A nation renting
MELBOURNE:- Prosper Australia today released the graph Land Prices to GDP: Australia (attached) updated to end June 2011 that shows just how poisonously high land prices are.
“The giant mortgages needed to buy in this market mean people are exchanging renting a house for renting money. And such large mortgages cannot be easily paid down – at these multiples of income it takes years of sacrifice to make the slightest difference,” Prosper Australia Campaign Manager David Collyer said today.
Price gains in the last twenty years have blown land prices out to 3.08 times GDP in a never-before-seen explosion in the cost of shelter.
“These towering prices have driven two generations of Australians into debt and dependence, even though they have solid jobs, good incomes and lead sober prudent lives.
“Land prices are now falling. This will continue for years, erasing equity and painfully revealing the foolishness of all those heavy mortgage repayments.
Bryan Kavanagh of the Land Values Research Group says: “The total value of all Australian real estate sales (residential, commercial/industrial and rural) fell to $268 billion in financial year 2011, down 14.3 per cent from $312.6 billion in 2010. This is the biggest decline in real estate sales since the 25 per cent fall in 1990 which introduced Paul Keating’s 1991 ‘recession we had to have’.”
“Asking ‘que bono?’ – ‘who benefits?’ – shows who the villains are: bankers and the wealthiest 1%,” Collyer said. “They have imposed widespread economic damage to the vast majority of Australians by capturing life-long incomes – encouraged by our vile tax system that confers privilege on capital gains and rentiers.
“The current tax regime not only forces people to deliver the land rent – owed equally to all Australians – to the 1%, but, by leaving all this rent in private hands, the deep sickness of rising land prices tends to increase exponentially – NOT because of population increase and zoning controls, but because more and more economic rent has been privately expropriated and capitalised further into rocketing land prices.
“Land can simply be held off the market without penalty. It will neither rust, decay nor become obsolete, and – as the price of a piece of land is simply the private capitalization of the rent not captured for public revenue –it is guaranteed a profit if held idle until a land-hungry community will pay its ransom.
“The wealthy have every incentive to chase capital gains in real estate: they are merely obeying the signals sent by the tax regime. Meanwhile wage-earners and business carry the entire burden of government, just so an undeserving and parasitic minority can seize more and more of this monopoly asset.
“The headlong pursuit of unearned capital gains in land starved the productive sector of the Australian economy of much-needed investment. Our productive assets are now largely foreign-owned – notably mining, which should be a foundation stone of national strength and wealth.
“If instead of gambling on land price inflation we had invested some of that $4 Trillion in our supposedly Australian-owned mining giants, the benefits of the minerals boom would be ours.
“Prosper’s unceasing call for government to rebase its revenue needs from wages and business onto the land through Land Value Tax would have stopped this economic catastrophe before it even started. The calamitous financial bill for this tax-induced misbehaviour will eventually be paid. That’s how economies are killed.”
Media comment: David Collyer email@example.com
ATTACHED: Land Prices to GDP: Australia