edge of the sprawl, rich overnight. Mr Spiteri bought his property for $375,000 twelve years ago and with the new zoning is now estimated to be worth $11 million dollars.

How much money will Spiteri make when he sells the property? Lets give him a million dollars for council rates, real estate commissions and to cover the next few years Land Tax (about $330,000 p.a). If we assume he pays capital gains tax at 30%, he will take home over $7 million dollars. This equates to more than 122 years income for the average wage earner.

That’s as if he’s earnt $11,217 per week for the last 12 years. Staggering!
(more…)

Prosper Australia today applauded the State Government’s announcement for taking housing affordability more seriously. However, questions must be asked about who benefits most from this announcement.

“Today’s declaration of residential zoning has made Victoria’s land bankers more money in a day than many earn in a lifetime.”

“Questions must be asked why the government is releasing 90,000 blocks of land when the property industry swallowed up at least 38,000 sites in just one year, as reported in the Age (22/09/07).” stated Prosper Australia spokesman Karl Fitzgerald.

“The property industry has dictated all housing affordability policies at both state and federal level.”
(more…)