Is doing anything that reduces house prices really such electoral poison? Don't parents realise that higher houses prices mean their children are less likely to leave home, or will need to draw more from the bank of Mum and Dad, or will need to move far away to afford a home, taking the grandkids with them?
Maybe the smarter ones even understand that housing wealth is an illusion. Your house goes up in price but so does the price of your next house
“The asset price of housing doesn’t reflect the price of occupying housing—it mostly reflects prevailing interest rates.” Your words Cameron.
Thanks for a great article, I hope you are still checking the comments.
Two questions about the above statement:
1) What has been the relationship between rates and house prices over (say) the last 30 years in Au and NZ.
2) Australia and NZ have the highest house price to income ratio in the OECD, ( only Honk Kong is higher!). At a guess, our rates are higher on average than others, e.g. Germany, France, even UK. What is the main driver of Antipodean out performance ? It certainly isn’t a shortage of land!
Great article. Amazing how taboo the obvious solution is… to suggest any public role in the provision of housing in the west you might as well be wearing a communist hat!
What sad is we already know changing zoning works well. There are just too many vested interests to do it.
Example: In the 2015 town plan Logan City in SE QLD decided to attack housing affordability by letting *any* size residence have a attached or de-attach unit that was legally rentable separately with a separate address, even though both residences would be on the same title. This effectively doubled the potential legal residential density.
It was a huge success. Rents flat-lined and started to decline. New housing builds even subdivision started to slow in favor of builds being dual on even small blocks. Property prices stagnated for those who couldn't or didn't add a unit.
However... the vested interests were just too big. A collosal lobbying campaign caused the council to revoke it - under the claim that it caused too much on street parking from increasing the population. The real reason of course was all the investors now held assets that were not longer appreciating.
Today the councils policy has reverted to only allowing 1 residence per 400sqm block, with only extremely constrained restrictions given to a select handful of companies who create over 55 villages, and a few tiny amount of pockets on main roads that are zoned for town houses.
Sadly the other thing you are missing is that gold plating of all Australian building standards has made it incredibly expensive just to get a legal block. A peice of farmland on the urban fringes (for example: SE QLD's Yarrabillba) has a sale price equivalent of only $800 per 400sqm block. Over $160k in costs are needed to build the roads, power, water, etc. These costs are staggering because roads must generally be made now so that gutters and road surface last 80 years, same with water and sewer and storm water. So even where the land is 'worthless' and essentially free, empty blocks for residential start at about $200k. Add on the building codes which are mostly there to make houses more expense to be legal... and you cannot make a house in Australia for under $400k anymore even if you are given the land for free.
If property prices keep rising at similar rates to that of the past 15 to 20 years, we will effectively price all subsequent generations right out of the property market. In many cities now in Australia and NZ, debt to income ratios on very ordinary run of the mill houses, have gone from 3 or 4 times median household income 25 years ago, to as much as 8 to 12 times median household incomes today. All the Boomers who have been patting themselves on the backs for the increased value of their “great investments” have failed to account for the fact that demographically, subsequent generations will be significantly smaller than the boomer generation. Secondly the tax burden of supporting an increasingly bigger ageing population with less workers will mean it is likely that subsequent generations are even more unlikely to be able to afford a property. Who will buy many of these boomer owned over inflated properties in another 20 or 30 years when the time comes to sell up and cash in, in order to be able to afford those exorbitant nursing home fees, when the elderly become to enfeebled to stay in their own homes independently. By the way I am a boomer myself, and I do wonder who will be able to afford to purchase my home in 30 years if prices continue to rise stratospherically and the pool of buyers demographically is smaller. But I suspect, that is why successive governments are keen on pulling that immigration lever. The boffins have already done the forward mathematical projections, and know the only way they can boost both the tax payer bases of demographically smaller generations, and keep the whole demand for the housing Ponzi scheme afloat, is to keep importing fresh bodies from elsewhere in the world. Won’t work though, we have already entered an era of global entropy both economically and with resources becoming increasingly scarce and the costs of remediation with global climate change will grow with every passing year. Buckle up Dorothy, Kansas is going bye bye, and the politicians will continue to play a zero sum short term game politically. The world will irrevocably change over coming decades as we have globally reached peak wealth effect (for most of the world’s population), not to mention population, natural resource depletion and climate change overshoot.
I call it "When we're dead laws" (or could be changed to "When we're gone laws"). It's purpose it to both to get around Poltician & Voter self-absorption & moral corruption and at the same time appeal to the fact we tend to want to so good. It could be done on many things, not just Housing.
It basically means a Politican or Citizen Voter voting on policies that solve a problem (e.g. provide the known simple & cheap housing solutions that corruption prevents), BUT the policies don't come in for decades, after your own selfishness is less appealing because you will be dead.
The young will vote for it, because it is in their own interests as non property owners. The older will vote for it because they will be dead anyway.
I'd love to have you take my idea or tell me what you think.
Btw I have just found your work Cameron on Walk the World YT Channel, & wow I am thrilled!! Thank you for your work.
Is doing anything that reduces house prices really such electoral poison? Don't parents realise that higher houses prices mean their children are less likely to leave home, or will need to draw more from the bank of Mum and Dad, or will need to move far away to afford a home, taking the grandkids with them?
Maybe the smarter ones even understand that housing wealth is an illusion. Your house goes up in price but so does the price of your next house
“The asset price of housing doesn’t reflect the price of occupying housing—it mostly reflects prevailing interest rates.” Your words Cameron.
Thanks for a great article, I hope you are still checking the comments.
Two questions about the above statement:
1) What has been the relationship between rates and house prices over (say) the last 30 years in Au and NZ.
2) Australia and NZ have the highest house price to income ratio in the OECD, ( only Honk Kong is higher!). At a guess, our rates are higher on average than others, e.g. Germany, France, even UK. What is the main driver of Antipodean out performance ? It certainly isn’t a shortage of land!
Great article. Amazing how taboo the obvious solution is… to suggest any public role in the provision of housing in the west you might as well be wearing a communist hat!
What sad is we already know changing zoning works well. There are just too many vested interests to do it.
Example: In the 2015 town plan Logan City in SE QLD decided to attack housing affordability by letting *any* size residence have a attached or de-attach unit that was legally rentable separately with a separate address, even though both residences would be on the same title. This effectively doubled the potential legal residential density.
It was a huge success. Rents flat-lined and started to decline. New housing builds even subdivision started to slow in favor of builds being dual on even small blocks. Property prices stagnated for those who couldn't or didn't add a unit.
However... the vested interests were just too big. A collosal lobbying campaign caused the council to revoke it - under the claim that it caused too much on street parking from increasing the population. The real reason of course was all the investors now held assets that were not longer appreciating.
Today the councils policy has reverted to only allowing 1 residence per 400sqm block, with only extremely constrained restrictions given to a select handful of companies who create over 55 villages, and a few tiny amount of pockets on main roads that are zoned for town houses.
Sadly the other thing you are missing is that gold plating of all Australian building standards has made it incredibly expensive just to get a legal block. A peice of farmland on the urban fringes (for example: SE QLD's Yarrabillba) has a sale price equivalent of only $800 per 400sqm block. Over $160k in costs are needed to build the roads, power, water, etc. These costs are staggering because roads must generally be made now so that gutters and road surface last 80 years, same with water and sewer and storm water. So even where the land is 'worthless' and essentially free, empty blocks for residential start at about $200k. Add on the building codes which are mostly there to make houses more expense to be legal... and you cannot make a house in Australia for under $400k anymore even if you are given the land for free.
I found this a well put together discussion with some actual logic making it quite a compelling argument.
Excellent article Cameron
You may wish to comment on https://www.researchgate.net/publication/362635231_AustralianHousePrices50Years
Great original work, especially in outlining the social and political dynamic driven by self interest. At the end of the war, they didn't want a group of disaffected former soldiers rocking the boat. Soldiers like this one: https://ptolemy2.wordpress.com/2022/09/09/siegfried-sassoons-private-letter-1916/
If property prices keep rising at similar rates to that of the past 15 to 20 years, we will effectively price all subsequent generations right out of the property market. In many cities now in Australia and NZ, debt to income ratios on very ordinary run of the mill houses, have gone from 3 or 4 times median household income 25 years ago, to as much as 8 to 12 times median household incomes today. All the Boomers who have been patting themselves on the backs for the increased value of their “great investments” have failed to account for the fact that demographically, subsequent generations will be significantly smaller than the boomer generation. Secondly the tax burden of supporting an increasingly bigger ageing population with less workers will mean it is likely that subsequent generations are even more unlikely to be able to afford a property. Who will buy many of these boomer owned over inflated properties in another 20 or 30 years when the time comes to sell up and cash in, in order to be able to afford those exorbitant nursing home fees, when the elderly become to enfeebled to stay in their own homes independently. By the way I am a boomer myself, and I do wonder who will be able to afford to purchase my home in 30 years if prices continue to rise stratospherically and the pool of buyers demographically is smaller. But I suspect, that is why successive governments are keen on pulling that immigration lever. The boffins have already done the forward mathematical projections, and know the only way they can boost both the tax payer bases of demographically smaller generations, and keep the whole demand for the housing Ponzi scheme afloat, is to keep importing fresh bodies from elsewhere in the world. Won’t work though, we have already entered an era of global entropy both economically and with resources becoming increasingly scarce and the costs of remediation with global climate change will grow with every passing year. Buckle up Dorothy, Kansas is going bye bye, and the politicians will continue to play a zero sum short term game politically. The world will irrevocably change over coming decades as we have globally reached peak wealth effect (for most of the world’s population), not to mention population, natural resource depletion and climate change overshoot.
What do think of this solution, Cameron?
I call it "When we're dead laws" (or could be changed to "When we're gone laws"). It's purpose it to both to get around Poltician & Voter self-absorption & moral corruption and at the same time appeal to the fact we tend to want to so good. It could be done on many things, not just Housing.
It basically means a Politican or Citizen Voter voting on policies that solve a problem (e.g. provide the known simple & cheap housing solutions that corruption prevents), BUT the policies don't come in for decades, after your own selfishness is less appealing because you will be dead.
The young will vote for it, because it is in their own interests as non property owners. The older will vote for it because they will be dead anyway.
I'd love to have you take my idea or tell me what you think.
Btw I have just found your work Cameron on Walk the World YT Channel, & wow I am thrilled!! Thank you for your work.
Is this recorded?
Fantastic article Cammeron! You may be interested in my recent book that delves into these same troubled waters for the USA. https://justicelandandthecity.blogspot.com/p/download-sick-city-pdf.html.
Professor Patrick Condon University of British Columbia. pcondon@sala.ubc.ca