On the one hand, the market delivers the best for the least cost.
But on the other hand…. few are willing to call it as it is.
Yesterday’s National Housing Supply Report used coded language to hint at a ‘possible over-supply of housing’ due to housing investor tax breaks (p50).
However the usual suspects were missing from analysis when commenting on the role of vacancies:
Specific purposes include vacant stock awaiting sale, demolition or replacement, and holiday homes.
“Awaiting sale”. How very polite! People are screaming for housing and this is the best the nations peak body on housing supply can come up with?
Census data was used to show 830,374 properties as ‘awaiting sale’ or as holiday homes.
The said analysis focused on ABS statistics, which don’t include vacant land. This figure could easily be doubled if the nation’s residentially zoned land banks were included.
To bring the rental vacancy rate back to 3% – the rental market equilibrium, it is stated on p87 that:
The Council estimates that an additional 26,000 vacant private rental dwellings, mainly in New South Wales and Victoria, would be required in 2008.
We identified 14,149 here in Melbourne in a survey covering just 44% of Melbourne’s housing stock.
The ubiquitous Productivity Commission was quoted regarding the changing of the capital gains tax:
… has added to the recent housing price boom by encouraging investors to reduce current income in favour of longer term capital gains.
Only 830,000 vacant properties….but yet there is a possible shortfall of 200,000 dwellings by 2026???
And over at Rupert Murdoch’s Australian, Housing Shortfall Locking Out Thousands, the usual lines are run:
In a carefully worded criticism of the tax system, the report said the rules were skewed towards home buyers and mum and dad landlords at the expense of investors to build more medium-density housing for the future.
Medium density is mentioned twice in the report but from what i can see never is there a carefully worded mention along these lines.
Lower yields are of course mentioned. Is that why housing supply is dropping? What is the other hand saying? Shhhh…..
That’s what happens when you have a land boom. The pursuit of capital gains ensures that rental yields drop (slowly increasing rental income compared to Melbourne’s Dec 09 $70,000 jump in land prices).
In the final pages (p176), the report states:
In 2008, Port Hedland had a capital growth rate for property as at March 2008 of over 37 per cent according to Residex statistics.
Rising incomes and the Law of Rent demands that landlord’s can demand higher rents, as miners have the capacity to pay. It’s either that or go live in a shipping container house in 45 degree temperatures.
The Age’s Jason Dowling states:
The report also noted a large proportion of Australian homes were empty. It found one in 10 homes were unoccupied and that a quarter of these were holiday homes.
If one quarter of all vacancies are holiday homes (a mysterious stat we have been yearning for), this implies that 7.5% of Australia’s stock are speculative vacancies.
The pursuit of justice demands that we calculate the supply of speculative vacancies. Why didn’t the National Housing Supply Council? What was this ‘committee’ set up to do? (Fair enough they do say they will next time…when the bubble has popped)
That total is 622,781 properties.
622,781 speculative vacancies are holding the market to ransom, demanding their capital gain.
To emphasise, that is 3 times the supposed under-supply predicted in the far future of 2026.
To re-re-emphasise, these speculative vacancies could add 350% more to supply than was needed in 2008.
Until housing is seen as a human right rather than a speculative kite, the housing supply analysis will always have one hand behind its back.
Will Ken Henry have the ticker to recommend that higher and flatter land taxes replace payroll, halve income taxes and fund the abolition of the regressive GST? That is what is needed to restore the Great Aussie Dream.