Doubt it, the problem isn't supply, it's demand. They could build another million houses, the investors will just come in and buy them up, even Blackrock are here apparently buying rental properties. The more you build the worse it gets. The problem largely is about conflicts of interest between the government and the people. The higher property prices rise, the greater the returns to government, councils and RE agents. The average wage worker subsidizes investors, because housing has been turned into a business where negative gearing and a host of other things related to property get tax breaks. One could build a million houses and 100 investors will snap them up to re-lease them, the effect being, prices rise, it's good for investors prices rise, more collateral for further loans, more gearing, more tax breaks, gummint is happy because they are in on it too. Governments like to portray the impression they disaprove of conflicts of interest in business, unless it applies to them, that's when you can hear a penny drop, they just shut up. This has been going on for years, everyone in power wants to wash their hands and say; "It's not our responsibility to fix the issue". Governments know that renters don't control voting outcomes, they are not a big enough force. So, the government is not threatened by being voted out by renters, so they go along with the problem because it is financially good for them and their cronies. Pigs at the trough.
Your explanation does away with the basic principle of supply and demand. Yet, negative gearing, a financial wizardry Australians are fond of, distorts that principle. If I'm correct, it encourages borrowing to purchase properties that can't break even by allowing the loss to be tax deductible. So the challenge is primarily to get the loan, and wealthy people get bigger loans than less wealthy people. The social hierarchy is preserved. In my years living there I found no correlation between property price and rental price. Negative gearing let's you not worry and I don't know how Australia would survive without it. If suddenly rents had to cover a significant part of the property cost, they would instantly triple.
If one is fortunate enough to be a high income earner, then unfortunately for them, their taxation rate is high. This high tax problem can be overcome by owning rental properties whereby all costs are tax deductable, including interest payments on loans. When these rich dudes die, instead of paying capital gains tax on the house (because they are dead no longer own the property) the property can be inherited by their children for example and no capital gains is levied when passed on down to the kids. That's how the rich get richer, at the expense of those further down the food chain.
You are not looking hard enough, house prices are going through the roof and so are rents. In Australia, if your house for example is worth $500,000, the going rent is $500 per week, if $800,000, then $800pw etc.
Capital City: Annual change in price: Median Price: Sydney + 30.4 per cent $1,499,126 Melbourne + 16.8 per cent $1,037,923 Brisbane + 15.3 per cent $702,455 Adelaide + 20.1 per cent $667,888
https://www.smh.com.au/business/the...ustralian-housing-market-20211110-p597nc.html ‘Of course there are examples’: Criminals laundering billions through Australian housing market By Sarah Danckert November 10, 2021 Homebuyers could be competing at property auctions against organised criminal gangs using Australia to launder their ill-gotten gains, according to evidence from law enforcement agencies at a federal inquiry. Representatives from financial crimes regulator, Austrac, the Australian Federal Police and the Australian Crime Intelligence Commission told a Senate hearing into Australia’s money-laundering laws that criminals are using lawyers, accountants and real estate agents to launder tens of billions of dollars in ill-gotten gains through the property market each year. In a red hot property market, who’s buying is a key issue for the Senate’s anti-money laundering and counter terrorism financing inquiry. Crediteter Rae Austrac estimates that in 2020 alone, Chinese interests laundered $1 billion through Australian real estate. The head of the AFP’s asset confiscation taskforce, Stefan Jerga, told the inquiry there were times when prospective homeowners would be competing against money launderers at auctions. “Without any histrionics ... of course, there are examples of there not being a level playing field when you have a well-financed organised crime using real estate to launder money. Yes, there will be instances,” he said. The AFP told the inquiry that of the $187 million in assets it seized in 2021 financial year, $116 million was in real estate assets. AFP Deputy Commissioner Ian McCartney said the AFP was supportive of expanding the anti-money laundering regime to take in real estate agents, accountants and lawyers saying there was evidence where individuals in the three ‘gatekeeper’ professions had been knowingly involved in money laundering. The inquiry is reviewing whether Australia should implement new laws that require potential “professional facilitators” of large transactions – such as lawyers, accountants and real estate agents – to report suspicious dealings to regulators. Only Australia, Haiti and Madagascar are yet to expand their anti-money laundering and counter-terrorism laws to include “professional facilitators” like agents, accountants and lawyers alongside banks and casinos. Senator Deborah O’Neill pressed witnesses on the impacts the gaps in money laundering laws are having on home buyers. “Australians are going to purchase a house this weekend – whether they are going to an auction or in the midst of a transaction to purchase a house. Are they competing against people who are flush with the benefits of crime? Is that a real thing?” Ms O’Neill asked senior executives from the Australian Crime Intelligence Commission. ACIC executive director Robert Jackson said it would be hard for ACIC to define that someone was being outbid at an auction by someone looking to launder their ill-gotten gains. “Obviously, criminals do their very best to obfuscate and make it opaque as far as the dealings in any legitimate purchases.” ACIC deputy chief Matt Rippon added: “Let me put it this way, Senator, it’s a well documented methodology to launder funds through the financial system and one part of the financial system is the real estate market.” Austrac representatives also told the inquiry that their modelling indicated criminals using real estate to launder money could theoretically push up the price of homes. “We note the widespread concentrated real estate purchases with proceeds (of money laundering) could drive prices up. And the word is could.” Austrac national manager intelligence partnerships Bradley Brown said. “The logical economic consequence of an unequal market means that if a person like you and I was competing next to a person who had illicit proceeds of crime then it’s an unfair situation,” Mr Brown said responding to questions from Ms O’Neill. But allegations that home buyers were potentially competing with crime gangs came as a surprise to the real estate agents lobby group, with the President of the REIA Adrian Kelly saying he had not seen any evidence that Australian real estate was particularly vulnerable to money laundering. “To suggest that money laundering is pushing house prices up, I’m not sure that’s something that could be substantiated,” Mr Kelly said. He added the REIA was supportive of providing information to agencies to assist in their investigations but the industry was wary of the cost impost of being formally brought within the AML laws given many agencies were small businesses. His concerns were echoed by Liberal Senator Paul Scarr who said some of the information being sought from real estate agents could be provided by conveyancing lawyers processing transactions.
The best bet for young people who want to buy a home is to have parents who already own one, the Reserve Bank has admitted David Adams Nov. 15, 2021 https://www.businessinsider.com.au/reserve-bank-australia-home-ownership-parents-inheritance Adrian Greeman, Construction Photography / Avalon / Getty Images The most realistic way for many Australians to enter the housing market may be through their parents, the Reserve Bank of Australia (RBA) has admitted. Speaking before a parliamentary committee, RBA assistant governor Luci Ellis said those whose parents rent a home will likely be in a “much more difficult situation”. The stark admission comes as policymakers examine the tax, regulation, and supply issues driving wild price growth. The most realistic way for many Australians to enter the housing market is to receive help from their homeowning parents, the Reserve Bank of Australia has admitted, leaving little hope for those whose families don’t already own a home themselves. Speaking before the Standing Committee on Tax and Revenue for an inquiry into housing affordability and supply, Reserve Bank of Australia (RBA) assistant governor Luci Ellis on Monday confirmed the fears of thousands of young Australians locked out of the hyperactive market. “There’s a mechanism by which children can relatively easily end up being home owners” if their parents already own a home, Ellis said. That ‘mechanism’ involves parents using the equity in their property to guarantee new home loans for their children. The alternative: parents can leave the family home as an inheritance upon their death. While things are already tough for those relying on the generosity of their elders, people whose parents rent their home “are going to be in a much more difficult situation,” Ellis said. It is a “fact” that “some people will find it easier to purchase a home than others based on the socioeconomic position they were born into,” she added. Ownership vital to avoid poverty in retirement: RBA Echoing the experience of financial counsellors and social workers, the assistant governor also suggested home ownership is a key determinant of hardship later in life. “If you own your own home at the point you retire that’s basically the thing you need to do to not to be in poverty in retirement,” she said. And Australia’s prevailing policy mix means homeowners are unlikely to downsize in retirement, Ellis said, keeping even more homes off the market. “A lot of people are holding on to more houses than needed in case they need that asset base for aged care,” she said, resulting in “people in homes that are perhaps a bit too big for them now.” The fact the home is not counted as an asset under the current pension test has further skewed the market, Ellis added. The central bank’s frank home ownership admissions back up the experiences of countless young Australians, whose quest for home ownership feels increasingly farfetched. That sense of disillusionment has only grown after months of incessant house price growth across much of the country. Domain reports Sydney median house prices hit nearly $1.5 million in September, rising more than $6,700 a week for the past year. Prices have risen more than 15% in every capital city over the past twelve months, driven by high demand, record-low interest rates, and a suite of government incentives through the COVID-19 pandemic. The average Australian dwelling price grew to $836,000 in November, the RBA says. In other terms, middle-of-the-road home prices are now 5.5 times the average household disposable income. Inquiry chasing housing market solutions The inquiry was launched in September with the goal of investigating how Australian tax, regulation, and housing supply have impacted pricing. Ellis said these dynamics are “something that is worthy of public consideration,” but stopped short of announcing hard-and-fast central bank interventions to elevate home ownership rates. The RBA has already ceded rock-bottom interest rates have inflated housing prices. However, it has refused to lift the rate prematurely, citing a risk to jobs in Australia’s ongoing recovery from COVID-19. Instead, in their opening remarks to the inquiry, Ellis and her RBA colleague, head of economic analysis Bradley Jones, suggested a suite of supply-side changes. Improved planning systems, new transport infrastructure, and lowered construction prices could make it easier for young Australians to climb the property ladder, they said. “But they will not undo the fact of rising demand, and they will not prevent price increases entirely,” Ellis and Jones added.
As the older get richer, young people pay the price Julie Hare Education editor Nov 17, 2021 https://www.afr.com/policy/tax-and-...er-young-people-pay-the-price-20211117-p599nu Something startling sets workers aged 35 years or younger apart from older generations: most have never had a pay rise. “While weak wages growth has bitten all age groups, for younger people it has been particularly pronounced,” Grattan Institute chief executive Danielle Wood said. “Workers aged 20-34 experienced close to zero growth in real wage rates from 2008 to 2018.” The intergenerational bargain is fraying at the edges, says Danielle Wood. Louise Kennerley Delivering the John Button Oration at the Melbourne Writers Festival on Wednesday night, Ms Wood said it was possible to identify somebody’s age by asking if they had ever had a pay rise. “For most of us, it seems a silly question. But for many under-35s, the answer – at least in terms of a pay rise that improved their real living standards – would be no,” she said. And the bad news keeps coming for young people, because one of the main determinants of whether they will ever own a home is whether their parents own a home. Ms Wood said the housing price boom was in no small way responsible for the growing schism between the wealthy older generations and the rest. She noted that in 1966, home ownership peaked at 71 per cent, but the declines since 1981 had been unravelling the great Australian dream. Steady decline in home ownership “In 1981, when the Boomer generation was settling down and having families, 67 per cent of 30-year-olds owned their own home. In 2016, the equivalent figure was 45 per cent,” Ms Wood said. But home ownership had declined the greatest among the poorest groups. In 1981, 60 per cent of the poorest under 34-year-olds owned a home. Today the figure is just 20 per cent. “The fact remains that it is now only the richest ones, or the ones with the richest parents, that can afford to [own a home],” Ms Wood said. By being locked out of the housing market, young people had their capacity to accumulate wealth undercut, rendering their wealth profile static. Meanwhile, the wealth of households aged 64-74 had risen exponentially in recent years as the property market exploded. Lower incomes than previous generations Ms Wood said young people now spend less on discretionary items such as clothes, alcohol and recreation than the same age group three decades ago, but spent more on essentials such as housing, power, food, medical care and transport. She said the overall effect of flatlining wages and rising underemployment was that under-35s in 2018 had, on average, lower incomes than those of the same age a decade earlier. “The Australian Productivity Commission has found that people joining the workforce in the past decade have graduated into less attractive occupations on average, for a given level of education, than previous generations. “And with young university graduates moving into lower-level roles, other young people without the same qualifications are pushed even further down the ladder – in jobs more likely to be characterised by part-time and casual work. “This has been accompanied by a big rise in underemployment – workers not getting all the hours they want – particularly among younger age groups.” And echoing the words of Reserve Bank assistant governor Luci Ellis, Ms Wood said the only realistic way for many young people to now buy a house was via financial support from their parents. “Large intergenerational wealth transfers can change the shape of society. They mean that a person’s economic outcomes relate more to who their parents are than their own talent or hard work,” she said. She listed a number of policy interventions that could help correct the tilt that was preferencing older Australians. They include not increasing the superannuation guarantee so young people have access to money now, when they need it; boosting housing supply and planning rules in inner and middle rings of cities; improving rental laws; and governments taking a serious look at taxes on intergenerational wealth transfers.
Soaring stamp duty ‘bracket creep on steroids’ John Kehoe Economics editor Nov 19, 2021 https://www.afr.com/property/reside...uty-bracket-creep-on-steroids-20211118-p599zl The stamp duty slug on home buyers, described as “bracket creep on steroids”, has more than quadrupled in major capital cities over the past 20 years and appears to be deterring people from moving house, as state governments fail to adjust the tax in line with the property boom. A Sydney home buyer now pays $49,934 in stamp duty on the median house, compared with $11,915 in 2001 – a more than $38,000 windfall for the NSW government. This represents 54 per cent of the average annual earnings in the state, compared with less than a third in 2001, significantly increasing the difficulty of saving for a deposit and transaction costs of a first home. Property stamp duty is surging along with house prices. AFR In Melbourne, the typical home buyer faces a $48,770 stamp duty bill, compared with $10,120 two decades ago – a $38,650 bonus for the Victorian government. This represents 53 per cent of the average Victorian wage earner’s yearly salary. The trends are similar across other states and territories, including a $23,900 stamp duty jump on the median house in both Adelaide and Canberra, a $14,400 increase in Perth, $13,250 rise in Brisbane, $20,800 in Hobart and $21,880 in Darwin. Former federal and NSW treasury economist Robert Carling said stamp duty had become “bracket creep on steroids”. “State governments have enjoyed surfing the waves of the real estate boom,” he said. Property tax expert Joanne Seve said states were imposing much higher stamp duties on the current generation of home buyers because of a refusal to index the thresholds in line with the surge in real estate prices. “The public needs to be aware and politicians need to debate this in Parliament,” she said. “For stamp duty there should be a more generous indexation linked to inflation or house price growth and it should be annual like there is with land tax.” “This is urgent, overdue and needs to be immediate.” The analysis by AFR Weekend also suggests that the huge spike in stamp duty costs is deterring people from moving homes, with the number of capital city house sales declining since the turn of the century. In the early 2000s, an average of almost 60,000 Sydney houses were sold each year, dropping to an annual average of about 49,000 sales in the decade before the pandemic hit. Melbourne houses changed hands at a rate of 64,000 a year early this century, compared with about 55,000 annual transfers between 2011 and 2019. The fall in the turnover of established homes in capital cities has occurred despite a growing population – Melbourne grew by almost 40 per cent – and many more homes being built. The housing turnover figures from the Australian Bureau of Statistics are for detached houses in capital cities and exclude apartments and house sales in regional areas. The stamp duty costs exclude concessions for first-time buyers and higher charges often imposed on investors and foreign buyers. State governments have occasionally tinkered with stamp duty rates and thresholds, but nowhere near enough to keep pace with surging property prices. NSW Premier Dominic Perrottet was working on a plan as treasurer to gradually replace stamp duty with an “opt in” land tax for future property buyers. The refusal to index stamp duty rates means it has become much harder to move from a reliance on transfer duty towards land tax. Ten years ago, stamp duty accounted for 18.3 per cent of NSW’s taxation revenue. In this year’s budget, it is expected to rake in 31.6 per cent of the government taxation revenue. In contrast, land tax, which almost all economists say is a far less damaging tax, has risen from 11.4 per cent of revenue to 13.2 per cent. Unlike stamp duty, the threshold at which investment and commercial property owners pay land tax is indexed to the increase in values. Mr Perrottet and his new Treasurer Matt Kean this month said they wanted federal government financial assistance to help make the transition, but they may be willing to go it alone. NSW in 2019 began indexing stamp duty thresholds to the rate of inflation. However, inflation has increased only modestly, while property prices have surged. If NSW stamp duty was indexed to property prices since 2001, the median house price of $1.18 million would face a charge of $11,915, instead of about $49,000. When NSW stamp duty was introduced in 1987, the average rate was 1.75 per cent, compared with about 4.5 per cent today. The huge “bracket creep” on stamp duty differs from land tax, which is indexed more generously in line with property price changes. The Valuer-General of NSW last month increased the average land value in NSW by 22.8 per cent to $947,000, to help determine the amount that property investors and commercial land owners will pay in annual land tax. The Australian Capital Territory is slowly transitioning from stamp duty to annual land rates on property owners under a two-decade plan that began in 2012. In 2000, as part of the introduction of the GST, states abolished a range of transaction taxes including financial institutions duty on bank accounts, accommodation (bed) taxes and stamp duty on quoted marketable securities such as shares. However, states have shifted their reliance to property stamp duty, which was not part of the final GST deal. House prices began to boom from the early 2000s as interest rates fell and the capital gains tax was halved for investors.