Triple the Supply Side Squeeze
Consider these three points:
- Property developers have openly stated they are reducing the supply of property to the market in order to massage land banking profits:
- The story of banks starving developers of finance hit the mainstream on the weekend.
A key reason was that banks, spooked by the financial crisis, sharply cut back the flow of finance for new commercial developments. Bureau figures show only 1.7 per cent of new home lending in 2009 went to investors building new housing, a phenomenal fall from 11.6 per cent 20 years earlier.
- With land prices skyrocketing $766 per day in the December quarter alone in Melbourne, the benefit of capital gains far outstripped the possible rental revenue. Why supply property when you are experiencing such gains? This motivates small time developers to massage supply in line with their profiteering ambitions.
While some already owe more than their home is worth, the result of prices initially boosted by first home buyer grants, but which fell when the grants were removed, so far, prices have mostly held steady on the estates. This is in no small part because developers have limited the supply of blocks in recent months.
This story of banks restricting credit began in the Business Spectator:
One of the reasons why we have such a strong housing property market is that banks are restricting loans to property developers but spraying housing buyers with loans. There is a shortage of dwellings, so buyers armed with bank cash want to buy, but the industry can’t create sufficient new dwelling stock partly because of bank lending policies.
The motivations for such speculative profits are holding the Australian economy from it’s true potential. Not only are developers and speculators constraining supply, so are banks.
With the Brumby government having re-zoned 230,000 sites as residential land over the last 2 years and rushed through streamlined planning, this can hardly be used as an excuse any more.
By implementing a system of Resource Rentals we can reduce our debt burden to banks, level the playing field from speculative hoarding and genuinely unleash the land of opportunity. Will the Henry Review have the ticker to stand up to lobbyists?