Don’t Shoot The Messenger!
News hit the wires two weeks ago that the Federal Liberal Government didn’t like the findings of the Housing Affordability inquiry that it set up, and so it let the enquiry lapse thereby making all the thousands of hours of work, and hundreds of pages of ideas and proposals, unusable.
Word on the street is that the majority of the proposals called for winding back the generous capital gains tax rules, and abolishing stamp duty in favour of a broader based land or property tax. Clearly the government didn’t want to create unhappy voters by making radical changes, especially after they attacked Labor’s policy on negative gearing.
Saying that they junked the proposal might seem harsh until you read how the inquiry was started by Joe Hockey (who sacked himself), and chaired by three politicians of decreasing significance, before quietly lapsing (i.e. dying) before the last election.
Now that the election is over, our Treasurer, Scott Morrison, feels housing affordability is an “important policy focus” and has put the States on notice that they need to release more land to make homes cheaper.
Sorry Mr. Morrison, we don’t need more homes in urban fringe areas that are poorly serviced by roads and public transport. Somehow we need affordable homes in places where people want to live.
This is not an easy problem to fix, as we need to change the planning laws to allow for a different style of cheap living, such as mobile homes like they have in the US. What we don’t want are ghettos caused by planning laws changing so developers can build tiny concrete boxes in the sky. Oh wait, they already have in inner city Melbourne, Brisbane and Sydney! Doh!
What we also don’t want to see is this problem kicked down the road for another four years, or buck passing back and forth between the Federal and State governments. Vision is what’s needed, and some political courage. Who will step up?
So what can we glean as investors? Outside of world economic shocks (Brexit, the US election, tensions in various parts of the world, etc.), it seems unlikely that anything politically ‘game changing’ will happen in this term of parliament, and so we should expect more of the same in respect to pressure on house prices arising from low supply and low interest rates.
That is, despite record property prices in many areas, current conditions remain favourable for continued capital appreciation in areas where demand outstrips supply.
The party can’t go on forever though. The housing affordability problem is not going to go away just by ignoring it, and Australia is spending more than it earns and is borrowing the difference. Sooner or later the piper must be paid, and that means higher taxes and a lower standard of living – probably enforced rather than by choice.