Tim Colebatch’s interesting article today on Investors’ Housing Splurge shows how dominant the speculative dollar is over the genuine developer’s dollar. Colebatch says “Only one in every 12 dollars lent to investors was used to build something.” This must arouse a few questioning minds to ask if such loans are for any productive purpose? If first home owners are being beaten out of the market by investors with a greater borrowing capacity, one must ask whether these investors deserve negative gearing?

Prosper Australia’s Research Officer Gavin Putland has promoted a possible reform that this week’s State and Federal Housing ministers should discuss. Negative gearing should be limited to new buildings only.

With the perceived shortage of housing in the marketplace, this reform could be a practical alternative. Significant competition in the housing market must be encouraged to ensure that the shortage is not “manufactured”. The land market must be opened up via significant reforms to Land Tax.

Payroll tax should be abolished. As should Stamp Duty and Developers Fees. In their place should be a reformed Land Tax, at a higher and flatter rate. In time many other taxes could also be removed, with the regressive GST firmly in our sights.