Houses are cheaper

It's an interesting idea... if we left negative gearing alone and capital gains tax alone and released heaps of land onto the market at cheap prices, what would happen?

(If you ignored the howls of protests from existing owners who know that it will devalue their existing assets, and the builders who now see that adding 30% onto a $300k house is much better than adding 30% onto a $150k house.)


I would argue that Perth is a case in point at the moment where large amounts of land were released in the period of the mining boom, and seemingly a lot of people have left, and land prices are falling, and the house price values seem to be stagnant at best.

^^^

Well if the graph goes like this we are all screwed. It would mean a great depression for us all home owner or not. Our currency would spiral down taking all our aud riches and purchasing power with it.

Much of the chart is actually financial deregulation ie where apra the rba etc decided it would be good to add a second income to household borrowing capacities. Then they upped the ante by giving banks risk weighting discounts to mortgages vs productive business loans.

Then they added the sugar of emergency interest rate levels to the mix and bingo we are set up for Armageddon at some point unless the world returns to record growth rates (highly unlikely)

It amazes me how few see that we have basically just become debt slaves for an asset that even in the best boom ever has only gone sideways on an international basis.

Investor tax breaks impacts are yesterday's news. The numbers simply don't stack up anymore except maybe in Perth (and that depends on china) It's the owner occupiers and especially first home buyers who are behind this latest push and they are the most vulnerable to economic shocks.

We will see a few more tricks yet I suspect to prop us up for longer as policies are now firmly tilted toward sustaining the bubble as long as possible at any cost rather than the more sensible slow deflation to sustainnable levels. That's too hard now. Let the next guy deal with it.

the solution is simple. Tax the economic rent (money for nothing and your chicks for free) collect this tax and invest in a sovereign fund that then pays a dividend to every citizen in the country. This will stop speculation on land and the wasted use of valuable credit for speculative purposes.

Land owners will be forced to value add to their properties or at the very least make them cash flow postive... eliminating the need for negative gearing and the plethora of taxes. This would also replace most income tax (which by the way was invented by the English only to pay for ships to fight the hundred year war against France ... and continued to this day).

this will free up credit for actual productive sectors of the countries economy.


this way all citizens can benefit from the their land not just the elite few.


singapore does it and by 2050 is predicted to the the richest nation per capita... and yet they have little land. Funny enough so does Texas ... (the tax part only) and they didn't really feel the effects of the GFC.


So this would also eradicate the boom bust cycle and the need for large bulky and ineffective governments as well.


but alas the biggest game in town is the control of land, fostered by government policy and controlled by the banks (who we have mortgages the earth to).


tax away the economic rent of land. So simple and yet the wealthy elite will never let this happen
So it will never happen... probably not until the greedy baby boomer generation have finnally died out and also their institutions. If they ever Fckn die !! They have power and wealth powered by fractional reserve lending and government policy and they won't be letting it go. The mess will need to be cleaned up by multiple future generations if they even have a planet/resources left to clean up.

@Harrow, well yeah that's what I reckon, still let an investor subtract his expenses/losses from his capital gain but only let the investor do it when they dispose of the asset not every year.

The core driver for this type of deal by govt is job creation and the economic stimulus to service sectors it generates. They used to work on a $33X multiplier when they do these deals. The initial deal is treated as a catalyst for ongoing and new development. The land probably had no opportunity cost value anyway...
Brisbane did a similar style deal to get Virgin Airlines to set up their head office in Brisbane. Also Lockeed Martin or one of the US airline manufacturers as well. Can't remember now but Lend Lease was part of the bid.