The housing fix we actually CAN do something about

As someone who has spent the best part of their professional life involved with property markets and public policy, I reckon I've seen pretty much every type of lunacy at work. When it comes to housing, that lunacy frequently ascends new heights. The latest hysteria is nothing we haven't seen before, and will see again – despite the many inquiries, task forces and talk fests proposing "solutions."

Here's some bad news for those who think they have "the fix." We basically can't do anything about established house prices (typically measured by the median price). To make established housing in our major cities 'affordable' prices would need to fall by around 30%. This would likely collapse our banking and financial system which is heavily leveraged into residential mortgages. Along with wiping out incalculable personal wealth. Alternatively, incomes would need to rise by around a third. That would collapse the economy. And a lot of other things along with it.

The established housing market – second hand homes if you like – is a function of supply and demand. Demand for capital cities is red hot and increasing supply is challenging (anyone who has tested their sanity by lodging a DA almost anywhere will attest to that).

Politicians and other policy makers will tinker at the margins, usually with the net result of making things worse via grants and complex processes intended to target particular subgroups in the market. Stamp duty exemptions for first home buyers, grants and things like "shared equity" schemes are just some of the distortions they think will make things better.

But what they continually refuse to do is focus on the cost of bringing new stock to the market, which we can do something about. Maybe they're just stupid, or their advisors are stupid, or maybe entire government departments are stupid, or we are the stupid ones for not chucking them out of office for not getting this right.

The simple fact is that the supply of new housing – detached houses or home units – is both taxed and regulated to a degree many many times that of the second-hand market.

Leaving aside the very real challenges around the approval of new supply (be that a residential subdivision or new apartment project) the tax and compliance story alone should tell the knuckleheads in power in almost every state that we have things very badly wrong.

Here's a simple example. Let's say I buy a second-hand traditional Queenslander style home with 5 bedrooms, two bathrooms, a two-car garage on a 1,000m2 block in the Brisbane suburb of Clayfield for $2.275million. The tax I pay on that will be 4.6% in stamp duty, or $104,162. Yep, that's a big tax bill, and it would hurt. You know about it because it's a separate payment to be made on settlement. It's not buried within the purchase price.

Keep in mind that Clayfield is a suburb with a lot of pre-existing amenity. There is good pubic transport, local libraries, shops, tree lined streets, a choice of local schools within reach and so on.

Now compare that with buying a new project home – house and land package – in an outer suburb like Yarrabilba for $715,000. This 4 bed, 2 bath, 2 car house sits on a 400m2 block and while amenities are slowly coming, it's still early days. Public transport is almost non existent, and most local facilities are a good drive away. My tax bill on this will be around 30%. That's right, not 4.6% for a $2.275 million house in a high amenity area, but 30% for a new low set costing $715,000 in an area with fewer amenities.

The total tax bill for our new house buyer is around $216,000 – but the buyer of the new home doesn't know this as the costs are buried within the price. Yes, they will know about the stamp duty of $18,025 (which is separately billed) but they won't realise their new home comes with around $65,000 in GST (which only applies to new housing), an infrastructure levy for the local council of $33,000 (which only applies to new housing), and a host other charges associated with delivering a new, humble dwelling which will add a further $100,000 to the bill. That includes by the way, a new $30,000 bill to comply with the latest round of energy efficient and disabled access guidelines which of course, like all the other charges, only apply to the new house and not the established Clayfield house.

These are Brisbane examples but it's the same across the country. Have a look at any number of HIA, UDIA, Master Builders or Property Council reports which all say the same thing.