The Financial Review’s Ben Hurley has revealed an absolute game changer in the age old housing supply debate:
Adjusted by Morgan Stanley researchers to allow for a potential census under count, the 228,000-home undersupply becomes a 341,000-home oversupply.
This adds to the imperative for better checks and balances in housing supply analysis. Our recent Speculative Vacancies report revealed Melbourne had 90,700 empty homes. This adds to the concern that housing prices are higher than they should be.
Most markets see additional supply putting downward pricing pressure. However, land and location is a different animal. There is only one GPS location on this planet. Land doesn’t age and can’t be replaced. We all want to live in amiable locations and communities. This gives the owner of land, the most precious of resources, a dominant advantage. This challenges our ability to determine our place on this planet.
The drip feeding of the market must be questioned as ethical behaviour. Our film Real Estate 4 Ransom critiques this behaviour and the tax system that encourages it.
Consider the staggering fact that Lend Lease (in the press for their higher than expected profits) have released just 29 properties to market over at least 18 months out of the council approved 4900 vacancies.
Akin to the unemployment rate, that is a lazy land use of 99.94%. This has helped maintain a land price of $157,000.
Marc Pallisco, from the Age’s Capital Gain section writes (June 23, 2012):
The developer negotiated with council to create a community with 4900 blocks, but instead will offer just nine to the market this weekend, priced from $157,000. This stage follows the late 2011 launch when 20 blocks were offered using a ballot method to prospective buyers who registered an interest online.
Critics of the current taxpayer-funded public housing building boom, and housing affordability advocates, argue a dent could be made if developers were prevented from self-regulating supply, otherwise known as land banking.
Developers, however, argue land values are preserved selling land this way.
What would happen if supply was opened up? The question then is – who is Lend Lease responsible to – their shareholders or the community? One look at their Our Values, Our Promise page and you are inundated with all the Corporate Social Responsibility needed to put one at ease:
Respect, Collaboration, Integrity, Excellence, Innovation, Trust
The ledger between shareholder and community responsibility was once re-balanced via Land Taxes. The longer these locations were held for ransom, the more they paid. As a percentage of holding cost vis capital gain, these have been ratcheted down to such an extent that they barely equate to a months rent these days.
As Speculative Vacancies author Philip Soos states:
Since 1996, Australia has experienced yet another boom in housing prices (specifically land prices), fueled by the loose lending standards of financial institutions and generous tax subsidies for property. These two factors have ensured that property speculation is an immensely profitable activity, becoming a national pastime for Australians. Melbourne has become a focal point of frenzied debt-financed speculation, resulting in the greatest escalation of housing prices in its history.
One can only hope that the hundred’s of thousands of people who have taken on an inflated mortgage for the next 25 years will take an interest in the way such information is portrayed and understood.
As the ramifications of the global property bubble continue to remind us, asset bubbles always end in tears. It is time the public took matters into their own hands to ensure this doesn’t happen again.