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I'm one of those inner-city professionals (although at 40 no longer so young) who supports high levels of immigration. Let me try to explain my reasoning: 1.

by MarkMc 10y ago

I'm one of those inner-city professionals (although at 40 no longer so young) who supports high levels of immigration. Let me try to explain my reasoning: 1. It's true that immigration has increased property prices, but other factors have played a much bigger role. In particular the drop in interest rates since the early 1990s greatly boosted asset prices. To exclude the effect of interest rates it's better to look at rental prices - there we find the cost of housing to be much closer to the inflation rate [1] 2. I have lived in Sydney's Inner West my whole life but am still renting because house prices are simply too high. But that's fine - I have instead invested in US stocks which have achieved a pretty decent return in the last 10 years. If the Sydney property bubble bursts then I will sell some of those shares and buy a house here. But if not, I'll just keep renting - no big deal. 3. Skilled immigration is a fantastic deal. Normally to produce say, a new doctor, society would have to pay for maternity leave, childcare allowance, 6 years of primary education, 6 years of secondary education, 5 years of tertiary education and medical training and 22 years of healthcare costs. But with skilled migration someone else has already paid for all that - we get it for free. We get an educated, skilled, healthy, young doctor with no criminal history who will work and pay taxes for the next 40 years. It's a bargain. 4. I don't feel I'm 'copping' much from greater population density. Yes, there is now more traffic on the roads, but the busses run more frequently. When I was a kid the train to the city would run every half hour - now it's every 15 minutes. The local park has a better playground and a new BBQ area, the local pool has been refurbished - all because there are now more residents paying council rates. 5. To reduce property prices it's much better to increase the supply of homes rather than cut demand. We should be reducing restrictions on extending existing dwellings and building new, tall apartment blocks. [1] House price and rent index graph on http://imgur.com/4VUGfPz http://imgur.com/4VUGfPz

spangry 10y ago
Supply is definitely part of the equation, no doubt about it. Relaxing zoning and land-use regulations is necessary but, IMHO, not sufficient. More radical steps need to be taken, like the introduction of a land-value tax and repeal of stamp duty (Canberra has done this, albeit phased in over the next 15 years or so). This would: - Stop developers from 'land banking'. They would either have to put the land to use (e.g. build an apartment building, thus increasing supply) or sell the land to someone who will. - Reduce 'speculative vacancies' (properties that are purchased and then left vacant). Prosper Australia (a Georgist non-profit) estimated vacancies in Melbourne (in 2014) by examining water use data. They found that 1.45% of non-advertised residential stock was demonstrably vacant (0L water use per day). This would mean the actual vacancy rate was 8.3%. They also found that 4.8% were likely vacant (residences with below 50Lpd usage, when the average usage is 160Lpd). Which would equate to a vacancy rate of 18.9%! [1] - Obviously, an LVT would make vacant possession much more costly, and financially infeasible in some cases (although my assumption is that a decent proportion of these are financed by hot money flows out of China). And the removal of stamp duty would effectively result in additional supply on the market, as it would remove the disincentive for people to efficiently reallocate to appropriately sized homes. And fair enough re: immigration. You make perfectly valid points, and if your own experience of it is positive then that's obviously a good thing. Just as an aside: usually people cite "the need to support our ageing population" as their reason for preferring high immigration, even though the Productivity Commission has stated in three separate reports that this view has no real merit (simply put, because immigrants also age). However, I would still contend that, in aggregate, our current net inwards migration numbers aren't sustainable (and haven't been for a while).[2][3][4] For me, it's nothing against immigrants, and certainly nothing to do with race, religion or creed. It's simply a numbers issue. Not just in terms of housing demand, but also in terms of increasingly constrained infrastructure and education services. I think we need a bit of breathing space so we can catch up (or more competent politicians). Regardless, on the demand side, I think the bigger issue is our messed up tax system and the (mal)incentives it creates to invest in housing (or, as they say, 'equity maaate'). And I think your financial strategy is extremely sensible (perhaps, dare I say, optimal). It's the exact same strategy that's used by most 'housing bears' that I know. It's what I should be doing too, but I'm sorta lazy :) EDIT: Oh, and the decoupling of rent and prices is one of the reasons I think there's a bubble in property. People make investments to earn a return. The fact that super low rental yields haven't deterred property investment suggests that people are investing to chase capital gains, under the conventional wisdom that 'house prices never go down'. This is the textbook definition of speculative investment. [1] https://www.prosper.org.au/wp-content/uploads/2015/12/11Final_Speculative-Vacancies-2015-1.pdf https://www.prosper.org.au/wp-content/uploads/2015/12/11Fina... [2] http://www.macrobusiness.com.au/wp-content/uploads/2017/02/ScreenHunter_17403-Feb.-13-11.51-660x465.jpg http://www.macrobusiness.com.au/wp-content/uploads/2017/02/S... [3] https://www.macrobusiness.com.au/wp-content/uploads/2017/03/Australian-population-change.jpg https://www.macrobusiness.com.au/wp-content/uploads/2017/03/... [4] http://www.macrobusiness.com.au/wp-content/uploads/2017/02/ScreenHunter_17401-Feb.-13-11.51-660x489.jpg http://www.macrobusiness.com.au/wp-content/uploads/2017/02/S...

by MarkMc 10y ago

spangry 10y ago

Supply is definitely part of the equation, no doubt about it. Relaxing zoning and land-use regulations is necessary but, IMHO, not sufficient. More radical steps need to be taken, like the introduction of a land-value tax and repeal of stamp duty (Canberra has done this, albeit phased in over the next 15 years or so). This would: - Stop developers from 'land banking'. They would either have to put the land to use (e.g. build an apartment building, thus increasing supply) or sell the land to someone who will. - Reduce 'speculative vacancies' (properties that are purchased and then left vacant). Prosper Australia (a Georgist non-profit) estimated vacancies in Melbourne (in 2014) by examining water use data. They found that 1.45% of non-advertised residential stock was demonstrably vacant (0L water use per day). This would mean the actual vacancy rate was 8.3%. They also found that 4.8% were likely vacant (residences with below 50Lpd usage, when the average usage is 160Lpd). Which would equate to a vacancy rate of 18.9%! [1] - Obviously, an LVT would make vacant possession much more costly, and financially infeasible in some cases (although my assumption is that a decent proportion of these are financed by hot money flows out of China). And the removal of stamp duty would effectively result in additional supply on the market, as it would remove the disincentive for people to efficiently reallocate to appropriately sized homes. And fair enough re: immigration. You make perfectly valid points, and if your own experience of it is positive then that's obviously a good thing. Just as an aside: usually people cite "the need to support our ageing population" as their reason for preferring high immigration, even though the Productivity Commission has stated in three separate reports that this view has no real merit (simply put, because immigrants also age). However, I would still contend that, in aggregate, our current net inwards migration numbers aren't sustainable (and haven't been for a while).[2][3][4] For me, it's nothing against immigrants, and certainly nothing to do with race, religion or creed. It's simply a numbers issue. Not just in terms of housing demand, but also in terms of increasingly constrained infrastructure and education services. I think we need a bit of breathing space so we can catch up (or more competent politicians). Regardless, on the demand side, I think the bigger issue is our messed up tax system and the (mal)incentives it creates to invest in housing (or, as they say, 'equity maaate'). And I think your financial strategy is extremely sensible (perhaps, dare I say, optimal). It's the exact same strategy that's used by most 'housing bears' that I know. It's what I should be doing too, but I'm sorta lazy :) EDIT: Oh, and the decoupling of rent and prices is one of the reasons I think there's a bubble in property. People make investments to earn a return. The fact that super low rental yields haven't deterred property investment suggests that people are investing to chase capital gains, under the conventional wisdom that 'house prices never go down'. This is the textbook definition of speculative investment. [1] https://www.prosper.org.au/wp-content/uploads/2015/12/11Final_Speculative-Vacancies-2015-1.pdf https://www.prosper.org.au/wp-content/uploads/2015/12/11Fina... [2] http://www.macrobusiness.com.au/wp-content/uploads/2017/02/ScreenHunter_17403-Feb.-13-11.51-660x465.jpg http://www.macrobusiness.com.au/wp-content/uploads/2017/02/S... [3] https://www.macrobusiness.com.au/wp-content/uploads/2017/03/Australian-population-change.jpg https://www.macrobusiness.com.au/wp-content/uploads/2017/03/... [4] http://www.macrobusiness.com.au/wp-content/uploads/2017/02/ScreenHunter_17401-Feb.-13-11.51-660x489.jpg http://www.macrobusiness.com.au/wp-content/uploads/2017/02/S...