photo credit: dirkjanranzijn

Our I Want to Live Here report was quoted in yesterday’s Age eyebrow raiser Agent’s accused of hyping-up’ rental crisis to lure buyers.

Whilst the article could have gone further, we were pleased to see that Simon Baxter today wrote a letter in support:

Get real on property

BRAVO to Natalie Craig (“Agents accused of ‘hyping up’ rental crisis to lure buyers”, BusinessDay, 27/1) for reporting on those who disagree with the Real Estate Institute of Victoria’s perpetual “rental crisis” mantra.

The REIV is primarily a lobby group. It is beyond me why we continue to accept its biased assessment of the market. Why do we tolerate its inability to report 100 per cent of house sale prices? Why do we care for auction clearance rates when most sales now are private? How does it justify delusional price forecasts of “flat” and “stable” for residential while other property sectors have been and are combusting? Now there’s a shortage of rental stock? Check the thousands on the net.

It’s time to find an independent research body to provide property analysis with integrity, and not to feed commercial motive.

Simon Baxter, Northcote

For those making the biggest investment decision of their lifetime, let’s hope they aren’t duped into buying at record prices. High land prices are only good for banks and speculators. The rest of us would like to see more discussion on why property prices are so high and what we can do to push them down to reasonable levels. Some say that rent is a secret tax the wealthy charge the poor.

That’s what this website is for – to discuss the alternatives. A sane economic system is the new paradigm Obama needs. Join our e-news (click top right) or trial subscription to Progress Magazine to help join the dots.

Land is for housing, not hocking!

photo credit: °Florian

C’mon you can’t be serious but that’s what the lobbyists are looking for with commercial property in dire straits in the US. The NY Times reports:

Just as home loans were pooled, then carved up and sold to investors as securities over the last two decades, commercial property loans were repackaged for the financial markets. In 2006 and 2007, nearly 60 percent of commercial property loans were turned into securities, according to Trepp, a research firm that tracks mortgage-backed securities.

Now that the market for those securities has dried up, borrowers cannot easily roll over the loans that are coming due.

Many commercial property owners will face a dilemma similar to that of today’s homeowners who cannot easily get mortgage relief because their loans were sliced and sold to many different parties. There often is not a single entity with whom to negotiate, because investors have different interests.

Experts expect commercial vacancy rates at close to a shocking 20%. But as we have shown in the Melbourne residential market, vacancy rates here are at close to 10% due to speculative vacancies. Now that speculators have left the US property market, the prices paid at the peak of the market are uneconomic. But yet:

In recent weeks, a group led by the New York developer William Rudin has pleaded with Treasury Secretary Henry M. Paulson Jr., Senator Charles E. Schumer, Democrat of New York, and others to have the government include commercial real estate in a new $200 billion program intended to spur lending.

Here we have again some of the world’s wealthiest people pleading for a bailout on an investment that they paid too much for. It’s like giving  free money to a gambler. Even if developers get attractive re-lending rates, who will rent the property off them when there are so many vacancies? The market power that renters will have over the next few years will ensure they drive down prices.

This is a desperate move to try and pry open access to attractive interest only loans. The strategy will be to re-finance on a 5 year interest only loan, by which time the economy may have recovered and the resultant capital gains can pay off the principal with a timely ‘property flip’. But will this allow the property to remain vacant over this time? This will hold productive business to ransom whilst the speculative economy benefits from handouts.

Let the market work its’ magic.

The article, entitled Empty Homes for All to See, is an indictment on the inaccuracy of vacancy figures collected by a group with a vested interest in skewing the results their way.

We pointed out in the I Want to Live Here report that the published vacancy figures of the Real Estate Industry of Victoria are inaccurate. They only list those properties on the market at present, those advertised through Real Estate Agents. This excludes:

• those that are being held off the market because the capital gains of 15% per annum are at least double the annual rental income – why bother renting them out?
• all those properties that are being privately advertised
• those that are used only once per year (ie owners fly in when Melbourne Racing Carnival is on or Sydney Fireworks)

The overstated scarcity of land and property encourages an atmosphere of desperation in the buying market. A genuine vacancy rate would include all vacant property, especially vacant land, which constituted 93% of the vacancies in the I Want to Live Here report.

Beyond the troubles associated with negative gearing in the housing affordability quagmire, the real cause is the lack of holding charges on land. If Council Rates were reformed in Victoria by moving charges off buildings (CIV) and onto land (Site Rental rating), land banking would no longer be economic. When Land Taxes are reformed into a flat Site Rental (because locations naturally reflect higher values in areas where richer people live, thus superseeding the role that progressive levels of taxation presently address) and raised, then vacancies will no longer will be economic.

Adding to the motivation for property speculation is the knowledge by those in the know that working class taxes fund the roads and schools that add services and thus value to the surrounding land. A well reformed Site Rental would naturally capture this increase in value, recycling the public’s efforts back into the public funding system rather than into the deep pockets of the nations wealthiest industry.

This is the wholesale tax change needed to re-balance the playing field away from the speculative activity the tax system encourages and towards a productive role for entrepreneurs.

We are looking for volunteers to engage in a survey of the Melbourne CBD to shoot down this continuing farce. Gen X & Y are getting the raw deal on all fronts…