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More than wishin' and hopin' needed

By Ross Elliott - posted Thursday, 7 August 2014


The collective view of what the various property industry lobby groups are asking of government has become a confused picture. Little wonder governments can so easily divide and rule, or simply ignore.

Dusty Springfield's enduring classic "Wishin' and Hopin'" opened with the line "Wishing and hoping and thinking and praying, planning and dreaming." This is nice for a wistful love song lyric but hardly sound strategic guidance for an industry's advocacy platform. But if you combined the wish lists of the various property industry lobbies all jostling for 'peak body' status, you'd be forgiven for thinking that it was driven by wistful starry eyed dreamers, not hard-nosed business people.

Here's what I mean. Recently, the Property Council renewed its call for the abolition of stamp duty and land taxes. This was in response to a Business Council of Australia report that called for workforce mobility barriers to be removed. It's been a long held position of the PCA and the abolition of stamp duties was even a promise by the States in exchange for the rivers of revenue they would get from the GST. They (the states) lied.

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Now, the States have become even more dependent on property taxes than ever before, and most are subject to juggling very difficult demands for more services against high debt repayments. Calling for the abolition of their biggest direct revenue source, without proposing a replacement, at a time when every State is being forced into cutbacks and unpopular asset privatisations, is unlikely to get much traction.

At almost the same time, the Housing Industry Association renewed its call for first home buyers to be able to access their superannuation to fund a deposit on a home. This is a populist argument that seems to get reasonable airtime, but there are plenty of problems with it.

What of the first time buyers whose first purchase is an investment property? What of the fact that young people – typically the first time buyer demographic – have precious little in their super fund anyway? What of the reality that over our working lives, what we put into super is going to be nowhere near enough for the job it was initially intended (retirement funding) let alone trying to repurpose super to other things like a house deposit. The answers are not provided.

Then there's the thorny issue of negative gearing. Here, pretty much all the property industry groups agree: don't touch it. I tend, mostly, to agree with the arguments why it serves a purpose but a blanket ban on refining negative gearing doesn't make a lot of sense given the complexities of the economics and the very obvious excesses in some quarters. But to me it looks as if the industry's collective view of negative gearing at present is that any discussion is simply off limits. As for capital gain tax on the family home – you daren't mention it or all hell would break loose.

How about the supply side? Here, the HIA, UDIA and PCA are all pretty much in agreement: artificial planning constraints on new land for housing have been responsible for driving up land costs and for our worsening affordability problem. Their remedy (which I support) is for land to be less constrained, so that competition and more available supply will release the pressure on land prices and flow through to more affordable housing.

That's fine, but what's the view then on restrictive land use planning when it comes to retail? Hell no. The pro-free market view takes a 180' turn and all of sudden the high retail rents which are product of high retail property prices which are in turn a product of highly restrictive land use rights on retail property, are a good thing after all. Now it's a case of an orderly planning scheme and retail hierarchies and the prevention of retail sprawl into dormitory areas. The inconsistency in positions between land for housing and land for other uses is remarkable.

Put all the collective views together and imagine yourself a Minister for Property. What does the industry want?

They want stamp duties abolished, and land taxes too. Effectively, better they pay no tax. They want favourable tax treatment through things like negative gearing retained, along with the tax exemption on the family home. Don't even think about tinkering with that. To address affordability issues they want more land released and less planning control, and for first home buyers to access their meagre superannuation to get them into the market. But while freeing up land for housing to keep costs down and stimulate competition, don't even think of freeing up planning permissions for retail uses, because if retail rents – which are some of the highest in the world – fall, then it's the end of the world as we know it. Sovereign risk and all that.

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You'd have to forgive our imaginary Minister for wondering what they could actually do.

This isn't intended as a cheap shot because as a former industry advocate, I appreciate just how hard it is to prosecute the case for reform with limited resources, an unsympathetic public, and cash strapped governments. And you'd be mistaken to think I regard the current taxation and regulatory approach to property generally as anything but a mess of over-taxation and over regulation.

But lately the collective comments by the various industry groups seem to have become more one dimensional. Maybe it's just me but they appear, through their media comments, to be acting the same way unions did in the 70s and 80s: proposing logs of claims for wages and conditions without also proposing productivity improvements or other trade-offs in exchange. The collective view of the property industry, if it is to have some impact on government policy, might benefit from more collaboration amongst the various groups.

If a more unified voice on some of these pressing issues could be heard, and if that voice also identified solutions that didn't leave governments hopelessly out of pocket, then this can't be a bad thing. If, for example, as an industry we wanted lower stamp duties and land taxes and in exchange were prepared to publicly campaign for a 15% GST, along with a fairer system of distribution of those funds amongst the states, then that solution should form part of the overall industry-wide campaign. Ditto to finding a logically consistent approach to the issue of restrictive versus permissive land use controls, where some of the industry groups differ. If we intend to advocate both at the same time, this logically inconsistent position needs simple and plausible explanation.

The alternative is to fall into the trap of simply wishing and hoping, and thinking and praying, planning and dreaming.

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About the Author

Ross Elliott is an industry consultant and business advisor, currently working with property economists Macroplan and engineers Calibre, among others.

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