WHY ARE PRICES SO HIGH?

Jun 07, 2017
Michael Matusik

The housing affordability debate is starting to leap all over the joint – from quips about breakfast options to now, a blame game.So, I want to outline, in plain speak, why dwelling prices are so high.

Let’s keep this simple.  Here are the big five reasons why.

  1. Urban planning policies

Glacial release of land for housing development, urban growth boundaries, packing the population in major cities and especially the inner city versus decentralisation or multiple CBDs.

  1. Tax incentives and taxes

Capital gains discount on housing, negative gearing, government first home buyer grants, stamp duty, superannuation access/use.

  1. High immigration and baby bonus

Nothing wrong with population growth, but it works against you when half of it is taking place in Sydney and Melbourne.

  1. Cheap and accessible credit

Low interest rates, lax bank lending (yes, it is still lax!) and offshore wholesale borrowing by banks and developers.

  1. Foreign investment

Mostly out of China and most of this capital goes into property; much of it illegal under current FIRB guidelines.

Everything else is BS.

If you really want to make housing more affordable, the answer is easy, drop the price!

Thanks to Omar for his input. 

Tomorrow we will outline our housing market outlook.

Keen to hear your thoughts.

Until next time,

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Michael Matusik

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