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I don’t disagree with the sentiment of the author. The runaway cost of owning a home is a huge problem. But what’s the solution? If people are willing to pay a

I don’t disagree with the sentiment of the author. The runaway cost of owning a home is a huge problem. But what’s the solution? If people are willing to pay a price for a home, that’s what it is worth. Nobody is going to take less for their home. Upzoning or splitting parcels is only really a solution in cities. IMO, it will also just skyrocket the cost of existing SFH which are what people actually want to raise their families in.

lmm 3y ago
> Upzoning or splitting parcels is only really a solution in cities. IMO, it will also just skyrocket the cost of existing SFH which are what people actually want to raise their families in. Plenty of people will happily raise a family in a smaller but more central apartment with better services rather than a SFH in the suburbs. And worst case upzoning doesn't mean we have to use that zoning capacity - if it turns out people would rather build SFHs (and are willing to pay what they cost) then they can still do that.
- dottjt 3y ago
  Problem is that apartment quality in Australia is beyond bad. We have quite a lot of apartments, but no one wants to live in them for that reason. But yeah, if they were better quality I imagine people would move into them.
  - lmm 3y ago
    Well, if no-one wants to live in them then no-one will pay much for them and they won't be economical to build.
    - jfim 3y ago
      People have to live somewhere, so they might live in them begrudgingly, even though they'd rather live in higher quality dwellings.
      - lmm 3y ago
        Most people want to live in a giant house right next to where they work with a bunch of cafes and restaurants in easy walking distance but no neighbours and a great view, and it needs to be cheap. In practice something has to give. In the absence of artificial restrictions, a free market can do a pretty good job striking the balance between luxury and affordability.
    - dottjt 3y ago
      In theory, but what's happening is that they're all being bought by foreign investment and remaining empty. That's what happens when housing becomes an investment vehicle.
richev 3y ago
> If people are willing to pay a price for a home Poorly-regulated lending means that it's the banks who are willing to lend the money. Home owners pay what they have to out of necessity, not willingness. (speaking as someone who owns a house in Sydney)
- jojobas 3y ago
  Short of payslip fraud, that's something of the past. It boils down to how sure people feel they can keep paying the huge loan over the next 30 years.
dools 3y ago
In Australia, the solution is to remove all taxes, fees and charges on new builds. Some 40% of the total cost of a new build goes to taxes, fees and charges. If you bring down the new build cost, supply will explode and prices will come down. Of course this would also crash the property market and ruin a lot of boomers' retirement plans so don't expect that to happen any time soon. My favourite Real Estate investment analyst Chris Bedingfield said it because when he said that Australia isn't in a "Housing Bubble" any more than it's in a "Cigarette Bubble". The reason that both houses and cigarettes in Australia are so comparatively expensive is that they're heavily taxed.
- sowbug 3y ago
  Or prices for the other 60% of costs would rise to offset the reduction, meaning that the tax/fee/charge revenue instead becomes profit for private businesses. Don't ask me to prove it, but that seems to be what has happened in the US with the 30% solar subsidy, the federal EV tax credits, etc.
  - dools 3y ago
    As soon as the cost to supply drops below the price people are able to pay, supply will increase. The reason supply is so low is because so few people can afford to buy a newly built house in an area in which they can also find a suitable job. Property price movements are dominated by new build cost in Western Sydney. However with the doubling of the first home owner grant in QLD that is exclusively available on new builds, expect to see huge supply and falling house prices there over the next 5 years. A great time for first home buyers, a bad time for boomers who bought those gold coast investment properties.
- Gareth321 3y ago
  It would help, but addressing only one side of the supply and demand equation won’t solve the problem. Property investment is still very lucrative relative to productive enterprises, so people will continue to funnel money into it instead of businesses until taxes capital gains or land taxes increase to a sufficient degree. Further, Australia is operating an EXTREMELY aggressive population expansion policy. This can and should be reduced significantly. The solution is some mix of your suggestion and mine. Unfortunately most Australians own or live in an owned property. They won’t vote for this. In a few decades they will be in the minority, and life-long renters will be in charge. When that happens we can expect some wild policy swings. Similar patterns are developing all over the Western world.
geekpowa 3y ago
The author addresses cause and possible solutions in their longer essay. The fundamental cause is taxation policy changes around 2000. The solution is further policy changes, but the wicked problem is that the democratic majority do not want these changes; or can be easily persuaded these changes are likely harmful for them. So Australia socially and economically exists in a death spiral; where wealth channeled into real estate is not consistent with its productive utility.
whoknowsidont 3y ago
>If people are willing to pay a price for a home, that’s what it is worth. Why do we assume rational actors when we keep proving to ourselves people are not acting rationally?
__MatrixMan__ 3y ago
You could do some market analysis to figure out who is contributing most to the upwards price spiral and burn their house down. Maybe you do this yearly--you'd have to be restrained enough to not meaningfully impact supply. This would disincentivize being at the top of lists like that. Aggressive investors would find a different sector to play in, which I expect would bring prices down.

lmm 3y ago

> Upzoning or splitting parcels is only really a solution in cities. IMO, it will also just skyrocket the cost of existing SFH which are what people actually want to raise their families in. Plenty of people will happily raise a family in a smaller but more central apartment with better services rather than a SFH in the suburbs. And worst case upzoning doesn't mean we have to use that zoning capacity - if it turns out people would rather build SFHs (and are willing to pay what they cost) then they can still do that.

dottjt 3y ago
Problem is that apartment quality in Australia is beyond bad. We have quite a lot of apartments, but no one wants to live in them for that reason. But yeah, if they were better quality I imagine people would move into them.
- lmm 3y ago
  Well, if no-one wants to live in them then no-one will pay much for them and they won't be economical to build.
  - jfim 3y ago
    People have to live somewhere, so they might live in them begrudgingly, even though they'd rather live in higher quality dwellings.
    - lmm 3y ago
      Most people want to live in a giant house right next to where they work with a bunch of cafes and restaurants in easy walking distance but no neighbours and a great view, and it needs to be cheap. In practice something has to give. In the absence of artificial restrictions, a free market can do a pretty good job striking the balance between luxury and affordability.
  - dottjt 3y ago
    In theory, but what's happening is that they're all being bought by foreign investment and remaining empty. That's what happens when housing becomes an investment vehicle.

richev 3y ago

> If people are willing to pay a price for a home Poorly-regulated lending means that it's the banks who are willing to lend the money. Home owners pay what they have to out of necessity, not willingness. (speaking as someone who owns a house in Sydney)

jojobas 3y ago
Short of payslip fraud, that's something of the past. It boils down to how sure people feel they can keep paying the huge loan over the next 30 years.

dools 3y ago

In Australia, the solution is to remove all taxes, fees and charges on new builds. Some 40% of the total cost of a new build goes to taxes, fees and charges. If you bring down the new build cost, supply will explode and prices will come down. Of course this would also crash the property market and ruin a lot of boomers' retirement plans so don't expect that to happen any time soon. My favourite Real Estate investment analyst Chris Bedingfield said it because when he said that Australia isn't in a "Housing Bubble" any more than it's in a "Cigarette Bubble". The reason that both houses and cigarettes in Australia are so comparatively expensive is that they're heavily taxed.

sowbug 3y ago
Or prices for the other 60% of costs would rise to offset the reduction, meaning that the tax/fee/charge revenue instead becomes profit for private businesses. Don't ask me to prove it, but that seems to be what has happened in the US with the 30% solar subsidy, the federal EV tax credits, etc.
- dools 3y ago
  As soon as the cost to supply drops below the price people are able to pay, supply will increase. The reason supply is so low is because so few people can afford to buy a newly built house in an area in which they can also find a suitable job. Property price movements are dominated by new build cost in Western Sydney. However with the doubling of the first home owner grant in QLD that is exclusively available on new builds, expect to see huge supply and falling house prices there over the next 5 years. A great time for first home buyers, a bad time for boomers who bought those gold coast investment properties.
Gareth321 3y ago
It would help, but addressing only one side of the supply and demand equation won’t solve the problem. Property investment is still very lucrative relative to productive enterprises, so people will continue to funnel money into it instead of businesses until taxes capital gains or land taxes increase to a sufficient degree. Further, Australia is operating an EXTREMELY aggressive population expansion policy. This can and should be reduced significantly. The solution is some mix of your suggestion and mine. Unfortunately most Australians own or live in an owned property. They won’t vote for this. In a few decades they will be in the minority, and life-long renters will be in charge. When that happens we can expect some wild policy swings. Similar patterns are developing all over the Western world.

geekpowa 3y ago

The author addresses cause and possible solutions in their longer essay. The fundamental cause is taxation policy changes around 2000. The solution is further policy changes, but the wicked problem is that the democratic majority do not want these changes; or can be easily persuaded these changes are likely harmful for them. So Australia socially and economically exists in a death spiral; where wealth channeled into real estate is not consistent with its productive utility.

whoknowsidont 3y ago

>If people are willing to pay a price for a home, that’s what it is worth. Why do we assume rational actors when we keep proving to ourselves people are not acting rationally?

__MatrixMan__ 3y ago

You could do some market analysis to figure out who is contributing most to the upwards price spiral and burn their house down. Maybe you do this yearly--you'd have to be restrained enough to not meaningfully impact supply. This would disincentivize being at the top of lists like that. Aggressive investors would find a different sector to play in, which I expect would bring prices down.