14 July 2011

MELBOURNE:- “Falling land sales further signal the ending of The Great Australian Land Bubble,” Prosper Australia Campaign Manager David Collyer said today.

Australian land sales volumes have fallen for the last six quarters, according to Housing Industry Association/RP Data statistics released this morning.

“The HIA’s blaming government charges for high land prices is a furphy,” Collyer said. “Governments heavily subsidise the infrastructure for new subdivisions and the HIA knows it.”

“Builders are reacting to the lack of demand by turning off the construction pipeline. Activity is shrinking rapidly. Construction workers will find it harder and harder to find jobs and quoting will become super-competitive.

“Falling land sales is THE leading indicator of a coming recession.

Ricardo’s Law of Rent explains why: if there are highly productive land sites available for free (or at low prices), wages will tend to be high, all things else being the same; if the only available free land yields little, wages will tend to be lower.

“In other words, we are paralysing ourselves with high land prices,” Collyer said. “They force buyers into a lifetime of debt slavery, merely to pay a mortgage. This must and will end, with economic activity falling and prices correcting to the long term trend.”

“If economic principles are too ‘pointy-head’ for you, the on-ground measures also point to a major house price correction. Stale stock – houses on the market for more than sixty days and unsold – is piling up, particularly in the first home buyer hunting grounds to the west and north of Melbourne. In Tarneit 3029, ‘Stale Stock’ has blown out from 1066 in mid-April to 1932 today; in Werribee/Point Cook 3030, ‘Stale Stock’ has risen from 1634 to 2650 in the same time. (Source: SQM Research, Prosper analysis)

“The HIA is forever pretending land supply is a constraint. We say, feverish speculation in land by a range of players has driven the market off course and now onto the rocks.

Prosper’s Don’t Buy Now Home Buyers Strike campaign has been warning innocent first home buyers to stand aside from buying ahead of ‘imminent’ price falls.

“We see no reason why FHB’s should spend a life-time paying for someone else’s mistakes.

“The HIA sought comfort in the slight – inflation-tracking – rise in values. But skilled traders know modestly rising prices with strongly falling volumes is a very unpleasant market position and signals a correction.

“The real culprit in our unfolding economic disaster is the tax system which provides generous concessions to speculators and a heavy handicap on work and enterprise.

“The far-sighted recommendations by Dr Ken Henry in Australia’s Future Tax System come into stark relief: remove 125 stupid, discouraging and complex taxes and introduce a mere two: a Land Value Tax and the Resource Super Profits Tax,”
Collyer concluded.