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The price of housing

By Valerie Yule - posted Friday, 25 July 2014

The government likes the price of housing to be high and going even higher - never downwards. When manufacturing and even mining are going down in Australia, property remains a source of profit for the government, in many ways, from sales tax, land tax, capital gains tax, GST and taxation of the property-owners.

The First Home Owner Grant scheme is a way that public money can be spent to keep housing prices high.

But high-priced housing is bad for almost everyone else except for real estate firms.


The government encourages population growth so that more people bid for housing - but without more jobs for them except for mining in rural areas and the construction industry in the cities, which makes a vicious cycle. Many other industries are closing down. Australian population has grown naturally as well as by immigration from 19.15 million in 2000, to 22.68 million in 2012, following a steady upward line.

People who want houses to live in must compete with investors who want an investment, yet are not risking investment in manufacture, farming or mining. Land is taken for housing that once was fertile farmland and native bushland. 

Stephen Kirchner states as a myth that the supply of land is fixed:

The supply of land is finite in a physical sense, but not in an economic sense. Especially in Australia, land supply is far from exhausted and the intensity of existing land use can always be increased. The supply of land is a constraint on the supply side of the housing market in the short run, but it should not be a constraint in the long run if land supply and land use are allowed to respond to price signals from housing markets. Rising land and house prices should call forth increased land supply and increase the intensity of land use, putting downward pressure on prices. (Executive Summary Issue Analysis No. 146 • 10 July 2014)

But the important point is that it is finite in a physical sense, as greenland is taken over for housing, meaning food and recreation sources are lost and travel times are increased for new buyers.

Mortgages are too high and variable, so that people undertaking to buy must put themselves under long-term obligations that are far too high for their income , and disastrous if they hit misfortune or lose their jobs. The houses then fall into the hands of financiers. Mortgages should be only a part of young couple's expenses, not the major part. Entrepreneurship is discouraged for mortgagees on mortgage stress challenge for new buyers, wrote that 'more than half of first homeowners who purchased within the last two years are considered to be in mortgage stress, new research has revealed'.


According to a survey of 1,000 first home buyers by Mortgage Choice, 53% of respondents are paying more than 30% of their after tax income to a mortgage. The 30% mark is considered the stress threshold, where repayments may become unmanageable for many households, especially with other costs of living and variable factors such as interest rate rises.

Much of the housing on the market is infill. In my suburb of Monash five school properties have been taken for housing – later the government will buy more property for new schools to cater for the children in the new housing. Otherwise new housing is 'redeveloping' properties by demolishing houses as recently built as ten years old and replacing them with McMansions. Our local newspapers' latest property supplement advertised, apart from flats and shops, 33 single-storey houses, with 6 of them doomed by areas placed on them to show how new housing would fit, and 18 McMansions – big houses of a certain porticoed pattern to fit the same-size family of the single-storey house that was demolished to build them. The people who built these McMansions were not going to live in them themselves.

People buy expensive McMansions believing they will have a re-sale value. They may not. Any down-turn in the economy and mortgage holders are hit badly by it. McMansions are replacing perfectly good brick homes in every street in our suburb. They are very unsustainable and fit only the same number of people that lived in the previous housing.

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About the Author

Valerie Yule is a writer and researcher on imagination, literacy and social issues.

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