That’s essentially the message from the February Housing Finance figures.
With the property market bubbling at extortionate levels, housing investors have decided to go to sleep at just the time they are most needed. In seasonal terms, housing investment fell in total by 3.4%.
Housing investment crept upwards by just 0.4% in February. Owner occupied investment again fell significantly by 3.1%.
This signals that genuine home owners are stepping away from the market. First Home Buyers again fell, this time by 2.3% from 20.5 to 18.1%. Thankfully they have wised up, remembering that they peaked at 28.5% of all purchases in May 09.
That’s a 10.4% drop in home acquisition by exactly the people who should be buying homes.
One can only conclude that the people who need homes have been scared away by a mix of institutional and foreign investors.
Have investors only remained in the market because of beneficial tax breaks?
Developers have gone on holiday, realising that they can reduce risk and increase profitability by rationing supply. This is the unique aspect to housing. Scarcity breeds desperation in a market with no alternative.
Our colleague Andrew Sadauskus calculate that there was over 1 year’s supply of auctionable properties sitting vacant throughout Melbourne.
But yet the media is littered with comments that land supply is to blame. Drive through any recent property development and you will meet families struggling to meet their mortgage as they innocently pass the ubiquitous vacant block, sleeping idle until the time has come for its rationing.
In the meantime those poor first home owners who are buying 45km’s north of Melbourne are forced to spend an hour each way in traffic jams.
Why are government policy analysts asleep at the wheel? Property is not a productive investment vehicle. No matter how much foreign investment, you can’t produce more land. Such investment can however, make those lucky enough to already own even wealthier.
The Henry Tax Review had better recommend a higher, flatter Land Tax so that such property bubbles become a thing of the past. Perhaps Brumby could show some vision and replace stamp duty with a higher, flatter Land Tax.
Without such a reform, property (read land) speculators can continue to earn more than most of us in their sleep. Why be a working family KRudd?
Strike a match for prosperity over short-termism KRudd, Ken Henry.