Magic Money Quotes

Karl FitzgeraldCommentary, Hot Issues5 Comments

Earthsharing and Australia’s 2nd richest man Harry Triguboff are quoted in Forget Undersupply, We’ve Got Too Many Houses, AFR July 7-8:

Apartment billionaire Harry Triguboff was surprisingly candid at a lunch held by the American Chamber of Commerce last October.

He told the audience he was able to pay “very little tax”.

“I keep a lot of my properties. And if you keep them and there’s capital gain it’s beautiful,” he says “You don’t pay tax. I don’t lease them so I don’t pay tax on the rent, but I get depreciation.”

He paid tax on apartment sales but that’s where the land banking came in.

“You have to buy lots of empty land,” he said. “You keep the land and it brings you no income, so you claim it against your tax.”

From the same article:

“I remember back in the global financial crisis we were worried about the amount of stock on the market and then I think it got up to around 240,000,” Kusher says. “What would be good for the market is if some of those people realise that they’re not selling, there’s not much point in keeping it advertised, take that property off the market.”

Poor Richard Pratt gets nicked for rigging the price of cardboard boxes, but its fine for mainstream media commentators to make such Real Estate 4 Ransom statements.

In Doncaster railway line ‘could be built for $840m’

The report found that property values in Brisbane in the past 25 years had risen 23 per cent more in suburbs with high-quality public transport than those without.

Read Ben Hurley’s We Spend, You Win, You Pay where we hear Lucy Turnbull, deputy chair of the Cities Expert Panel:

“You could argue that property owners are getting a windfall gain from the provision of infrastructure without making some kind of contribution from the property value rise that they enjoy,” Mrs Turnbull said. “In an ideal world, they would pay a fair and reasonable component of the infrastructure which they directly enjoy. You couldn’t argue that’s not a fair proposition.”

Moving to the UK, as if money printing hasn’t been a big enough subsidy (let alone the corporate control of the Olympics), please consider the danger falling land prices have on banks. For students of these pages this will come as no surprise, but the UK government is trying to further their support of insiders in the banking and property sectors, not by money printing, but railway investment – the biggest in 150 years:

Speaking on BBC Radio 4’s Today programme, Greening agreed that too much of the taxpayer-funded Network Rail grant was paying for “waste and inefficiency” among profit-making private rail companies.

That’s to say nothing of the leakage inherent in how the train system will be financed. The above quote is akin to ‘we will crush the unions but reward our rent-seeking landed interests’. With economic rent analysis barely taught at University, the lucky few get a red carpet ride into the magic money trough.

It would be of immense interest to see if the £9bn UK public investment delivers a 300% return for insiders with capital gains of £27bn as per the Jubilee train line.

Free Riders on Public Transport from Real Estate 4 Ransom on Vimeo.

This modelling tool by London School of Economic’s Dr Gabriel Ahlfeldt, lecturer in urban economics and land development, may well be able to predict such capital gains.

One day the public will use this magic money to finance rail expansion in a closed loop system of financing.

Hear Professor Peter Newman discuss how this is possible.

photo by: Images_of_Money

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