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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. I
by 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 agoOr 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 agoAs 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 agoIt 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.
- siquick 3y agoProperty investment is one of the easiest ways to reduce your tax bill in Australia.
- dools 3y agoThe taxes I'm talking about are the cost of building a new home. Prices mean revert to replacement cost.