40% of UK MP’s own investment property, 94% in Australia

40% of UK MPs own real estate, 94% in Australia by Renegadeeconomists on Mixcloud

Renegade Economists Show 364

As broadcast on 3CR, Wednesday 22/10, 5.30 – 6pm
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Jacob Wills (radicalhousingnetwork.org) discusses the protest movement against the international property convention MIPIM, held in London last week. Some shocking stats are revealed in this candid discussion on the commodification of housing. www.earthsharing.org.au (excuse the audio quality :(

Show Notes

The Radical Housing Network is at the vanguard of a global movement concerned about the rapid escalation in housing costs (read land prices). This is particularly the case so soon after the Global Financial Meltdown that was precipitated by the US fall in land prices in the June quarter of 2006.

Read more about the RHN’s MIPIM agenda. We sent a statement of support:

We at Prosper Australia fully support the UK MIPIM protest “Say NO to MIPIM: YES to housing justice for all!”
Rental Backed Mortgage Securities, the increasing use of Property Options and the control that lobbyocracy has over our MPs threatens our right to a place on this planet. The myriad of tax loopholes, derivatives and massive infrastructure projects delivering windfall gains to insiders can all be addressed with a very simple alteration to our tax code. Switch taxes off productive workers and onto landowners. Land Value Tax is the best and fairest way to share the naturally increasing value of the earth amongst all. The property that IS genuine theft is the rising value of the earth, the economic rents. Why? Because it is community created. If no-one lived in London, what would happen to the Duke of Westminster’s land holdings? Karl Fitzgerald, Prosper Australia

94% of Australian politicians own an investment property.

Boris Johnson speaks over the protest noise, mentioning that he bought an apartment for £93,000, now those in the same street are valued at £1.6m. An increase of £83,000 occurred in the last year alone.

My commentary on the video: Boris dispels the blame game behind ‘Bashing London’ and ‘Foreign investors’. He states the real solution – more housing. But his predictable response avoids the lightly taxed capital gains delivered to those who own prime locations on earth. With published vacancy rates ignoring those held empty for speculative gains, a better answer would be for more efficient use of our land, at prices more closely aligned to the earning capacity of people who live in the area. That’s whats possible with a Land Value Tax.

Boris is proud that (only) 100,000 houses will be built under his 8 year mayorialship. When investors can buy and sell from anywhere on the planet for great profit, that argument is old hat. More investment on a fixed land mass leads to higher land prices.

No MIPIM behind the scenes

Bursting the Bubble – Say No to MIPIM

Insider deals between councils and developers

39% of private renters in London live below the poverty line.

23 Advantages for Investors

Policy Fraud

Policy Fraud: with Matt Elliis by Renegadeeconomists on Mixcloud

Renegade Economists show 362

As broadcast on 3CR, Wednesday 15 October.
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Matt Ellis (rationalradical.me) discusses his petition calling out Senator Nick Xenophon for pushing superannuation access as a vehicle for housing affordability. More money on a fixed land mass = higher land prices AKA a seller’s subsidy. Policy fraud must end!

Show Notes

Matt’s Petition
His open letter to Nick Xenophon
The report back on phone call

Here is the South Australian government body HomeStart Finance, offering risky 3% deposits or 97% LVR. Anything above a 90% LVR is frowned upon. Here’s another similarly named group with $2,500 deposits.

For Nick to be taking advice from HomeStart rather than listening to people like Matt and his incredible list of evidence compiled (on the original petition) is frustrating.

Let’s see if the Senator accepts our challenge to appear on the show and counter this discussion with scientific evidence. Will it be any different to what happened in Canada?

23 Advantages for Property Investors

Property Options for Some

Property Options for Some: Karl reports back from a seminar on this new property speculation weapon by Renegadeeconomists on Mixcloud

Renegade Economists Show 361

Broadcast on 3CR, 5.30-6pm Wednesdays
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Karl reports back from the Ultimate Positive Cashflow Breakthrough seminar on this property speculation weapon delivering thousands to some for a few hours work. Is it by accident and how does it effect the rest of the community?

Follow the tweets @earthsharing.

With Rental Backed Mortage Securities, Self Managed Super Funds (exempt from Capital Gains Tax if sold in the pension phase & able to borrow), Negative Gearing, Capital Gains Tax exemptions, foreign investment, superannuation investing in housing, the advantages for the investor class continue to grow. Now listeners need to get up to speed on Property Options, a tool that has been around for years (Kerry Packer reportedly made millions out of it). Its popularity continues to grow as the pressure on affordability ramps up. Passive income for some.

Show Notes

Options ”An option is defined as the right to buy a property for a specified price (strike price) during a specified period of time. An owner of a property may sell an option for someone to buy it on or before a future date at a predetermined price. The buyer of the option hopes the value of the property will either go up or is already low. The seller receives a premium called “option consideration”. The buyer may then either exercise the option by buying the property or sell the option to someone else to exercise (or sell). This is often done to obtain control over a property without much cash. Option premiums are typically non-refundable. The option represents an equitable interest in the property and may be recorded at the county recorders office.”

Bird Dogging, links to Creative Real Estate investing.

Other comments on the Mark Rolton presentation:
Talks about US middle class evaporating but there is no connection to how such property investment, the profiteering off the fruits of the earth, leads to the divide!

Now till 2020 – 4m boomers retire – reduced UE -> increased immigration, increase retirement age.

Pension just $14k pa, by 2021 it to end. Maybe he talking about the assets test

Staggered Options
dont sell all the properties, keep 10 / 14

One couple kept 46 properties in just 1 year. DA adds massive value. You cant borrow that kind of money, but you can with soft equity. Soft equity – option owner doesn’t own property but can use the option as a deposit to garner loans!!!!!
Gotta be curbed.

Loves land subdivisions, “its insane how much money is made.”

If it sounds too good to be true – it is. This is a corruption on the very fabric of a democratic society. We the people have lost control, lost even an insight into what the property lobby are able to do to OUR land. $15K for 5 hours work – another example of economic rents being forfeited by the public financing system. We are demeaning our earth rights, in preference for a place on the beggars table.

How Options Can Help Minimise Tax

“As illustrated, an option may be used to manage the timing of when a CGT event happens to a property sale, which may be very useful in a variety of scenarios.”

Under the law, if a vendor enters into an option to sell a property, no tax will generally be crystallised at that point, provided the option is exercised at a later date.”

I did my 1st Option Deal at 72 and made $160K

What is a Popi (Property Options for Pensioners & Investors)?

The investor pays the pensioner a monthly fee in exchange for the option to buy the pensioner’s home in the future but at today’s price.

Generally, a pensioner is “asset rich but cash flow poor”. They own their own home, which may be worth many hundreds of thousands of dollars, but have to live off an aged pension which is only a few hundred dollars per week.

In effect, a Popi allows the pensioner to receive cash from an investor on a regular basis, and in return the capital growth of the property will be passed on to the investor.

A Popi allows an investor to get into the property market without requiring a deposit or taking out a loan. Providing the investor has sufficient cash flow, all they need to do is pay a monthly fee and they are able to benefit from the capital growth of the property. However, my favourite is that there are no tenant hassles; the pensioner still owns the house and is technically not a tenant.

The downside is that the investor isn’t able to control when they can buy the property; that is controlled by the senior and is triggered when the pensioner wants/needs to sell their home. So a Popi isn’t ideal for people who need maximum control over their investment timelines

Popi is a lifestyle solution for retirees! Essentially, a Retiree exchanges the uncertainty of future capital growth on their property, for the certainty and financial security of a monthly income today, without putting their existing household equity at risk.

How To Buy Property When You Don’t Have Money

What you’re aiming to do is use other people’s money (OPM) to organise you deals or to net you a buy and hold investment.

3. Option agreements

Strategy: Get the vendor to agree to an option agreement, where you have the right, but not the obligation to buy the property. Find a way to increase the property value and onsell it for a profit

Requires: A vendor who will agree to an option agreement, usually a distressed seller

When a buyer and seller agree to an option, it means the buyer will pay the seller a specified amount – usually a couple of thousand dollars, depending on the property – to acquire the right to purchase the property at an agreed price until a certain date.

This amount, say $4,000, will usually be credited against the purchase price of the property should the buyer purchase the property. If the buyer does not exercise the option, the seller retains the payment.

During the option period, the buyer has the option and exclusive right (but not the obligation) to buy the seller’s property. Before signing the option, there will usually be a contract of sale already drawn up, which means that if the option is exercised it will be under terms already agreed to.

An investor can use these types of agreements to raise finance if they can find some way to increase the property’s value. This way they can sell the option to purchase to another buyer who is willing to buy the property at its new value and net the profit.

It’s a risky strategy and relies on the investor having two skills: the ability to add value to the property in a cost effective way (such as a cosmetic renovation), as well as the ability to negotiate a fairly low purchase price for the option.

The other issue is that few vendors will be willing to agree to an option unless they have had some trouble selling their properties.


Think Tanks Blow Public Opinion

Think Tanks Blow Public Opinion: Prof Michael Hudson on the most influential US think tanks by Renegadeeconomists on Mixcloud

Renegade Economists show 360

Subscribe to the weekly podcast, broadcast 5.30-6pm on 3CR.

Prof Michael Hudson is a compelling interviewee – could you imagine him at a dinner party? During this discussion we investigate the most influential think tanks in US economic history, along the way Michael reveals insights into what really drives US foreign policy, how fracking fits in and the state of democracy. He also provides a unique insight into how Bill Clinton got off his impeachment charges. We finish with commentary on speculative housing and the future economic plays now that US interest rates seem set to rise.

Read Michael’s work and his outstanding book The Bubble and Beyond.

Cato mug shots

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Doctors sued for malpractice. Politicians too?


Doctors sued for malpractice. Politicians too? The Fisherman’s Bend development with Rowan Groves by Renegadeeconomists on Mixcloud

Renegade Economists Show 359

As broadcast on 3CR Wednesday 24th September.
Subscribe to the free weekly podcast.

This week an insight into the Fisherman’s Bend developments with Rowan Groves (Fisherman’s Bend Network Committee). The Planning Minister commits a planning 101 multi-million dollar mistake but few are aware of the cost.

Show Notes

City of Port Phillip sustainability goals watered down

Ninety per cent of the 250-hectare area falls within the City of Port Phillip, which had drawn up draft design guidelines for development that mandated surpassing the building code in relation to sustainability.
Measures the council proposed include a preference for cogeneration, solar power and grey water recycling; a requirement all developments of more than 20 dwellings to utilise rooftop space for gardens or recreation areas; and a guideline that minimises car park provision to 0.5 spaces per two-bedroom dwelling and generally none for one-bedroom dwellings, while increasing the amount of bicycle parking.

Under the state government’s new Fishermans Bend Urban Redevelopment Authority design guidelines, sustainability aspects beyond the bare minimum required under the Building Code are “encouraged”, rather than required, and the guidelines also clearly state at the outset that “prescriptive” measures will be avoided.

Affordable Housing Targets – Development incentives (DCP exemption) to deliver community diversity.

the $340 million planning blunder

The state government could be forced to spend up to $340 million buying private land to turn into public parks at vastly inflated prices in light of a major planning blunder in the new inner city suburb of Fishermans Bend.

The Sunday Age can reveal the government’s decision to re-zone 250 hectares of industrial land in Port Melbourne and South Melbourne before creating parks and open spaces has doubled or tripled its value virtually overnight, raising the spectre of a blow-out in costs for taxpayers.

This will cost us $340 million to buy the land at inflated prices. Then the billions of dollars required to build the infrastructure in the area will further add to land values, leaking from the public purse into the deep pockets of the property development industry. For this we will receive some $44m from developer charges. The stamp duty revenues will be considerable but will be passed on to the buyer, in effect exempting those who benefit most from paying much back to the community.

Our guest Rowan Groves stated 10% of the $44m in developer charges will be paid upfront. We will await the Fisherman’s Bend Network Committee Freedom of Information request for more clarity. With total development costs estimated at $738m, the $4.4m won’t pay for much infrastrucure, meaning that budgets for health and education will be squeezed. We do agree there needs to be a fairer method of funding infrastructure. Developer charges are inefficient. It would be far fairer to spread that cost over the 20 year lifecycle of the asset and recoup them with value capture.

Read more on Value Capture
LVC Primer
LVC Historical examples

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HIA’s save Neg Gearing report

New research released today by the Housing Industry Association (HIA) confirms that
restricting access to negative gearing for residential property would reduce investment in
housing, erode housing affordability and put upward pressure on rents.

Saul Eslake on Negative Gearing

This assertion is actually not true. If the abolition of ‘negative gearing’ had led to a ‘landlord’s strike’, as proponents of ‘negative gearing’ repeatedly assert, then rents should have risen everywhere (since ‘negative gearing’ had been available everywhere). In fact, rents (as measured in the consumer price index) only rose rapidly (at double-digit rates) in Sydney and Perth – and that was because in those two cities, rental vacancy rates were unusually low (in Sydney’s case, barely above 1%) before negative gearing was abolished. In other State capitals (where vacancy rates were higher), growth in rentals was either unchanged or, in Melbourne, actually slowed (see Chart 9).

Opportunity and Equity