Cuba for Sale?

Welcome to the second Evolving Economics enews, combining the Earthsharing and Prosper Australia news lists. This knowledge is important in an age of entitlements, where welfare is demonised and unearned incomes (a.k.a. capital gains) are ignored. Take a quick look at these budget costs:

Jobseekers – $10bn p.a
Family Tax Benefits – $19bn
National Disability Insurance – $17bn
Medicare – $20bn
Imputed rents (unrealised capital gains) – $484bn in residential real estate alone.

So why tax students, the poor and the productive when so much revenue potential exists in economic rents?

With much talk about the ‘1996 Howard Costello tough budget’, we are reminded of the change since. In 1996, First Home Owners borrowed just $95,000 on average. Today that has more than tripled to $303,000. Wages have only increased by $214%, compared to 319% in housing (read land) costs.

This federal budget will cost the poorest 20% of the population, the lowest quintile, $2.9 billion over four years. However the wealthiest 20%, those earning $88,000 or more, will pay just $1.78 billion – 40% less.

It is time the public spoke up on the record capital gains occurring in housing, mining and other natural monopolies. That is our specialty here on the Evolving Economics enews. We hope you find this information of use and can join us to maintain this knowledge base, continuing to push governments towards a refined economic system that encourages productive activity over speculative largess. See our recent press releases.

New economics night

Tuesday, May 27 6:30 PM onwards
2/22 Punch Lane, Melbourne, CBD
RSVP to this free event

Policy director David Collyer will host this informal event for new members and supporters to ask the burning questions. David has invited an interesting few friends to attend. We hope you can join the free event for discussions.

David has been busy supporting the AFR editor Alan Mitchell, who proposed greater usage of land taxes in place of stamp duties as a means of filling the new state government budget hole. David’s piece on the topic was picked up by Macrobusiness, with the comment section revealing significant support for land value tax. A special cheerio to all those Macro readers signing up to our e-news list.

David has also written on the ACT light rail value capture debate, ensuring there will be plenty to discuss this tuesday.

The housing market is enjoying record weekend auction supply. Sydney saw some 76% of properties sold over the weekend – including $100 million worth of units sold off the plan in just two hours . Supply is responding. Never before in Melbourne in May have there been two weekends in a row with 1000 properties for sale. Make that three in a row this weekend. Whilst last weekend’s clearance rates were lower here at 61.7% on 1182 auctions, questions must urgently be asked about effective demand.

Specifically – the role of speculative demand must soon hit mainstream analysis. Investors continue to run at nearly 40% of the market. Significant Investment Visas are being sold at record levels, where for a $5 million purchase these visa holders can also invest in real estate via managed funds. Additionally some purchases are paid for via cash, understating the 39% figure.

Speculative demand is unquestionably crowding out first-time owners from the market. Who will be the first politician to seriously question this trend?

More money spent on a fixed landmass is guaranteed to ratchet prices skyward. This gives the owners of land in prime locations an undeniable advantage. They make money in their sleep and for that reason there is little questioning of such behaviour.

Evidence continues to mount that the global land bubble is speeding ahead unabated. The paucity of effective economic advice continues to plague entrepreneurs and workers looking to develop a comparative advantage in their industry.

There is no more apparent example than the economic policy of post-Fidel Cuba. Since late 2011, Cuban real estate is now privately owned and can be traded on the open market. This is done largely via word-of-mouth. There is no tax policy correcting the windfall gains resulting from the development of society.

Initially only those legal foreigners or nationals could buy real estate. “As a consequence, a brisk business in prestanombres, or name lenders…” emerged.

This led to another dog-leg. Instead of taxing away the lure of capital gains, the government was advised to allow real estate to be bought by international investors! Unsurprisingly, land prices are increasing by 10 to 12% per annum.

What will be the excuse concocted for this once bastion against neoliberal economics? Throw your hands in the air like you just don’t care …

We thank you for your support, hoping you can share this email with your networks. Become a member for just $30 per year. 

Karl Fitzgerald

Project Director