Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

WM Residences fills gap in Mordialloc townhouse market

Housing Affordability

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Last week, Joe Hockey stood up in front of Parliament and on behalf of the Abbot administration, announced: ''The age of entitlement is over. It has to be replaced, not with the age of austerity, but with an age of opportunity!'' 
The former multi-millionaire banking and finance lawyer, husband to an investment banker, and owner of several premium land holdings (including a 200-hectare cattle farm in Malanda and mansions in Sydney), whose own ‘entitlements’ and that of his colleagues remain largely untouched, went on to address:
<ul>
<li>The single mother set to lose more than $,3000 per year;</li>
<li>The newly unemployed university graduate and retrenched worker, who must live with no income for six months (poverty) before claiming Newstart (forgone benefits of more than $7,000) – yet still have to service their rent or mortgage;</li>
<li>The low wage family with kids, who will lose $6,000 a year once all changes are factored in;</li>
<li>The hospitals and schools  who lose their projected funding (on the rationale that they are state responsibilities, forcing an increase to GST – a regressive tax);</li>
<li>The bottom one-fifth of earners who will lose around 5% of their disposable income, compared to the top one-fifth, who will lose only 0.3% (modelling undertaken by <a href="https://www.smh.com.au/federal-politics/political-news/reshaping-welfare-are-we-entering-an-age-of-inequality-20140516-38fc9" target="_blank">NATSEM</a> who point out the burden of this budget, overwhelmingly falls upon people in the most precarious position);</li>
</ul>
.. justified by telling Australian public, that they are not “to be alarmed”, because it’s all “in the national interest”.
“The National Interest”
The “national interest” is an interesting term to use for a budget that has set about plucking the feathers of the poor - the low and middle-income earners, the numerous small businesses, the main productive sectors of our economy - whist avoiding any direct action to the assessed <a href="https://www.prosper.org.au/2014/05/15/budgeting-for-capital-gains/" target="_blank">$484 billion total increase</a> over 12 months in unearned capital gains (more correctly termed “economic rent”) stored in land holdings, according to the ABS.
Or laying a finger on the licensed resource monopolies, the mineral wealth of which increased by $56 billion in 2012-13 alone.
Does this sound fair to you?
The country we want
“It’s about the sort of country that we want to be, in the years and decades ahead. It's about the value we impart,” continued Hockey, who has requested that all complaints be directed to the former government – adopting the age-old habit of passing the buck. Yet, warnings were given well in advance of this “budget emergency” and the sensible and equitable reforms needed were laid out in the Henry tax review – which they ignored.
The “sort of country we want to live in the years and decades ahead”, is an apt question to ask – albeit, it should be directed at our children.
After all, it’s our children who are set to inherit this land and it’s their future the government is shaping. More importantly, it’s not one the Liberal administration should be dictating on our behalf, following the usual stream of failed ‘promises’ we are familiar with on all sides of politics.
No doubt, job security and housing affordability would come top of the list – both are interdependent and serve our most basic needs.  
Without land, or the ability to use it, rent it, or buy it, we’re unable to do, or produce anything.  We are by definition “poor”.
The accumulation of all our ‘stuff’ is due to the natural resources land bestows.
It is therefore no coincidence that in both religious and ancient mythology, the first job of man was to tend the land. 
Our relationship with land is truly unique.
The quality of its location and care of its produce is foundational to ourmost basic human and consumer needs.
Destroy the land, or prevent ready and affordable access to it, and you destroy a population. 
The consequence is as black and white as that - “pay the rent or leave.”  
And it is no surprise, that this budget ignored the role of land in its economic modelling – they have been ignoring it for years. 
It’s not included in the Consumer Price Index for example - the tool the RBA use to measure inflation and reflect the cost of living, despite land prices and the size of the loans needed to service them having an uncanny consistency of exceeding wage growth through the course of each cycle – at least for that of the average <a href="https://www.news.com.au/finance/money/mortgages-rise-faster-than-wages/story-e6frfmci-1226921791556" target="_blank">household</a> and income earner.
And it’s easy to lay the blame of inequality or the reduction of it, on income distribution alone. Either that or confuse it with other items of ‘wealth’ – as is the case in Thomas Piketty’s book <a href="https://www.amazon.com/Capital-Twenty-First-Century-Thomas-Piketty/dp/067443000X" target="_blank">Capital in the 21st Century</a> (a subject I explored in part last <a href="https://catherinecashmore.com.au/wp/?p=506" target="_blank">week</a>).
These are items that are easy to hide in tax havens. You can’t do that with land.
But importantly, the politicians who delivered the budget, and the other “20%-ers”, will only feel a modest loss to their disposable income from the newly imposed ‘debt levy’. They will claw far more back in the increased value of their land holdings – particularly as we progress through the next phase of our cycle.
The Cause of Wealth inequality
This is the cause of wealth inequality – a lopsided economy, built on a $5.1 trillion housing market (over $4.1 trillion of which is land.)
<img src="/images/2014/05/19/cashmore-may-19-one.jpg" alt=""> 
<a href="https://www.macrobusiness.com.au/2014/03/deflating-australias-land-bubble/" target="_blank">Source</a>: MacroBusiness
It’s a subject overwhelmingly ignored, and yet shapes every other area of housing policy – due in part to the vested interests of <a href="https://www.smh.com.au/comment/even-i-am-shocked-by-icac-revelations-20140516-zreh2" target="_blank">wealthy property tycoons</a> who lobby our politicians to maintain the status quo. As well as politicians who don’t want to see their investments affected in anyway.
The corruption of economics, however, is not unique to Australia. It began soon after Henry George, in 1879, took the world by storm, when he successfully communicated the root and leading indicator of the massive boom/bust cycles (although he was not the first to do so) – that being land.
His farsighted solution, whilst understanding the importance of private ownership, clearly demonstrated that recessions/depressions on a large scale, could be avoided (not by banking reform alone). But if the natural revenue from the economic rent was recycled, to provide and fund community facilities – along with the other government services we require.
This is because it removes excessive and unwanted speculation from the market, assists home buyers, utilises land effectively, improves productivity with lower land prices and can assist in increasing wages, which would help the workers – not the land hoarders.
He influenced the likes of;
David Lloyd George in England, Leo Tolstoy, Billy Hughes in Australia, Rolland O'Regan in New Zealand, Chaim Weizmann in Israel, Francisco Madero in Mexico, and many others including, Winston Churchill, Milton Friedman and Albert Einstein (to name but a very few). He quite simply took the political world by storm. 
The people it didn’t impress however, were the large landowners and financiers, the political lobbyists, who set about a on a well-constructed and amply funded mission to change the course of economic education to one that moved away from the classical models which recognised the role of land and were advocating George’s policies.
“The Corruption of Economics”
Mason Gaffney and Fred Harrison chart the full story in their book <a href="https://www.propertyobserver.com.au/https://www.amazon.com/The-Corruption-Economics-Georgist-Paradigm/dp/0856832448" target="_blank">The Corruption of Economics.</a>
They show how the three elements of production—land (and the resources it bestows), labour, and capital (that of the ‘industrial’ kind) were gradually reduced to two. Labour and capital – land being “lumped in” with the latter.
Capital was now no longer ‘man made’ the result of hard work and genuine innovation. 
Instead, it included the stuff of nature – the very elements we need to live – allowing the increasing gains from any natural appreciation of land value (the expected result of every collective improvement we make to society) to be pocketed, rather than shared through a proportional system of land rent on the unimproved value alone.
It simply implied that the home-owner pay directly for the facilities they use – the amenities that give their land its value – which in the main, removes the need for other taxes which are easy to avoid – like income tax for example. 
That sounds fair doesn’t it?
All taxation is at the expense of Rent
As the classical economists David Ricardo and Adam Smith proved, all taxation is at the expense of Rrent.
<img src="/images/2014/05/19/cashmore-may-19-two.jpg" alt="">
<a href="https://www.macrobusiness.com.au/2014/03/deflating-australias-land-bubble/">Source</a>: MacroBusiness
In other words, any tax withholdings or exemptions given to land holders, result in an increase of “economic rent” available to be capitalised (at the current interest rate) into the price. 
This raises the cost of land – yet does little to address the needs of our children, who must take on an every greater proportion of private debt to join in.
Consequences
The consequence results in what the current budget suggests. Collecting taxes to offset the items we require from other areas, wages and productivity, the burden of which falls overwhelmingly on the poor  yet advantages those at the top.
Is this fair?
Well this is what the current (and previous) administrations have been enforcing and advocating for years. 
Promoted widely by our nice ‘balanced’ property commentators who teach how to get rich on capital gains (as if it’s hard), without stressing the consequence and burden to society and the economy as a whole.
Think about that when you’re browsing the property investment isle in your local bookshop.
Think about it.
Who benefits?
The progress of genuine innovation
Thankfully with the birth of genuine innovation – the internet - we finally have the beginnings of a global revolt against mainstream economic <a href="https://www.theguardian.com/education/2014/may/04/economics-students-overhaul-subject-teaching" title="More from the Guardian on Teaching">teachings</a> which cannot identify boom/bust cycles and crashes, because they refuse to see land.
Not to mention their completely false understanding of money creation and debt and its role in banking - highlighted consistently by Steve Keen who is about to head the first “progressive” department of economic teaching at <a href="https://www.debtdeflation.com/blogs/2014/05/08/for-a-pluralist-education-come-to-kingston/" target="_blank">Kingston University in London</a>. Our loss.
Importantly, economic students are starting to recognise their degrees are hardly worth the paper they’re written on (something else to ponder when you read the many “market updates” from our mainstream economists).
Change
Changing the system is not easy when we have built a society dependent on housing wealth to fund retirement.
It requires a slow transition (such as that set out in the Henry Tax review) to gradually phase out tax subsidies such as negative gearing – offset by the supply reforms Leith Van Onselen, <a href="https://www.performanceurbanplanning.org/" target="_blank">Hugh Pavletich</a>, Senator <a href="https://www.macrobusiness.com.au/2014/04/bob-day-slams-australias-housing-policy-failure/" target="_blank">Bob Day</a> and many others have been advocating for years.
But if you want a “fair go” country, one that avoids volatile boom/bust cycles and instead of promoting wealth inequality provides economic prosperity along with the best we can leave to our children, then change we must.
And it starts with us. 
Feature picture courtesy of Twitter.
</body></html>

catherinecashmore-6LXia3pPQj

The real consequences of the budget

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As we approach the federal budget, once again we have to endure another round of economic nonsense as the Treasurer tries to convince ordinary Australians that the country is running out of money – facing a ‘budget crisis’.
So ingrained is this message, that few question it.
Instead, <a href="https://www.3aw.com.au/blogs/3aw-drive-blog-with-tom-elliott/my-fivepoint-plan-to-fix-australias-budget/20131211-2z5mw" target="_blank">talk radio</a> is flooded with callers outraged at the ‘debt burden’ they imagine will be passed onto their children. A lifetime of work and servitude lay ahead – not only charged with the responsibility of paying down their own debt – but the government’s debt as well!
For an administration that wants to retain leadership through blaming the last government for the ‘mess’ they’ve reputedly left us in, it’s a convenient message to sell.
‘Fiscal responsibility’ is the catch term of the day, cuts to health services, education, welfare, job seekers allowance, wages, and proposed back to work assistance for those laid off  from the car industry - you name it, it’s on the table. 
Everything that is, except the golden egg of speculative windfall gains that can be gleaned from the increasing value of land.
In countries such as <a href="https://catherinecashmore.com.au/wp/?p=400" target="_blank">Germany</a>, they have historically managed to divert speculation away from residential real estate, with the focus being on productivity instead. Here we’re all subject to an economy built on the retirement ‘wealth egg’ of land – our personal economic leverage for all lifestyle and business needs.
It used to be called Monopoly. Today its termed - 'Getting onto the property ladder'. 
The rules of the game are simple.  The player uses as much debt as they can borrow - to buy and hold as much as they can – and those who got in at the beginning of the lending boom, securing the best plots available, win the game.
In relative terms, the ordinary home owner doesn't advantage much, but what else can they do? Retire still renting? Or become a contestant and hope their house yields enough appreciation to support them when they retire.  (But not so much that their children can't get a foot onto the first rung of course, and leave home before the age of 40.)  Our lives are therefore spent working to pay off a mortgage - or two. (That is, unless you're an unlucky tenant who doesn’t have the funds to buy, in which case you play a game called The Rental Trap.) 
The question we ask however is: at what expense? – Or perhaps at whose expense?
As demonstrated by a recent <a href="https://hia.com.au/~/media/HIA%20Website/Files/Media%20Centre/Media%20Releases/2014/national/Residential%20Land%20Market%20Pressures%20Continue%20to%20Mount.ashx" target="_blank">HIA report</a> – land values continue to skyrocket – with the weighted median across all capitals during the final quarter of December 2013, rising to the:
“Highest level on record… a 22.3% increase on the final quarter of 2012.”
 <img src="/images/2014/05/12/cashmore%20may%2012%20one.png" alt="">
Or perhaps it can be better illustrated on a graph <a href="https://www.newgeography.com/content/004261-urban-containment-land-price-up-5-times-income-smaller" target="_blank">Wendell Cox</a> (author of the <a href="https://www.demographia.com/dhi.pdf" target="_blank">Annual Demographica Housing Affordability Survey</a>) constructed which cuts through the usual measures used to convince readers that “housing has never been more affordable”, with overwhelming focus on mortgage serviceability rates alone.
Instead, it demonstrates the speculative nature shaping the property cycle, which affects not only established house prices, but building activity as lot sizes reduce, whilst land price per square meter, outpaces income growth considerably.
  <img src="/images/2014/05/12/cashmore-may-12-two.jpg" alt="">
<a href="/expert-insights/investing/who-is-really-benefiting-from-the-property-cycle-and-at-what-cost">The smoke screen debates on affordability and scrapping negative gearing</a>, are just that, smoke screens.  Something that was subsequently confirmed upon release of the government's Commission of Audit, which ruled out any consideration of a change to housing policy – better to tax income instead – easier for the top 10% to avoid it, whilst low to middle income earners suffer the shortfall.
Importantly, the Commission of Audit’s terms of reference was to concentrate on direct government expenditure - such as grants and transfer payments rather than tax expenditure - rebates, exemptions and so forth (such as negative gearing, capital gains).
We all have to shoulder the burden, tighten belts, work harder – pensioners included!
‘All’ that is, except those imposing the rules – whose entitlements are immune from any fiscal responsibility.  
Yes – the members of our federal government - the issuers of our monetary supply, offset through taxing those who do have to earn dollars before they can spend it – whilst our government earns nothing – but is rather elected, and charged, to manage the budget in the best interests of its working population to promote economic growth – for which education, health, back to work initiatives and so forth, are vital pillars.
There is no evidence and no economic wisdom that indicates running a surplus under current conditions is good for the economy, especially if that surplus is to be achieved through the measures suggested. 
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The Henry Tax review set out a framework that would move us to good model of economic management - a well managed deficit in order to achieve this is better than a running for a surplus at any cost - harming productivity in the process - as well as exacerbating private debt - which is high by any measure.
Something, <a href="https://www.youtube.com/watch?v=D0iFiUfDqSw" target="_blank">Steve Keen</a> does an excellent job of demonstrating in a recent lecture given in Sydney, in which he shows the inevitable consequence to GDP should our government attempt to presently do so.
Economic orthodoxy, which stubbornly insists austerity measures to pay down government debt, should take precedence whilst imposing onerous taxes on its working population, are lessons that should have been learnt following the Great Depression in the 1930s.
There is nothing new about this – indeed, Australia’s oldest PhD at 93  - Dr Elisabeth Kirkby - has just written a 100,000 word thesis on it. And whilst valuable lessons reaped from the grains of history are ignored, the patterns that led to our greatest economic disasters are repeated.
What all demonstrate is, when the government tightens its belt, for no other reason than a vain attempt to spruik a surplus, it has the unwonted effect of withdrawing money from the economy – leaving the private sector (the working class population) to pick up the slack.
Therefore “repairing the [government] budget” with the claim it’s putting Australia “on the right track” – is not putting the fate of Australians on the right track.
It is the government’s responsibility to manage the monetary system for the needs of its population (whether surplus or deficit) - spending enough money into the economy to keep employment and productivity boosted, which by design, reduces pressure on the welfare state.  
Yet it chooses instead to penalise productivity and ignore tax expenditures such as the capital gains exemption on owner occupied housing or scaling back negative gearing.
In this respect, it is economically irresponsible to have a growing deficit offset by tax receipts that reward speculation and by consequence, widen the wealth gap between rich and poor.  Ironically, the very gap the tax and transfer system is supposed to narrow.
In other words, we are not burdening our children with debt – we are burdening them poor economic management.
As austerity measures bite and the retirement age increases, the majority of Australian’s will be working longer and harder – and whilst the government pays down its reputed debt burden – private debt levels will continue to increase as families borrow to afford the basic necessities they need, most likely leveraged against their own homes.
Notwithstanding, most of our debt, is bank created debt – arguably, a far greater concern than government debt.
For those that need a reminder – as demonstrated in the latest <a href="https://www.abs.gov.au/ausstats/abs@.nsf/Lookup/4102.0main+features202014" target="_blank">ABS social trends report</a> – total household debt was $1.8 trillion as at the end of 2013 - higher than it has been at any other time over the past 25 years.
<img src="/images/2014/05/12/cashmore-may-12-three.jpg" alt=""> 
Real Household Debt Per Person, Source: ABS
Low interest rates aside - $1.8 trillion is a hefty figure.
To put it in some kind of context – a trillion, is a thousand billion. 
The sun is set to burn out in approximately 5 billion years. A trillion is so large; it’s almost meaningless in real terms.
Total government debt is around $542 billion (as at March 2014 - <a href="https://www.rba.gov.au/" target="_blank">RBA</a>) – that’s about 35% of GDP.
In contrast, our household debt to GDP ratio is estimated to be around 97% (as at December 2013 - <a href="https://www.rba.gov.au/" style="line-height: 1.3em;">RBA</a>) - assisted by low interest rates and an array of financial products to ‘woo’ new borrowers into the property market (such as shared equity schemes, interest only loans, redraw facilities, offset accounts and so forth). 
Notwithstanding – the increase in bank created debt is a far greater issue than \government debt.
Therefore instead of our current leaders asking Australian’s what they can do to assist government debt. We should be asking the government what it will do to assist private debt. Particularly as we move forward over the next 12 months or so, and the lending cycle turns.
Capitalism?
Of course, this problem is not unique to Australia.  Thomas Piketty’s book <a href="https://www.amazon.com/Capital-Twenty-First-Century-Thomas-Piketty/dp/067443000X">Capital in the 21st Century</a> has just come out to great acclaim, choc full of statistics to demonstrate how income earners – the vast body of productive workers, who prop up the local economy through the taxes they pay and products they produce - are the losers, compared to those who hold stores of unproductive wealth. 
The book focuses on the ‘1%-ers’– advanced through gifts of inheritance – those who hold the vast majority of assets; controllers of the stock and bond markets - collecting their economic rent by way of hording property, and effectively, buying protection through lobbying seats of power.
It’s an age old game and in a world where gaining political leadership is only possible with vast sums of advertising dollars, lobbying is crystallised into the system.
We’re currently seeing this with the <a href="https://www.3cr.org.au/economists/podcast/renegade-economists-07052014" target="_blank">ICAC investigation</a> as it uncovers a web of alleged political corruption, with illegal donations from property developers and other sources, funnelled into a Liberal Party <a href="https://www.smh.com.au/nsw/icac-to-be-suspended-as-mike-gallacher-investigated-for-serious-electoral-funding-irregularities-20140506-zr59n#ixzz30xGqICRV">slush fund</a>.
Meanwhile, Clive Palmer has been accused of “<a href="https://www.theaustralian.com.au/national-affairs/palmer-spending-like-a-drunken-sailor-on-poll/story-fn59niix-1226871364428" target="_blank">spending money like a drunken sailor</a>” to secure a third seat in Senate for his PUP party.
Palmer reportedly entered the leadership battle due to “poor policy decisions” by the Gillard government – the carbon tax in particular being highlighted, which promised to negatively impact his core business.
However, his other policy evaluations leave much to be desired.
For example, Palmer’s <a href="https://palmerunited.com/national-policy/" target="_blank">housing affordability</a> plan, is to make home loans tax deductable for the first $10,000 – a move which will unquestionably push land prices higher, as future buyers factor the savings into their budget and adjust price expectations accordingly.
But then, considering Mr Palmer’s significant land holdings, which are said to <a href="https://en.wikipedia.org/wiki/Clive_Palmer" target="_blank">include</a>;
<ul>
<li>“A six bedroom, 11 bathroom, 22 car garage property in Queensland - along with;</li>
<li>An array of golf courses. As well as;</li>
<li>“Family and associates” owning a total of “11 homes in the Sovereign Islands” on the banks of the Southport Broadwater - as well as;</li>
<li>“Other known properties at Broadbeach Waters on the Gold Coast, Fig Tree Pocket in Brisbane, Jandowae on the Darling Downs, Queensland, and Port Douglas” and notwithstanding;</li>
<li>“An undisclosed number of properties held in trust for their daughter.”</li>
</ul>
I suspect lowering land values, may not be top of mind.
The wealth tax solutions Piketty proposes to stop the gap widening fail not only by the confused definition of what one would consider wealth (a Rembrandt painting, or luxury yacht for example?), but also that of capital.
In modern terminology, capital is used for anything that yields a profit – which under our current system includes land. However, in classical terms, capital is a factor of production - a depreciating asset and one, which can be reproduced.
In a society built on the foundation of free markets, factors of production flourish under competition. If one widget costs too much, an entrepreneur will find an innovative way to produce the same widget at a cheaper price. 
It’s called capitalism.
Land however is not a factor of production. It can’t be moved or reproduced and it’s limited in supply. Therefore the revenue stream generated from the unimproved portion alone is due to its locational advantage, and little else.
The free market activities in a capitalist society, cause land values to increase – and considering this is through no act of individual exertion on the vendor’s side, but rather the collective efforts of the community, it makes sense that most consider owning a well located plot of land, better than both money in the bank and the wages they have to earn.
This is why increasing charges on the revenue stream ensuing from the locational value of land, and recycling it back into the community - (which is where it came from, and where it belongs) – by way of a tax shift offproductivity (wages) and onto our valuable and limited natural resources - was termed the ‘least bad tax’ by the capitalists <a href="https://www.macrobusiness.com.au/2013/11/land-tax-must-kill-negative-gearing-stamp-duty/" target="_blank">Milton Friedman and Winston Churchill</a> – to name but a few. 
Rising land values harm capitalism, they increase the rent for small business owners, always benefitting the landlord but never benefitting the wage earner. Furthermore, rising land values force young people out of the market, whilst making those in the market wealthy – and widening the gap between rich and poor.
When land prices inflate, jobs are lost as more revenue is taken away from productivity and soaked into the ground.  
It’s not called capitalism; it’s called capitalising - taking advantage of community created revenue - the total of which is pocketed by the land owner.
This is why land prices are so high and vested interests of policy makers <a href="https://catherinecashmore.com.au/wp/?p=503" target="_blank">always act</a> to push them higher.
The great man Buckminster Fuller – architect, systems theorist, author, designer, inventor, and futurist – once said:
“You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.” (H/T author of soon to be published book Land by <a href="https://medium.com/p/18066c10ac50" target="_blank">Martin Adams</a>)
We live in a democracy, therefore any change to the status quo needs to come from the ground up – we will never get it from the top down.
The Henry tax review set out recommendations for transitioning our economy based on the ideas penned above. 
 How we get there is worthy of debate – however thankfully, due to the internet and a new age of enlightened priced out folk, we can start that debate in 2016/17 by using our own preference and economic wisdom to vote a government which acts to widen the rich/poor divide out.  By which time there may be better options to vote in.   
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Economic nonsense and the consequences for future generations

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Take a cursory look through the international press and reports on housing related matters, and it could be merged it into one text as property cycles become increasingly interrelated and investors search for ‘safe havens’ off-shore.
Overwhelmingly, affordability, bubbles, the rise of Asian investors, and fears of a new breed of non-home owning ‘renters’ dominates, and although headline chasing would place any sensationalist report front of line, the reader comments and related dialogue that follow present a familiar picture for the ordinary home buyer – no matter what reforms are taken, it never seems to get any easier. 
You could be forgiven in thinking it’s by some abject force of nature, bustled in at the time of the ‘big bang’ that property (or as I pointed out <a href="https://catherinecashmore.com.au/wp/?p=494" target="_blank">here</a>, ‘land’) is deemed unaffordable. Outpacing wage growth and inflation through the course of a cycle, subject to the whims of a bank’s propensity to lend - burdening buyers with one of the most stressful experiences they’ll go through in life. 
Or in the bleak words of the eminent poet <a href="https://www.youtube.com/watch?v=Lin-a2lTelg&amp;feature=kp" target="_blank">Leonard Cohen</a>:
“Everybody knows… That’s just the way it goes.”
This is what the real estate and finance industry would have you believe as they navigate through the fluctuations of the property cycle with authoritative analysis, on what and where to buy.  And no doubt, it’s been a prosperous affair.
The number of property investment <a href="https://www.propertybooks.com.au/">books</a> written by the ‘<a href="https://www.propertybooks.com.au/">I Did It - And You Can Too!</a>’ experts, belies belief. And yet, becoming successful in the game isn’t incredibly hard for anyone with an ounce of locational common sense. The authors are simply singing their own interpretation of an age-old song titled ‘Monopoly’. 
Over the course of a business cycle, which is both lead by, and correlated to the housing cycle, the gains – more correctly termed economic rent or “earnings from land,” alone - by far and away surpass those that can be gleaned from other more productive investments.
This was stressed in a recent submission by <a href="https://www.earthsharing.org.au/" target="_blank">Earthshare Australia</a> to the upcoming Senate enquiry into housing affordability:
“Unearned incomes in land increased a whopping $187 billion in the December 2013 quarter alone (<a href="https://www.propertyobserver.com.au/https://www.abs.gov.au/ausstats/abs@.nsf/mf/6416.0" target="_blank">ABS 6416</a>). Total yearly dividends (2013), for investors engaged in risk, was recently reported at $84 billion – $103 billion less for an entire year.
(Leading them to question) “Why invest in small business or the ASX when one can earn more for less risk at a lower tax rate as a land speculator?”
These gains occur primarily because we choose to leave the larger proportion of ‘economic rent’ (mistakenly termed, ‘capital growth’ – however in this context, we are talking about the unimproved value of the site) locked in the land, rather than recycled back into community – from where it evolved.
Hence why housing is so expensive – the financial benefit derived from improving the surrounding facilities, is not effectively utilised – and our tax and supply policies do little to assist.
The Henry Tax review was not slow to <a href="https://taxreview.treasury.gov.au/content/finalreport.aspx?doc=html/publications/papers/final_report_part_1/chapter_12.htm" target="_blank">point this out</a>, when it suggested progressively scrapping a vast array of ‘bad taxes’ (payroll, insurance, vehicle registration, stamp duty, and forth, as well as reducing those that reward speculation) and instead, collecting more of the economic rent of natural resources - significantly land. (Notwithstanding, it was another government review which fell largely on deaf ears.)
Yet, historically, the capture of economic rent (through land tax and to some extent ‘betterment’ taxes) financed some of the most remarkable infrastructure we have. Sydney Harbour Bridge being a case in point.
The tale of a bridge and our accumulated wealth
It was <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/radionational/programs/rearvision/tony-abbotts-big-plans-at-odds-with-infrastructure-history/5404212" target="_blank">acknowledged</a> at the time, that residents on the north shore would benefit significantly from an increase in their property values as a result of this essential piece of infrastructure.  Therefore, a framework was set in place to capture a proportion of the uplift – approximately one third – to assist with funding. 
This was in no way detrimental to the property owners. 
The increased advantage of economic activity coupled with the rise in prices resulting from the enterprise, more than compensated. A win-win if you like – and readily accepted by the public as fair.
Over time, changes in the way both state and federal government collected tax moved focus away from land values, onto productivity, effectively, placing a fine on labour and doing a good job of keeping us asset rich and income poor.
It’s great for the haves – but not the ‘have-nots’ (our growing pool of tenants.)
Consequently, the wealth locked in our residential land market, through the process of this accrued speculation – sits at post $4 trillion (add the buildings on top, and it’s an estimated $5.02 trillion).
It’s so large a number; it’s almost meaningless in real terms.
In comparison, the UK housing market is assessed to be $5.2 trillion with a population of around 60 million, so the distribution across a population of 23 million, is telling.
It’s this, that enables publications, such as the <a href="https://www.credit-suisse.com/ch/en/news-and-expertise/topics/wealth.article/article/pwp/news-and-expertise/2012/10/en/global-wealth-report-locating-the-super-rich.html" target="_blank">Global Wealth Report</a> produced annually by Credit Suisse, to assess Australian’s to be the ‘richest in the world’ in median terms. 
In other words – if you stand everyone in a long line, richest to poorest, the middleman has more asset wealth than any other country assessed.
It should therefore come as no surprise that our wealthy know where to bank their dollars - and it’s not down the high street.
As economist <a href="https://www.project-syndicate.org/commentary/adair-turner-explains-how-a-fresh-wave-of-automation-is-transforming-employment-and-much-else" target="_blank">Adair Turner</a> and others have pointed out in response to a recent report by Oxfam, which demonstrates how Britain’s five richest families are wealthier than the poorest 20% of the population.  The riches are only in part derived through productive activity – the vast ‘wealth’ however, has been derived through ‘rents’ (unearned gains) in land.
If you thought wars were about religion – think again.
The compounded rent is effectively what we pay for when acquiring real estate – a calculation that takes into account expectations of future growth, minus expenses for the time held – along with a range of other variables such as wages and borrowing rates.
Yet capturing a greater percentage of annual land values, whilst at the same time reducing those on productivity holds much in its favour.
<ul>
<li>It reduces the propensity of boom/bust housing cycles. 
</li>
<li>Encourages timely construction and effective utilisation (good for both the economy, employment and consequently, our welfare state). 
</li>
<li>Aids infrastructure financing. 
</li>
<li>Supports decentralisation. 
</li>
<li>Assists in keeping the cost of shelter affordable – levelling to some degree, the playing field between non-owners and owners. 
</li>
<li>And importantly, in regions where it’s been implemented with <a href="https://catherinecashmore.com.au/wp/?p=414" target="_blank">success</a> - Pittsburgh and Pennsylvania being examples - most owners pay less tax when there’s a shift from productivity onto land, than would be the case otherwise.</li>
</ul>
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Change ahead?
Of course, to change the mindset of any nation that has been encouraged to use their housing investments as leverage for economic activity, a welfare fund for retirement, collateral for the advancement of business and commerce, and an ATM for family emergencies, is no easy task. 
Not to mention the many vested interests in both government and the property industry, all of which derive their income from the promotion of it.
However, it’s vitally important we do so – because it sits at the very base of everyconversation government is current having regarding the welfare state, cutting pensions, and increasing the working age until retirement.
Even in our technological age of driverless cars, lasers that can change the weather, 3D printers that can produce substitute body parts, and solar farms that can produce enough energy to run a small city, nothing is possible without the land which gives us the food we eat, the water we drink, the air we breathe, and a rich array of commodities to fuel our appetite for ‘growth.’
There is nothing to be gleaned in from the hording of land, and whilst secure private tenure of property is vital in so much as land needs to be cared for, cultivated, and effectively utilised, a proportion of unearned economic gains that come from the locational rent of the unimproved value alone – should not be privatised to the extent that prices escalate through the inducement of speculative gain.
Can supply policy solve it alone?
We talk a lot about supply, but whilst the status quo exists - rising land values being used as the primary driver for economic growth – high prices ensure land will only developed for profit, timed to capture the upward wave of a cycle, rather than developed to meet the immediate needs of a home buyer, which does little to deter the wasteful process of <a href="https://au.news.yahoo.com/thewest/business/wa/a/22865421/developers-choking-land-supply/" target="_blank">land banking</a>.
It is not insignificant that the burdens to supply policy, which we consistently criticise – the structural impediments to development - were implemented along side a gradual shift of the rental capture of land, onto productivity.
As <a href="https://www.bobday.com.au/PDF/Home-Truths-Revisited-May-2013.pdf" target="_blank">Bob Day asserts in his submission</a> to the Senate debate on housing affordability:
“The regulatory seeds of the housing affordability crisis were sown in the 1970s. Until then land was abundant and affordable, and the development of new suburbs was largely left to the private sector.”
The 1970s was not only the point at which urban zoning (a process of false scarcity) was imposed by state governments – it also came at a time at which any hope of tax capturing the fair uplift in land values to keep construction timely and offset soaring costs, had been truly eroded.
This, coupled with a shift in infrastructure financing – as private enterprise played an ever-increasing role and projects were no longer provided with capacity ahead of time, but required to prove revenue – ‘user pays’ whilst home owner benefits – was the beginning of the end.  
A Glance Back At Policy
Early settlers had rejected the British system of taxing both land and buildings, in favour of the methods advocated by the classical economist <a href="https://www.prosper.org.au/about/henry-george/" target="_blank">Henry George</a>, who had previously presented his ‘single tax' theory in Australia to thunderous success. 
However, over time, the government’s inept and poor administration in the regularity and standard of valuations, the creeping in of exemptions (including the family home) coupled with lobbying from large landholders - a group which have historically maintained the greatest political clout – significantly eroded the system, and by the 1950s an array of taxes were falling increasingly on productivity, rather than land. 
In 1953 when the Menzies government abolished the <a href="https://www.prosper.org.au/about/geoists-in-history/clyde-cameron/" target="_blank">Federal Land Tax</a>, rapid post war population growth had firmly laid the foundations for a thirst to profit through capital gain (mounting land values.
The then Labour party – which had historically always rallied in favour of raising revenue from the economic rent of land rather than productivity, were up in arms, prompting <a href="https://en.wikipedia.org/wiki/Arthur_Calwell" target="_blank">Arthur Calwell</a> to speak in opposition of the plan, passionately declaring:
“We have always believed in the land tax…The land belongs to the people, and its use must be safeguarded and protected at all times!” (Hansard, Vol 221, pp 165-170 passim)
However, it was the beginning of the end. Up until 1961 it was an integral part of the Labour platform. By 1963 however, the commitment had been omitted all together, apparently, <a href="https://www.cooperativeindividualism.org/cameron-clyde_how-labor-lost-its-way-2005" target="_blank">without conference approval</a>.
When Whitlam came to power in 1972 (see Bob Day’s comment above) he ignored any call to bring in legislation to collect the economic rent of land, instead of levying heavy direct and indirect taxes on income, and in so doing, a politically fabricated boom in land values was underway.
In the decades that followed, the promotion of negative gearing (1985), halving of the capital gains on investors (1999), onerous levies on development and upfront infrastructure costs passed onto buyers - grants, incentives and so forth, had little to do with the delivery of affordable housing, and everything to do with escalating land prices.
It should come as no surprise then, that large landowners and the commission side of the real estate industry, shy away from any changes to the tax system. The smoke screen debates on affordability and scrapping negative gearing are just that.
So what now?
Due to China-led resilience and economic stimulus Australia, although in no way unscathed, avoided the disastrous consequences of 2008, resulting in thousands of foreclosures across the US and Europe, whilst banks were bailed and families <a href="https://stephendonnelly.ie/betrayed-by-victorian-era-debtors-prison-mentality/" target="_blank">continue</a> to be evicted.
Not so the recession that marked the early 1990s.  
Affecting 17 out of 18 comparable OECD countries, high unemployment, a large current account deficit and elevated level of foreign debt left many economists gloomy Australia would ever achieve long lasting economic recovery.
Endless debate was given to the causes and consequence, which left policy makers reassuring the community that lessons’, would be learnt! However, as the then Governor of the RBA, <a href="https://www.propertyobserver.com.au/https://www.abc.net.au/radionational/programs/saturdayextra/ian-macfarlane/3378434" target="_blank">Ian McFarlane, later summed up in his 2006 Boyer lecture</a>:
“Any boom built on rising asset prices financed by increased borrowing has to end.”
And considering the date this lecture was given (2006), the following comment was insightful:
“No-one though has a clear mandate at the moment to deal with the threat of major financial instability associated with an asset price boom and bust.”
It’s unfortunate that “no-one” happens to be our most influential political and economic policy makers – and indeed, we’re not alone. 
After every economic crisis, there is always the promise that events will never happen again – safe guards are put in place and eventually the wreckage is cleared. however happen they do, and reforms that promise otherwise repeatedly fail.
Significantly, globalisation, the interrelating of major economies, is adding to the volatile nature of each economic downturn.  As Wayne Swan asserted in his speech <a href="https://ministers.treasury.gov.au/DisplayDocs.aspx?doc=speeches/2009/006.htm&amp;pageID=005&amp;min=wms&amp;Year=&amp;DocType=" target="_blank">“A Future Of Promise”</a> given at The Sydney institute in 2007:
“It is, truly, the sharpest synchronised global downturn in living memory… And it's being inflicted on good Australians through no fault of their own.”
No cycle is exactly the same, but while history may not exactly mirror the past, patterns do emerge. 
There’s only one reason we have devastating house price booms and busts –  and that is speculation induced, in this case, through the privatisation of unearned gains.  And whilst some continue to reap a windfall from exploiting the process, we really need to pause and ask – Who is it really benefitting?
It’s time for change. 
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Who is really benefiting from the property cycle, and at what cost?

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We're not asking the right questions. That's why the property industry is getting so many misleading answers about important issues.
I think this explains, in part, why so many believe we have an affordability crisis and a housing shortage, when so much of the research data contradicts these widely-held beliefs.
Surveys of prospective first home buyers usually ask whether they think they can afford a home. The answer is meaningless, or at best misleading, unless there are further questions.
Those might include:
<ul>
<li>
Why do you think you can't afford to buy? 
</li>
<li>
Have you tried to buy? 
</li>
<li>Where have you looked? </li>
<li>Are you willing to compromise to get into the market?</li>
</ul>
The big problem, as I see it, is not an affordability problem but an expectation problem.
If you read between the lines in industry surveys and street interviews by media, it's clear many wannabe home buyers have a perceived problem because they've absorbed newspaper headlines and looked no further.
Why bother when you read daily that prices are through the roof (when in reality this is true only of Sydney)?
Others have a problem because they want their dream situation in their first purchase. People are quick to complain they can't afford a home but then we discover they want to live in a million dollar suburb.
Many commentators on real estate issues such as affordability apparently believe nothing ever changes. The assumption is that the current generation of young adults want what their parents wanted and should behave accordingly. That assumption is wrong.
<blockquote>
The big problem, as I see it, is not an affordability problem but an expectation problem.
</blockquote>
When the market share of first time buyers declines, it's assumed there's an affordability problem. No other option is considered. The possibility of demographic change is overlooked.
This is the nub of the issue because it's clear that today's 20-something's have different priorities to their parents. Married with kids and a mortgage before the age of 30 is not on the bucket list. Lifestyle takes priority and commitments can wait.
There's a similar issue with the idea of an undersupply of housing. Individuals and organisations stating under-supply as a fact (one that's accepted by many journalists without question) also fall into the trap of believing nothing changes.
Their analysis is flawed because they're using out-dated models about how many new dwellings are needed for a particular level of population growth. The assumption is that the average household size is X and if you divide population growth by X, that's how many houses should be built.
But a lot has changed. Young Australians are staying longer at home with their parents. Overseas migrants comprise a major chunk of population growth but it's coming from non-traditional sources with different household patterns.
Household sizes are rising again. Whereas in the past the typical household was a small family in a big house with surplus bedrooms, people are now buying homes that reflect their actual needs - e.g. opting for a two-bedroom apartment rather than a large, expensive and wasteful four-bedroom house.
The bottom line is that housing demand is created when someone buys a block of land and engages a builder. If that's not happening to the degree many expect because of what their formula tells them, then the formula is flawed.
The industry that complains about the alleged housing shortage is the industry whose job it is to build houses. If the vast undersupply they claim is real, there's a massive opportunity being missed by the industry doing the grizzling.
The industry will continue spinning its wheels until it starts asking the right questions. If there's a shortage, where are the queues at housing estates? And why is there no rental growth? And what are the real reasons young people have stopped buying in numbers?
You can contact Terry via <a href="https://mailto:ryder@hotspotting.com.au" target="_blank">email</a> or on <a href="https://www.twitter.com/hotspotting" target="_blank">Twitter</a>. 
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terryryder-YECXbqmri2

The problem with first home buyers isn't affordability, it's expectations

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I’ve been asked to write an answer to the question, “Which is better – an apartment or house?”
It’s one of the most common queries buyers ask - especially in light of what seems to be an inexhaustible high-density apartment boom, taking place in Sydney and Melbourne in particular.
In New South Wales alone, the latest data from the ABS shows apartment approvals near a record high, numbering 25,517 units in the year to February 2014 - a 69% share of total figures. Country wide, approvals of both units and apartments now sits at its highest level in <a href="https://www.macrobusiness.com.au/2014/04/australias-supply-side-squeeze-continues/" target="_blank">history</a>.
In Sydney in particular, the news is deemed ‘positive’ – assumed to put downward pressure on both rents and prices. But contrary to popular belief, additional supply of property does not always equate to lower prices.
For decades, the city’s supply has been hampered by stringent planning requirements, allowing big developers with a greater financial capacity to hold the upper hand. Consequently, a larger proportion of developers currently active in CBDs gain their funding offshore (which, according to some analysts, is expected to reach near 100% in Melbourne by 2016). 
<img src="/images/2014/04/28/cashmore-april-28.jpg" alt=""> 
In NSW, the shortage of stock required to cater to the needs of a market, which currently consists of over 50% investors in central areas, has resulted in a spike in prices, which has diverged considerably from other states.
Sydney is booming, and the real estate agents are busy making hay. However, it’s hard to term these dwellings as affordable – or for that matter, desirable.  They are not built for home buyers - they’re temporary pit-stops for renters who need to stay centrally located.
Groups such as Charter Keck Cramer estimate up to 90% of the apartments released in Melbourne’s central regions since 2009 have been sold to investors – albeit, it doesn’t make them good investments.
Complexities of construction
In order to maximise yield, they typically have a floor size of around 60-70 square metres (for a two bedroom dwelling) – compromising natural light and storage space along the way.
Furthermore, the challenge of keeping apartment prices low is complicated by zoning regulations, rendering some neighbourhoods immune from dense development, whilst others have been given the green light.  
This further limits the tight concentration of land where construction can occur and from a micro perspective, escalates already inflated land values for the sites deemed suitable.
The developers are not altogether to blame. Getting planning and building approval for an apartment block is a costly venture, requiring 100% debt cover and often resulting in a period of years from concept to ‘lock up’ (a six year period not being unusual).
The complexities include levies for funding of communal facilities (such as underground parking, street lighting and so forth), which understandably contributes significantly to the cost of the product and often a lengthy period to resolve protests from existing residents, who understandably fear the social and economic impact causing a downward valuation on their own wealth fund for retirement.
To obtain the necessary funding, larger percentages are marketed to overseas buyers using vastly inflated commissions.
High owner corporation fees to fund the required security features, lighting in corridors, lifts, lifestyle amenities (such as a gym or roof top garden for example) equate to at least a few thousand a year.
Some developments offer rental guarantees, promising a return not possible once it’s expired. And should the developer encounter financial difficulties during this period, there is no government legalisation backing up any promise of payment.
Good investments?
To give some idea - the floor plan below was taken from a building just north of Melbourne’s CBD, which was purchased off the plan in 2012 for $580,000, and sold some 18 months later for $476,000.
 <img src="/images/2014/04/28/cashmore%20april%2028%20two.png" alt="">
A sample floor plan for a two bedroom off the plan apartment.
Another in the block was promised a rental return some $50 a week higher than it achieved on the open market, examples such as this leave most local investors hoping tax concessions will help compensate their losses.  
Having worked in a rental apartment previously, I can anecdotally confirm turnover in this type of development is high - with renters generally preferring lowrise to highrise - and despite common belief that renters are poverty stricken ‘wanna be’ home owners, the demographic that live in apartments (typically young, childless, working couples) have aspirations that often exceed what’s currently on offer.  Therefore, whether we’re increasing supply for the ‘needs’ of the rental sector in central localities on a micro level is questionable.  
Melbourne’s Southbank has vacancy rates often topping 8%, which also falls in line with data obtained from Prosper Australia’s recent speculative vacancy report, which analyses water usage to assess residential vacancies across the metropolitan region over a 12 month period – the methodology of which is explained in detail <a href="https://www.prosper.org.au/2013/11/01/speculative-vacancies-in-melbourne-2013-report/" target="_blank">here.</a>
The research shows 7.9% of accommodation in the suburb uses no water at all, and over 22% less than 50 litres per day (a statistic which may be influenced to a limited extent, by some being serviced apartments).  Needless to say, periods of vacancy which put downward pressure on yields, is not what most investors have in mind when acquiring a property – yet an increasing number are doing so in their SMSFs and are acutely reliant on cash-flow.
Article continues on next page. Please click below.
<hr class="system-pagebreak">
Buying close to the city a better option?
All of the above, works on the assumption that most people like to live close to the city and whilst this may apply to residents in their early years, who delight in the hub and bub of an inner city lifestyle - including student renters who need to locate close to nearby university campuses - there isn’t much evidence that the rest of us are prepared to give up space to live in the type of accommodation constructed.
Indeed, the idea that demographically we’re becoming a nation of downsizers is somewhat mythological, but it doesn’t stop the flow of regular articles suggesting we’re all becoming a nation of happy strata dwellers. Once again, it’s often another excuse by property commentators (including buyer advocates specialising in apartment sales –often not openly obvious when you cruise their websites) to promote this option over others. 
Whilst we’re likely to see a trend toward apartment living due to lack of feasible alternatives, it’s been shown the elderly overwhelmingly downsize to medium density accommodation, thereby avoiding highrise developments altogether. Younger generations in their 20s and 30s have a greater propensity towards high density living, with the proportion increasing; however, figures still only peak around 14% at the age of 27 and the trend across all age groups is marginal, with only one in 20 choosing this form of accommodation nationwide (as of the 2011 census).
Obviously, most local home buyers prefer houses to apartments – and for the highrise price tag of a two bedroom flat, there’s far more bang for buck in established accommodation that doesn’t come with the additional risk of a view being built-out, queues to exit the car park, and 150 immediate neighbours traversing through various stages of their housing ‘career’.
At 44%, the typical Aussie home still has three bedrooms and the stats show only one or two residents occupy the majority, with a big increase in the number of four-bedroom homes, which now make up almost a third of our total housing stock. 
The single person household is no longer the fastest rising demographic. In the five-year period to 2011, lone person households had dropped from 24.4% to 24.3%, while group households (shared accommodation) jumped from 3.9% to 4.1%.  Whether the trend continues will become apparent in time.
In the rental demographic, this is likely due to reasons of affordability – renting a one bedroom inner-suburban apartment can often be more costly than an older three or four bedroom detached dwelling a few suburbs out. Therefore, it makes sense to share and this trend is mirrored in international markets – such as the UK and Canada, which produce similar data in their own census breakdowns.
Most of the first home buyers who cross my path also follow the above pattern.  Rarely do they opt for a one bedroom apartment – unless they’re restricted to a particular suburb. Most opt to move outwards and purchase something larger and if given the option, would rather rent until they’re able to afford a suitable property for their five- to seven-year time needs. 
Affordability constraints driving buyers away from city areas
Extra supply for the buy to let market should not be diminished, and it’s not my intention to do so.  However, there’s a broader need to establish quality accommodation for a larger proportion of home buyers who will accept townhouse living if locating inner city, but reject high density developments. And contrary to popular belief, it is possible to accommodate an equal number of residents in medium density dwellings without building to the skies.
Movements such as <a href="https://www.policyexchange.org.uk/images/publications/create%20streets.pdf" target="_blank">Create Streets</a> in the UK are at the forefront of pushing low rise initiatives, and Robert Dalziel – the London-based architect for Rational House, who visited nine cities around the world, including Mexico City, Shanghai and Berlin, has comprehensively examined how high-density can be made agreeable for a broad demographic of home buyers.  More information can be found in his book –commissioned and published the Royal Institute of British Architects: entitled <a href="https://www.propertyobserver.com.au/https://www.amazon.com/House-In-The-City-Architecture/dp/1859464521" target="_blank">A House in the City — Home Truths in Urban Architecture.</a>
Therefore, the major part of Victoria’s growth (mirrored in other states) has been evidenced in fringe localities such as Wyndham, Melton and Whittlesea. And one thing we’re not short of in Melbourne (and for that matter most other states,) is land.  Albeit, as I’ve written previously - regulatory constraints in outer suburban localities have increased land prices disproportionally, making the entry point for such developments effectively double what it should be. 
To demonstrate, following correspondence with Wendell Cox, author of the <a href="https://www.demographia.com/" target="_blank">Annual Demongraphica Housing Affordability Report</a> in reaction to a recent piece I <a href="https://catherinecashmore.com.au/wp/?p=494" target="_blank">wrote</a> outlining differences in international markets, Cox constructed a nice little chart which cuts through the usual measures used to convince readers that ‘housing has never been more affordable’, with an overwhelming focus on mortgage serviceability rates alone.
Instead, it demonstrates the speculative nature shaping the property cycle, which affects not only established house prices, but building activity as lot sizes reduce, whilst land prices per square metre, outpace income growth considerably.  (Something, which only a broad based land tax coupled with changes to supply policy will solve.)
<img src="/images/2014/04/28/cashmore-april-28-two.jpg" alt=""> 
Source: Demographia
Cox points out that ‘urban containment’ – contrary to the political rhetoric – does not result in cheaper prices.  However, to date, every reform put in place to release more land and build an abundance of accommodation, has resulted in higher prices per square metre both here and similarly in the UK and USA.
What to do?
Back to the question at hand – quite evidently, purchasing a new off the plan flat in either Sydney or Melbourne is not going to grant a windfall in economic rent (capital gains).  
You’ll often read commentators dictating that apartments perform better in their median data than house prices – and whilst it may be the case over the short term, it has not been proven over the long-term. In fact, over a long time frame, median detached house prices have outperformed unit prices and there are sound fundamental reasons why this may continue.
Broadly speaking, as a “set and forget”, providing you’re careful with the pre-purchase due diligence (strata reports - ensuring its not a stratum or company share title, which can cause issues in terms of financing and attracting future demand - fees, size, price, zoning, position, facilities, and so forth) apartments generally attract a higher yield, are low maintenance, and when issues with the building do occur, they are typically handled by the owners’ corporation and/or property manager.
Purchasing land offers more options – (subject to feasibility) - allowing extension, subdivision, back garden granny flats and so forth - our largest demographic of buyer are families and therefore land is still the golden nugget for most accommodation seekers.
No matter what kind of buyer you are – at some point you’re going to want to sell the home and move on, therefore acquiring an option that maximises consistent demand is critical in any equation.
Albeit, with the apartment choice being either an aged block in need of maintenance or new and subject to over supply. Or in terms of a house – budget restrictions only allowing a compact block in a fringe development in which landowners have control over how they ‘drip feed’ supply onto the market, I quite often advise purchasers to consider an alternative option. 
And, for that piece of advice, you’ll have to contact me direct.
You can contact Catherine via <a href="mailto:cc.cashmore@gmail.com" target="_blank">email </a>or <a href="https://twitter.com/ccashmore_buyer" target="_blank">Twitter</a>.
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Which is a better investment – an apartment or a house?

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I must be missing something here.  I have been told that I am slow.
But for the life of me I cannot see how the recent price growth in Sydney and Melbourne (up 15% and 12% respectively over the last 12 months) is anywhere near sustainable.
Nor can I see how the median Australian house price (which apparently is $535,000) is just over four times the disposable average family household income.  That would mean that on a gross basis, the average Aussie family earns about $175,000 each year.
Hmmm, something must be amiss.
Experiment
Each article i write is kind of like an experiment.  Topics are chosen often because the common rhetoric doesn’t seem to add up.  Sometimes they get picked because I like to disagree.  Many more are actually written than published.
In most cases we go back to basics – “explain it to me like I was a five year old” – it worked for Denzel Washington in the movie, Philadelphia, and it works for us too.
So in this regard we did the following:
<ul>
<li>Went to the 2011 Census for each capital city and found the median family household income 
</li>
<li>Worked out – via average weekly earnings – which are updated by state/territory twice each year –how much, by proxy, family incomes may have risen since the last census.  There was a big variation between each city. 
</li>
<li>Determined disposable income (gross wages minus tax) using an up-to-date (2013/14) online calculator. 
</li>
<li>Recorded dwelling prices by capital for all dwellings; houses and attached product according to the latest release from RP Data. 
</li>
<li>Used AFG’s mortgage index to determine the average loan to value ratio for each state/territory.  Overall, the average equity is 32% on recent home loans according to AFG. 
</li>
<li>Applied a basic online mortgage calculator using a principal and interest loan; 30 year time frame and 5.95% variable interest rate (the average rate, according to the RBA). </li>
</ul>
Our aim here is to find out two things:
<ul>
<li>The current dwelling price to income ratio for each capital, and 
</li>
<li>The proportion of disposable family income needed to pay the average mortgage in each city today. </li>
</ul>
Now that sounds pretty logical, right?  No silly things like prices versus nominal GPD; nor is income determined by national accounts.  Just a simple comparison between what we say we earn; what we have left over, in theory at least (as day to day expenses just seem to be escalating far beyond CPI), after tax; and how much a dwelling costs to buy.  Importantly, it is measured on a city by city basis.
So here are the results – all for March 2014.
Sydney 
<table style="width: 523px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td width="433">
Median dwelling price
</td>
<td width="90">
$762,000
</td>
</tr>
<tr>
<td>
Median detached house price
</td>
<td>
$818,000
</td>
</tr>
<tr>
<td>
Median attached dwelling price
</td>
<td>
$585,000
</td>
</tr>
<tr>
<td>
 
</td>
<td>
 
</td>
</tr>
<tr>
<td>
Median family household income
</td>
<td>
$97,500
</td>
</tr>
<tr>
<td>
Median disposable household income
</td>
<td>
$72,000
</td>
</tr>
<tr>
<td>
 
</td>
<td>
 
</td>
</tr>
<tr>
<td>
Ratio - dwelling price to disposable income
</td>
<td>
10.6
</td>
</tr>
<tr>
<td>
Ratio - house price to dis. income
</td>
<td>
11.4
</td>
</tr>
<tr>
<td>
Ratio – attached price to dis. income
</td>
<td>
8.1
</td>
</tr>
<tr>
<td>
 
</td>
<td>
 
</td>
</tr>
<tr>
<td>
% dis, income needed to buy dwelling
</td>
<td>
50%
</td>
</tr>
<tr>
<td>
% dis, income needed to buy house
</td>
<td>
54%
</td>
</tr>
<tr>
<td>
% dis, income needed to buy attached
</td>
<td>
38%
</td>
</tr>
</tbody></table>
Houses are very overpriced; attached property is heading that way.
Melbourne
<table style="width: 523px;" border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td width="433">
Median dwelling price
</td>
<td width="90">
$669,000
</td>
</tr>
<tr>
<td>
Median detached house price
</td>
<td>
$699,000
</td>
</tr>
<tr>
<td>
Median attached dwelling price
</td>
<td>
$498,000
</td>
</tr>
<tr>
<td>
 
</td>
<td>
 
</td>
</tr>
<tr>
<td>
Median family household income
</td>
<td>
$93,500
</td>
</tr>
<tr>
<td>
Median disposable household income
</td>
<td>
$69,500
</td>
</tr>
<tr>
<td>
 
</td>
<td>
 
</td>
</tr>
<tr>
<td>
Ratio - dwelling price to disposable income
</td>
<td>
9.6
</td>
</tr>
<tr>
<td>
Ratio - house price to dis. income
</td>
<td>
10.1
</td>
</tr>
<tr>
<td>
Ratio – attached price to dis. income
</td>
<td>
7.2
</td>
</tr>
<tr>
<td>
 
</td>
<td>
 
</td>
</tr>
<tr>
<td>
% dis, income needed to buy dwelling
</td>
<td>
50%
</td>
</tr>
<tr>
<td>
% dis, income needed to buy house
</td>
<td>
52%
</td>
</tr>
<tr>
<td>
% dis, income needed to buy attached
</td>
<td>
37%
</td>
</tr>
</tbody></table>
Like Sydney, Melbourne’s houses are very expensive and attached property is heading the same way.
Visit Michael's <a href="https://www.matusik.com.au/" target="_blank">website</a>, read <a href="https://www.matusikmissive.com.au/" target="_blank" rel="nofollow">his blog</a>, follow him on <a href="https://www.facebook.com/ThinkMatusik?fref=ts" target="_blank" rel="nofollow">Facebook</a> and <a href="https://www.twitter.com/michaelmatusik" target="_blank" rel="nofollow">Twitter</a>, or connect via <a href="https://www.linkedin.com/in/michaelmatusik" rel="nofollow">LinkedIn</a>.
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michaelmatusik-49YzLvdmNv

Price growth in Melbourne and Sydney is not sustainable

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Noting that the new NSW Cabinet is strong, with the potential to deliver much-needed planning reforms, regional plans and pending strata reforms, the Urban Development Institute of Australia NSW expects that affordability should increase.
UDIA NSW chief executive, Stephen Albin, told Property Observer that the reforms are a major apart of the industry performing well and maintaining this performance, as well as bringing much needed infrastructure to specific areas.
Asked which reform was most needed, Albin mentioned that there were many on his list, however it’s infrastructure levies that are one of the most significant issues, particularly for housing affordability. He expects this is one area where the new Cabinet can have an effect.
“It’s a complete shmozzle,” he said of the levy.
“It adds at least 15 to 20% to the value of a new property,” he explained, noting that when one part of the chain requires an increased payment, this is in turn going to be passed onto the consumer, as can be expected for any product.
Albin noted that in New South Wales, this is one of the highest levies globally.
However, there are other areas where affordability can be assisted.
He pointed to five priorities for the State Senate: 
<ul>
<li>NSW Planning Reforms 
</li>
<li>The Metropolitan Strategy for Sydney 
</li>
<li>The Illawarra Regional Strategy 
</li>
<li>The Lower Hunter Regional Strategy 
</li>
<li>NSW Strata Reforms</li>
</ul>
“Now we’re heading toward a state election, and recent distractions are out of the way, it’s crucial this current government gets on with the job of delivering much needed reforms,” he said.
“What we would like to see is these plans and policies rolled out as soon as possible to assist in the creation of more investment certainty to support the economy and jobs, and affordable homes for our state’s growing population.”
The regional strategies, in particular, were said to help bring infrastructure and money into these areas.
“I think people are always scared of changes,” he said of the reforms, which he noted would be the biggest overhaul in 30 years, however he also said that these reforms would not cause16-storey buildings to be built in peoples’ backyards, and especially not without consultation.
“They’re about cooperation, not conflict,” he explained in the shift towards New South Wales’ planning.
“The whole system needs to be changed. We’ve dealt with the current system for 30 years, and communities cannot got another three.”
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jduke-EHk3XBmHkn

Affordability should increase under new NSW Cabinet: UDIA

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New research released today has found that half of renters say they cannot afford a home deposit, while over a third of renters have been renting for five-plus years, according to realestateVIEW.com.au.
The Housing Sentiment Report has found that for many renters, there are two major factors affecting the desire to purchase a home.
Speaking to Property Observer, general manager of <a href="https://www.realestateview.com.au/" target="_blank">realestateVIEW.com.au</a>, Petra Sprekos, noted that it is her understanding that renters are stuck on the roundabout balancing two factors – affordability and lifestyle.
Noting that 28% of those surveyed noted that they cannot afford to buy where they want to live, with over 30% believing they cannot afford mortgage payments, it is interesting to note how these two act in concert.
“Renters do want to live close to work and to the shopping strips,” explained Sprekos. These locations, including the more fashionable suburbs, have become increasingly expensive, making affordability a growing concern.
However, she notes that it isn’t just the cost of property that’s an issue. It’s also the cost of other, now common, expenditures, such as holidays or even school fees.
“When you compare 20 years ago [to today], the biggest cost for a family or a couple or a single person was their home loan or rent, today there are also car loans, school fees, nice restaurants and holidays, as well. There’s more that people do these days and that’s when affordability comes in,” she explained.
Overall, she noted, it’s about perspective and the compromises renters are willing to make.
Anyone who remembers RP Data’s “cheaper to buy than rent” reports will note that there are often areas where repayments are lower than rent, which is the concern of 32% of the renters surveyed. For those not willing to venture to these suburbs, then there are still options.
Sprekos suggests the following considerations:
<ol>
<li>Consider purchasing an investment property in an area you can afford, while renting where you want to live. 
</li>
<li>A joint venture (particularly for an investment) might be a consideration, where you team up with a trusted friend, partner or family member to buy together. 
</li>
<li>Ask your parents to stand guarantor or to provide assistance in some way.</li>
</ol>
“It could be a little bit of fear of the unknown, or a fear that they can’t spend anything else and have the same lifestyle. You do adapt,” she said.
Of those looking to buy at present, 19% rely on their parents in some way, according to the survey’s findings. This may be through borrowing money, living with them while they invest, or using them as a guarantor. Of first home buyers, 42% use one of these strategies.
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The two aspects stopping most renters from buying

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I had the good fortune to meet two investors from Dallas, Texas last week - visiting in part, to survey the Australian real estate terrain and in return, provide a unique opportunity to glimpse the madness of it all through foreign eyes.
A cursory look through the press paints a colourful picture for our visiting observers.  Obviously, the spectacular rise in Sydney’s valuations has come under incredible scrutiny over the past 12 months or so. 
Like any upswing in the property cycle, it’s been exacerbated by a mix of forces, culminating in a shortage of effective supply against a bull run of speculation, which all agree has an inevitable end by date and no doubt subsequent correction when the tide changes (‘when’ being the operative word.)
The latest stats from RP Data’s capital city Home Value Index for the first quarter of the 2014 have evidenced “a near record level of growth throughout the month of March” rising in excess of 2% coupled with an “ongoing escalation in housing finance commitments”.
Sydney dwelling values are now reportedly 15.8% higher than their previous peak, some distance from Melbourne, which shows a more ‘subdued’ 4.7% ‘post peak’ increase (movements, which in industry speak are neatly termed a ‘recovery’.)
In response, the RBA, are like a read blowing in the wind, employing the same old wooden tools they’ve always relied upon as they warn investors in their latest <a href="https://www.rba.gov.au/publications/fsr/2014/mar/pdf/0314.pdf" target="_blank">Financial Stability Review</a>, - (like <a href="https://www.rba.gov.au/publications/fsr/2013/mar/html/bus-house-bal-sheet" target="_blank">last year’s</a> review, when stating how “undesirable” it would be “if households were to exhibit less prudent behaviour than they have over the past few years”) - that the:
“Cyclical upswing... cannot continue indefinitely” and any ease in lending rates holds the “potential to encourage speculative activity in the housing market”.
Community service groups hurriedly rush to Canberra, flagging a wealth inequality crisis, presenting yet another shandy of submissions to the rinse and repeat sequel of the last Senate inquiry into housing affordability,
And as Barclay’s Chief Economist <a href="https://www.smh.com.au/business/the-economy/australias-house-prices-flashing-red-debt-to-income-ratio-at-record-levels-20140404-362bz">Keiran Davies</a> sounds the alarm, reporting household debt to disposable income has hit a record “177% peak”, the public outcry against foreign investment bidding up prices has prompted the Coalition’s conservative version - reminiscent of Kevin Rudd’s 2010 <a href="https://news.domain.com.au/domain/home-investor-centre/blogs/domain-investor-centre-blog/what-housing-policy-20120621-20pcl" target="_blank">‘1-800-I-SAW-AN-ASIAN-AT-AN-AUCTION’ </a>debacle - to assess <a href="https://www.dailytelegraph.com.au/news/nsw/fears-chinese-investors-are-pricing-firsthome-buyers-out-of-the-market-will-be-investigated-by-parliament/story-fni0cx12-1226855755918">“what is happening on the ground”</a> and stave off the growing concerns that seem to indicate rules are not being adhered to.
The analysis my two new friends from Texas would hear from economists in response to the above backdrop is equally schizophrenic.
Whilst the Governor of the RBA <a href="https://www.theaustralian.com.au/business/economics/fitch-affirms-rating-warns-over-property-boom/story-e6frg926-1226874747119" target="_blank">Glenn Stevens is telling audiences</a> that a modest overheating in housing markets could have “long-term negative consequences for economic growth.”  AMP’s chief economist <a href="https://www.ampcapital.com.au/article-detail?alias=/olivers-insights/April-2014/Australian-housing-to-the-rescue-%E2%80%93-but-is-it-too-h" target="_blank">Dr Shane Oliver</a> is assuring the “normative” response to low interest rates producing a sharp surge in established house (land) prices, is “great news for the economy!”
According to Oliver, housing may show an “overvaluation criteria for a bubble,” but, we’re not in one yet, otherwise “property spruikers [would be] out in a big way” or “buyers rushing in for fear of missing out!”
Obviously Dr Oliver has not been attending many auctions or property seminars of late – otherwise he’d have plenty of evidence of the above practices (at least in the two biggest capitals.)  They’re all but engraved into Australian culture.
Notwithstanding, <a href="https://www.smh.com.au/business/the-economy/housing-bubble-fears-property-prices-could-fall-10-to-20-per-cent-20140331-35sg7" target="_blank">Christopher Joye</a> is back to the task of boosting his readership figures, evidencing the quite the opposite - warning overvalued prices could see “unprecedented 10 to 20% losses across the board” when/if the market 'normalises'.
Grave concerns indeed, albeit, it whistles the same tune as most industry commentary regarding affordability, with anxieties only going so far as to ensure an already inflated platform can be sustained (through prudent lending, of course) without open and strong advocacy into the policies that would stop these cyclical peaks and corrections, which result in numerous crash predictions, inevitable pain for new home buyers, a real wealth inequality crisis – for what seems to be for no more than generating publicity, whilst maintaining the status quo. 
“Build more houses!”
Unfortunately, the assumption – both here, and overseas – remains, that the only way to make houses more affordable, is to increase the supply of new dwellings.
Building more accommodation seems like an easy prescriptive cure, with supply verses demand being a well-tested economic model – that is, until it comes to the land market.
We can’t seem to deliver this supply at normative prices for the locational price/distance trade off.
Speculative activity, further promoted by a constipated planning system, has resulted in ever increasing land values, on ever decreasing lot sizes.
Analysis by RP Data shows vacant land prices over the past 20 years, have lifted from a median rate of $76.47 per square metre, to $507.70 per square metre, as of the end of 2013. Whilst the average ‘lot’ size has dropped from 700 square metres, to 500 square metres – and in some states, less than 400 square metres over the same period.
Obviously reforms to the planning process would greatly assist, however contrary to common belief, it would not alone provide a cure.
To truly restore housing back to fair value, we would have to remove the level of speculation manufactured into the structural design of our housing market and this is one side of policy reform Government has repeatedly refused to address.
Speculation
To be clear, an increase in the natural price of land, is an expected result when economies are improving due - for example - to capital investment in infrastructure, as is the case in Australia currently, with Tony Abbot’s desire to be knighted the ‘Infrastructure Prime Minister.’
Infrastructure intensifies the use and demand for land as the population grows, assisting job creation and collaboration between individuals.
Therefore, taken alone, rising values should be a ‘good’ thing for our country – (and economy) – or at least they would be, if the gains truly benefitted the community.
Any manufactured improvement to a location’s public amenities, gifts a beneficial trade-off to the owner, who receives a windfall in remuneration as the resulting economic impact boosts productivity.   
This increase in values is what economist’s term 'economic rent', although expressed rather misleadingly in popular vocabulary as capital growth.
To clarify – capital infers something that can be reproduced through productive activity, however we know from housing data, that the true gain in house prices is really collected in the rising cost of land, which takes up a 4.1 trillion dollar share of our 5.02 trillion dollar housing market.
 <img src="/images/2014/04/11/cashmore-april-11-two.jpg" alt="">
Land cannot be reproduced because it can’t be moved, it’s fixed in supply, and therefore any financial benefit derived from improving the surrounding facilities, is merely soaked into the ground.
This is why land banking is <a href="https://propertyupdate.com.au/land-banking-the-property-development-strategy-of-the-pros/">promoted</a> within the industry as a popular investment strategy – although to be clear, it’s not investment at all.
Investment implies the creation of wealth, whereas speculating is a zero-sum game; the wealth is not created, the landowner does nothing – and for the homeowners in Australia, lucky enough to be situated close to the best seats in town, it’s a generous tax-free unearned windfall.
Unwontedly or not, land bankers who hold their underutilised plot in lieu of capital gains, are free loaders on the economy and building activity does not respond to demand, but is only boosted when values are assessed to be on an upward trajectory.
Policies such as negative gearing, depreciation, capital gain exemptions, the encouragement to acquire properties and gear against them in self managed super funds, as well as the use of the family home as a wealth reserve for retirement, enforces speculation into the foundational makeup of our property market.
Land cycles
But I’m not informing Australian’s of anything they don’t already know.  People have become acclimatised to property being expensive, and our housing has become expensive because its value is derived from its accumulated and speculated future capital gains - correctly termed economic rent.
According statistics, home buyers typically move every 10 years or so. The price they are prepared to pay, is balanced against the price they expect to achieve, minus expenses – and in all my years assisting buyers, (barring the odd downsizer) I have never met a single one who calculated otherwise.
This is why property cycles – this is what promotes speculation. 
The banking sector, which has a monopoly on this process (after all, how many can purchase a property without a mortgage?) increases the volatility of this cycle markedly, however banks, lending, money (credit) creation, lack of regulation does not cause the cycle, (or stop the cycle).  Speculation does. 
We had land booms and busts before the evolution of our modern banking system – and without a change to the structural makeup of our housing market, we’ll continue to have them.
Lending restrictions can mitigate risk, but due to the vested interests of banking system, it will not remove it to the degree needed to stop the cyclical impacts.
Easy Earnings
Notwithstanding, for those home owners and investors who purchased over the last decade or so, making money through buying, holding and acquiring property (land) has been a far more effective in accumulating wealth by way of earning income and channelling it it into productive activities.
The BRW rich list is littered with examples, and for those who are not involved in the business of property, land is where they invest their dollars.
Of course, for the first home buyer on a single wage priced out – the mantra resumes that we just need to build more dwellings, the process of which contains just as much speculative activity in its design (including how we fund for infrastructure) so as to exacerbate the problem.
But how does it look to our Texan friends?
Well let’s just say, they’re not rushing to move here.
Texas is one of the top locations for interstate migration in America.
As with Australia, the economy has been super charged by way of a commodity boom, but unlike Australia, industries such as tech, manufacturing and business services are thriving and hiring in droves. 
The expansive list my new Texan friend’s reeled off, highlighting the number of companies moving their central operations into the state (rather than ‘offshore’ as they do here) is impressive, and when I asked how much they would spend purchasing a ‘home’ I was told that “three times annual earnings” would buy the best in town, which was summed up by the comment “like the house my parent’s own”.
Most of the units and condos in Texas are rentals – owned by large investment funds for example, and used as a hedge against inflation and source of positive cash flow.
There are less family sized rentals (detached dwellings) albeit, because housing is affordable, there is also less demand.
Devoting earnings to building a property investment portfolio isn’t a consideration for most Texan residents.
The state didn’t experience a housing bust, because it didn’t experience a housing <a href="https://www.newgeography.com/content/001680-how-texas-avoided-great-recession" target="_blank">boom</a>. 
 <img src="/images/2014/04/11/cashmore-april-11-one.jpg" alt="">
The subprime crisis didn’t hit, because speculation was removed. 
This was in part due to liberal and well funded supply policy, which ensures housing is built on demand and essential infrastructure funded by way of a deductable municipal utility district tax, administered by residents, funded by a bond, and payed back proportionally over a lengthy period of time.  
The additional key however in what’s been termed the “Texas miracle” is low taxes on productivity, lack of state income tax and a good regulatory environment, offset by higher than average property tax.
It’s not perfect – Texas does not remove other taxes, such as sales tax, which has a destructive impact on commerce – and property is taxed as well as land (where as ideally, in a truly productive environment, only the unimproved value of land – the economic rent – should be subject to a tax, which is far easier to accurately assess than the total capital improved value). However it makes the point. 
Whilst Texas boosts and attracts productivity with lower taxes, discouraging speculation in the areas that destroy it, Australia leans to the opposite.
We’re not immune to real estate crashes and there is plenty of evidence to prove their increased severity when prices are allowed to escalate. But, the best way to mitigate the risk and protect against volatility, is to encourage the industries that advantage the working population most (manufacturing for example) and take the air out of those that advantage land speculators the most. 
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Looking at our housing market through foreign eyes

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Many residential property markets around Australia are currently in a ‘hot’ phase of their cycles. By that, I mean that these markets are in the maximum peak property values of their current market cycles.
It is a great time for sellers but a tough time for buyers.
Buyers in markets like Sydney, Brisbane, Perth and many regional centres are facing tough times right now. There are a number of contributing factors as to why these markets are so hot; not limited to the following:
<ul>
<li>A record low interest rate environment is encouraging some first time buyers in to the market who otherwise would not have been able to afford to.</li>
<li>First time Australian citizen investors, enticed by the low interest rates on offer and an increase in construction upstarts for off the plan investment purchases, are buying up properties at very high rates.</li>
<li>In regard to non-Australian-citizen/foreign investors, the introduction of relaxed government policy as well as incentives offered for certain degrees and levels of foreign investment in Australia has made for a property buying frenzy from foreign investors.</li>
<li>The ever-increasing urbanisation of Australia’s population is resulting in more people moving to capital cities as well as established regional cities also. This in turn adds demand.</li>
<li>The general ‘FOMO’ effect (fear of missing out) as a result of the above factors adds a heightened sense of urgency to another property-seeking group, mainly upgraders and second or third time property buyers.</li>
</ul>
All of this of course adds up to high asking prices in many markets. However, initial high buying prices isn’t the only challenge that occupants and residents of these hot markets will face. Different groups will be affected in these hot markets, and in different ways:
First home owners
Despite low interest rates on offer, first home buyers remain consistently out-bid and out-priced within their desired suburbs. The other worrying factor for these buyers is that even if they stretch to their absolute maximum buy rate to secure a property now, they are doing so in a very low interest rate environment.
If first home owners are stretched to their limits now, how they will cope when interest rates fluctuate back up to higher levels over the next 24 months?
I am not of the view that a massive property bubble is forming, however I don’t deny that in low middle income areas where first home buyer volumes are higher, should a significant volume of them fall under mortgage stress over the next couple of years property values in those areas may stagnate for several more years to come.
Australian-based investors
I use the phrase ‘Australian-based’ for this investor group to encompass both Australian citizens who naturalised in this country for most or all of their lives, as well as those who are newer arrivals to Australia but call Australia home (in other words, they live here full-time).
Investors who have purchased residential property in hot markets are no different to those who seek out properties in emerging or undervalued markets; all interested only in the return they get on their investment. This means that providing that either strong capital growth potential, or high rental return, are evidenced in a property purchase, they will consider a property in any market climate – hot or cold.
The problem is hot property markets mean that capital growth for that market/post code is usually at its maximum. That means that for investors seeking immediate capital growth, this will be unlikely for several more years because the property is at its peak right now.
<blockquote>
The consequences of suburb specific saturation by investors have not yet been truly seen.
</blockquote>
This means that if an investor in a hot market is truly a savvy buyer, versus a poorly-researched, ill-advised wannabe investor, they must be seeking 'hot’ (and immediate) rental return over capital growth.
That  paints an alarming picture for overall housing affordability in these markets. Investor owned properties must be charging very high rents to occupants of their properties right now to ensure their investment isn’t a massive loss-maker for them. That means that not only are property buying rates high in hot areas, but so are rents. Overall affordability to live in these cities  becomes poorer.
Non-Australian and foreign investors
Similar factors exist for foreign investors in comparison to local ones.
However, there is another factor at play. Recent investor profile data research from Australian Property Investor magazine suggests that local investors tend to buy in the same city (if not in a nearby suburb) to where they live. Foreign investors typically purchase, site-unseen, in markets that they have never lived in, nor even (in many instances) have visited.
I guess the missing ingredient here is the ‘sense of community’ that mass-property buying, condensed into a small group of ‘favoured’ suburbs or areas, erodes and the effect this has on an area. Some suburbs can become at risk of being investor ghettos whereby the ratio of owner-occupier to investor-owned property is so high that a genuine sense of community within that area becomes quickly eroded.
<blockquote>
Investors should look to emerging markets where owner-occupier to renter ratios are much more balanced.
</blockquote>
This then changes the dynamic of that entire area; eroding the gentrification developed over decades, in the space of just a decade or so of heavy investor-buying. Of course, it is not the fault of (nor should the blame be pointed at) the foreign investors themselves; but rather local and state councils, policy-makers and governments whose planning departments allow this occur, as well as property developers who exclusively market to foreign investors from the moment the first block foundation concrete is poured, en-mass. 
I draw a parallel here to post-World War Two Melbourne, where ‘outrage’ existed over the Italians buying out entire suburbs within just a couple of years after the war. The difference however, is that these communities owner-occupied the areas, made a great contribution to the ‘sense of community’ those areas had, and in hindsight were one of the major market driving factors that has given these suburbs the wonderful identity (and desirability) they have today. Yes, some areas were almost entirely ‘foreigner-owned’, but these people became locals and celebrated their communities.
Fast forward to 2014 and there is a lot of uncertainty around the concentrated foreign-investor buyouts of entire suburbs. This is because investors are not living in the suburbs themselves. They do not have say a vested interest in ensuring the local park lands are maintained, or that roads don’t become too congested, or that units and houses are not occupied by too many people, and so on.
It is no doubt clear that hot property markets offer rewards and benefits for some property owners. However, the implications of investor buying extend beyond just bumping the rental and purchase prices up. The consequences of suburb specific saturation by investors have not yet been truly seen. Ever the optimist as I am, I remain doubtful that investors buying in hot areas, at a grand scale, will be a positive thing for those areas.
Investors should look to emerging markets where owner-occupier to renter ratios are much more balanced.
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