The price of housing

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.

People investing in McMansions and other expensive housing for living in or resale forget their future ongoing higher costs of maintenance and cleaning than for smaller homes – all the great spaces and pale carpets, all the air-conditioning and central heating, extra because there are stairways, passages and places for different activities all linked together, without doors to keep less used places unheated or cooled. They often have unecological dark roofs, no eaves,and little garden space for rain-water to stream away, minute gardens, no room for children to play outside or drying washing in the fresh air.

The fittings are not ergonomic – the baths and basins that must be cleaned underneath, the hand-basins with shapes that don't save water, the inner-spring mattresses that must go to landfill when they start deteriorating, the chairs that cannot be mended, the stuffed sofas with leather tops that cannot be sewn again, the kitchens that look like laboratories.

Cost of McMansions for the economy includes destruction of perfectly-all-right housing in the 'right' areas to build them. They do not cause destruction of the poor housing that really needs destruction in poorer areas.

The former houses turned to rubbish with little that is recyclable. The content of skips usually goes to costly landfill – while the landfill grows at the cost of potential good housing land.

The gap between rich and poor widens, as people dealing in real estate get percentage commission which is higher on the high-priced housing, for little real work compared with most people's jobs. It might be better to have a national real estate business to compete with lower prices for people wanting houses to live in.

Far too many foreigners invest in Australian property, increasing the competition. In our local property magazine, all the staff of one well-known real estate manager have Chinese or Vietnamese names.

The eco-standard of houses should be made public at sale or lease – as stated in Greener Homes on 20 November 2011. If you buy a car, you can easily find out its fuel efficiency. But what about a house? The ongoing costs and eco-impacts of existing buildings vary widely, but it's hard for would-be buyers or renters to know what they are in for. In early 2009, state and federal governments agreed that a dwelling's energy, greenhouse and water performance should be publicised at the point of sale and lease.

Since then, however, not much has happened. The policy is known as "residential building mandatory disclosure". It could prompt a big change in household energy and water consumption. While the details have not been set, the approach is broader than the current star ratings. As well as the building fabric, it is likely to cover heating, cooling and hot water systems, together with lighting, clothes drying, rainwater tanks and water fittings, and a list of recommended upgrades.

'On an inflation and quality-adjusted basis, house prices in Australia have increased by around 2-3% per annum since 1970. This is enough to yield a doubling in real house prices every 30 years or so, underpinning a long-term decline in housing affordability and the homeownership rate.'

What can be done?

The increase in price between the last sale and the next is often more than the stamp duty, and does not go to the state.

Stop encouraging investors in property, that increases the demand (and keep population growth down too). Encourage investment in the industries we need. Stop negative gearing.

We could have a nationalized estate agency, like Medicare Private in competition with private business, that took less than the high percentage of the selling price of property that private estate agents take. Private estate agents are on the side of the sellers not the buyers, since it is in their interests to do so.

The tremendous profits that people have made recently selling properties make it desirable that housing be sold at no more than 105% of the previous price, or some similar strategy to prevent continual spiraling of prices. This risks abuses with people pretending to be other people, so they can resell, but could have an effect.

Could the government prevent investment in real estate for re-sale instead of in the industries that we need, prevent the suffering of those who lose their homes through the swings in prices of real estate. prevent the situation of paying for your home a good slice of income all your life, and prevent the accumulation of property a major way to become a billionaire?