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dratts said..
As we live in Australia, and purchase in Australian dollars, its irrelevant what anything is worth in US dollars.
If a home is now worth a million dollars, 10 years ago it was worth a lot less.
All purchased with AUS $$$.
So in fact our dollar, and the real estate we purchase with it, has increased dramatically.

No , we live in the world , exchange goods and services constantly. The point I'm trying to make mean that our prices are going upgrade , but value of our dollar going down. On global market our real estate is going cheaper year by year.

That is correct Macro and should we (Australian society) be a bit more fearful? I wonder if the last hurrah for government may be to prop up a local housing bubble by relaxing foreign ownership laws, we're already looking pretty cheap, the $AU is dropping against the $US.

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Paddles B'mere said..
That is correct Macro and should we (Australian society) be a bit more fearful? I wonder if the last hurrah for government may be to prop up a local housing bubble by relaxing foreign ownership laws, we're already looking pretty cheap, the $AU is dropping against the $US.

exactly, be suspicious
When government tell you: "Be happy now your home is worth 20 % more ! "while in real monetary terms our wages/ income is half what it was a decade ago .

From 1.10 in 2012 to 0.66 USD just in 8 years ! That how our AUD is falling.
I am not complaining because even on falling market you could earn good money on shorting, but should we be proud of betting against our own currency constantly ?

Short exercise: I know that guy that arrived from Florida, USA just about 2012 , bought a house near by 920k after converting his US into our AUD.This year, he sold at $890k the same house and decided to go back when come from. How much money he is taking back into Florida ?

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Paddles B'mere said....I wonder if the last hurrah for government may be to prop up a local housing bubble by relaxing foreign ownership laws, we're already looking pretty cheap...

Maybe their last hurrah was last May....nothing else seems to be going all that swimmingly.

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Macroscien said..

Paddles B'mere said..
That is correct Macro and should we (Australian society) be a bit more fearful? I wonder if the last hurrah for government may be to prop up a local housing bubble by relaxing foreign ownership laws, we're already looking pretty cheap, the $AU is dropping against the $US.

exactly, be suspicious
When government tell you: "Be happy now your home is worth 20 % more ! "while in real monetary terms our wages/ income is half what it was a decade ago .

From 1.10 in 2012 to 0.66 USD just in 8 years ! That how our AUD is falling.
I am not complaining because even on falling market you could earn good money on shorting, but should we be proud of betting against our own currency constantly ?

Short exercise: I know that guy that arrived from Florida, USA just about 2012 , bought a house near by 920k after converting his US into our AUD.This year, he sold at $890k the same house and decided to go back when come from. How much money he is taking back into Florida ?

Wasn't the 1.1 because of the once in a lifetime mining boom? And isn't the longer term average closer to 80c. You need to extend your graph.

@macro, I think the answer is "not as much as he came here with" and the government scored a nice bit of stamp duty.

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Paddles B'mere said..
@macro, I think the answer is "not as much as he came here with" and the government scored a nice bit of stamp duty.

And what about the Aussie that bought USA property and sold in the same time frame? Winna Winna Chicken Dinna. ( excluding government charges of course)

Well bobajob, in 2012 in post GFC America, he could have probably bought an entire Detroit suburb including the police station and the fire department and might now be mayor

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bobajob said..

Paddles B'mere said..
@macro, I think the answer is "not as much as he came here with" and the government scored a nice bit of stamp duty.

And what about the Aussie that bought USA property and sold in the same time frame? Winna Winna Chicken Dinna. ( excluding government charges of course)

That is interesting question. Because unlike the Florida guy that bought property here at almost a million to have now only half of million after 8 years,
the same money invested in USA could almost bring you another half a million gain.Which means that our investor from USA is now 1 mln dollars poorer.
I can not stand rationale above that our property now are so much more expensive. Our dollar remain pesos or lira and by Wenzualan standards we should have homes values at trillions AUD.
If our currency if loosing value against the rest of the world , doesn't mean that we are suddenly so much reacher.
Maybe there is more millionaires now but how it compare to trillionaires in the poorest country where billion dollar buy you pack of cigarettes?
Summarizing. Yes , we pay now more for properties then ever , but absolute value of our properties dropped.Unfortunately I did try and can not find a single graph representing Australian median house prices expressed in US Dollars.Possibly we could create one ad hoc taking existing graph in AUD and converting to USD at give exchange rate at given time.

Macro, the problem is that the income level of most Australians is not linked to any global "market" for Labour. These guys all have to buy property based on local pricing so for them the pricing is high. If you're an executive of a multinational company however, then your income is possibly linked to the global market price for executives so the property prices here appear cheap. It's a good example of creating an economic division in Australian society. Ie the rich getting richer, the poor get the picture

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Paddles B'mere said..
Macro, the problem is that the income level of most Australians is not linked to any global "market" for Labour. These guys all have to buy property based on local pricing so for them the pricing is high. If you're an executive of a multinational company however, then your income is possibly linked to the global market price for executives so the property prices here appear cheap. It's a good example of creating an economic division in Australian society. Ie the rich getting richer, the poor get the picture

Income of most Australian is directly linked to global economy and current virus scare perfectly illustrate that connection.Why virus eating Wuhuans suddenly cause wipe out hundred of billions of Australian share market? All I am trying show here, how pricess of our housing in Australia are dissociated from reality.
It is not me or you keeping price hight, but government policy to keep lid on land availability to artificially inflate prices.I am in the process of setting new home on my hobby farm and see that below 200k give me 4 bedroom 260sq-300 meter brand new home. As a weekender home it should more than enough home me and think many struggling families now across Australia should be happy with similar. Actually for many families coming of interest only into principle repayments will be very painful. Real cost of 4 bedroom home will be around $250k and anything above that means artificially inflated that have no other explanation then greed. The problem is that near my Gold Coast family home empty section cost 450 to 880K alone.But supply of land for housing and commercial / industrial use is strictly restricted to keep prices as high as possible, now beyond any reasonable affordability criteria. All we need is our Australian Sanders to make thing affordable again. I don't say that you suddenly need to sell you home at 1/3 of the current price , but why not to release parcels of useless land for developments ?

cutting immigration and removing tax incentives would help enormously and follow NZ in banning foreign ownership

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.

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FormulaNova said..
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.

That means possibly collapse of whole real estate Ponzi scheme here. Anyway it is going to collapse later or sooner because most of families will never be able to repay principles on loans on 1 mln dollar houses.


Looking at Little John graph we could see where prices of homes should be now. Exactly at half what it actually is.Eventually we live in market economy which is artificially manipulated by government official . Such planned experiments failed already in socialist states.So later of sooner market will correct itself to the right values. By a chance and coincidence all faults will be blamement on another GFC if not newest flue virus pandemic.
Actually that virus provide the best cover to governments to explain failing financial system.

^^^

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.

I fixed the graph for you

I'm not betting on the price rising for awhile yet

that trickle down economics sold to us from the Libtards is just been shown to be a scam for the rich and corporate

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.

So eppo, in layman's terms are you proposing what is basically a land tax? ie. a return to the tax systems of many hundreds of years ago where the land owners paid the tax and whoever didn't own land had to pay the landholder rent to be on their land

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eppo said..



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).

Not controlled by banks !

land supply is the ONLY game and it's controlled by Regional Plans. every state has one and it clearly sets out where and what you can build on ably block of land. Restrict Residential land zoning and guess what ???!!! Land zoned residential increases in value. Increase the amount of residential zoned land and guess what happens !!???
no prizes !! Don't overthink this people !!

So Main, without "overthinking it" like you warned me not to .................. how do we tax industrial land so that there is an equitable amount of tax paid by the landholder (and therefore the business as the occupier of the land)? Obviously not all industries are as profitable as one another so if a cafe takes up 200sq.m of space and a surgeon takes up the same amount of space is it appropriate that they both pay the same amount of "tax" for their space if this is their only financial contribution to the state? Taxation is a "system" that incorporates a number of taxes that cover each other so that no-one is unfairly treated by any one tax.

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Paddles B'mere said..
So Main, without "overthinking it" like you warned me not to .................. how do we tax industrial land so that there is an equitable amount of tax paid by the landholder (and therefore the business as the occupier of the land)? Obviously not all industries are as profitable as one another so if a cafe takes up 200sq.m of space and a surgeon takes up the same amount of space is it appropriate that they both pay the same amount of "tax" for their space if this is their only financial contribution to the state? Taxation is a "system" that incorporates a number of taxes that cover each other so that no-one is unfairly treated by any one tax.

Depends on what outcome you are looking at ?

If we stick to house prices - the simple way to make it cheaper is to supply more residentially zoned land to the marker via the Regional Plans.

An increase in supply results in a decrease in value. If you want to bring industrial rents down then do the same thing.

Land tax is just another tax that gets passed on to the business operator / tenant (indirectly). It increases the cost of business for the tenant.

Don't get me wrong, I do wonder whether a land tax on residential property might be a good idea as part of an overall tax "system" if it encouraged positive gearing. Anything that discourages negative gearing as part of a yearly taxation calculation.

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Paddles B'mere said..
Don't get me wrong, I do wonder whether a land tax on residential property might be a good idea as part of an overall tax "system" if it encouraged positive gearing. Anything that discourages negative gearing as part of a yearly taxation calculation.

Isn't the easiest way to discourage negative gearing simply to get rid of it?

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Main said..

Paddles B'mere said..
So Main, without "overthinking it" like you warned me not to .................. how do we tax industrial land so that there is an equitable amount of tax paid by the landholder (and therefore the business as the occupier of the land)? Obviously not all industries are as profitable as one another so if a cafe takes up 200sq.m of space and a surgeon takes up the same amount of space is it appropriate that they both pay the same amount of "tax" for their space if this is their only financial contribution to the state? Taxation is a "system" that incorporates a number of taxes that cover each other so that no-one is unfairly treated by any one tax.

Depends on what outcome you are looking at ?

If we stick to house prices - the simple way to make it cheaper is to supply more residentially zoned land to the marker via the Regional Plans.

An increase in supply results in a decrease in value. If you want to bring industrial rents down then do the same thing.

Land tax is just another tax that gets passed on to the business operator / tenant (indirectly). It increases the cost of business for the tenant.

I have been looking at industrial land ,to build a warehouse or even just a storage yard, at reasonable distance from home,. Couldn't find anything in 150 km radius, that is cheaper then residential land or even already standing warehouse. I have been looking with jealous at my Chinese machinery suppliers- huge warehouses, plenty of machinery.
Our Australian policy is definitely anti business. To manufacture, do anything you need industrial space.
To buy you need a lot of free cash with deposit 40% usually, then after spending a half a million or more you still don't have anything yet- machinery, tools, resources to operate. I could possibly manufacture some of my inventions here, but running cost of business here do not guarantee any profit.
Hauling 20ft container from Brisbane port to my place ( 50 km) cost $1400 since whole trip from any port in China cost $400-500.

I must say that cost of doing business in Australia is extreme, phenomenal and the best we could do is do nothing.

Suppouse that Elon want to build Gigafactory to make Lithium batteries. The whole business is not about Real Estate ,to buy a land then setup a wahrehouse. As we do have here in Australia. If Elon needed to pay $2000 per 1 square meter of the gigafactory warehouse, imagine what total cost could be, Acturally 2k here cost plain tilt slab, low roof structure not up to Gigafactory standards for sure.

at 180,000 m2 it means that Tesla needed to pay $360,000,000 for the roof alone without solar panel or any machinery inside,.
But the plant is not about real estate but products to be made, jobs, so Nevada authorities comes with grants and support for such business.
Obviously we don't have such huge area for similar construction here in Australia, so nothing like that never will be build.

en.wikipedia.org/wiki/Giga_Nevada

@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.

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Paddles B'mere said..
Don't get me wrong, I do wonder whether a land tax on residential property might be a good idea as part of an overall tax "system" if it encouraged positive gearing. Anything that discourages negative gearing as part of a yearly taxation calculation.

We are talking at cross purposes a bit here. Im talking about why land costs what it costs and more specifically why house prices are as high as they are and the simple controlled way to reduce house prices. when it comes to land tax that really doesn't impact the value or cost to buy any given site. what it does do however, is push up rentals for businesses and/or adds to the overhead of an owner- occupier another tax which is a cost of doing business - like we don't have enough taxes.....

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Macroscien said..

Main said..

Paddles B'mere said..
So Main, without "overthinking it" like you warned me not to .................. how do we tax industrial land so that there is an equitable amount of tax paid by the landholder (and therefore the business as the occupier of the land)? Obviously not all industries are as profitable as one another so if a cafe takes up 200sq.m of space and a surgeon takes up the same amount of space is it appropriate that they both pay the same amount of "tax" for their space if this is their only financial contribution to the state? Taxation is a "system" that incorporates a number of taxes that cover each other so that no-one is unfairly treated by any one tax.

Depends on what outcome you are looking at ?

If we stick to house prices - the simple way to make it cheaper is to supply more residentially zoned land to the marker via the Regional Plans.

An increase in supply results in a decrease in value. If you want to bring industrial rents down then do the same thing.

Land tax is just another tax that gets passed on to the business operator / tenant (indirectly). It increases the cost of business for the tenant.

I have been looking at industrial land ,to build a warehouse or even just a storage yard, at reasonable distance from home,. Couldn't find anything in 150 km radius, that is cheaper then residential land or even already standing warehouse. I have been looking with jealous at my Chinese machinery suppliers- huge warehouses, plenty of machinery.
Our Australian policy is definitely anti business. To manufacture, do anything you need industrial space.
To buy you need a lot of free cash with deposit 40% usually, then after spending a half a million or more you still don't have anything yet- machinery, tools, resources to operate. I could possibly manufacture some of my inventions here, but running cost of business here do not guarantee any profit.
Hauling 20ft container from Brisbane port to my place ( 50 km) cost $1400 since whole trip from any port in China cost $400-500.

I must say that cost of doing business in Australia is extreme, phenomenal and the best we could do is do nothing.

Suppouse that Elon want to build Gigafactory to make Lithium batteries. The whole business is not about Real Estate ,to buy a land then setup a wahrehouse. As we do have here in Australia. If Elon needed to pay $2000 per 1 square meter of the gigafactory warehouse, imagine what total cost could be, Acturally 2k here cost plain tilt slab, low roof structure not up to Gigafactory standards for sure.

at 180,000 m2 it means that Tesla needed to pay $360,000,000 for the roof alone without solar panel or any machinery inside,.
But the plant is not about real estate but products to be made, jobs, so Nevada authorities comes with grants and support for such business.
Obviously we don't have such huge area for similar construction here in Australia, so nothing like that never will be build.

en.wikipedia.org/wiki/Giga_Nevada

Land cost and the taxes to get infrastructure to this would be sobering. many US towns compete to get this business in their town by offering to do the infrastructure for free, dropping land tax and other operating taxes like payroll.

Nevada is still waiting for a return.
It's not a good example macro they basically got ripped off. As far as I know.

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.

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Paddles B'mere said..
Don't get me wrong, I do wonder whether a land tax on residential property might be a good idea as part of an overall tax "system" if it encouraged positive gearing. Anything that discourages negative gearing as part of a yearly taxation calculation.

Negative gearing supports the whole apartment development industry. it's also a pretty big supporter of the development of the major house and land style subdivisions that stockland and lend lease do (the 25 year rollouts). These projects as massive direct and indirect job creators. Sales are really slow at the moment and investors are apparently up around 80% which is high but thank god they are there. Kill this goose and the flow on effects could be pretty devastating. Rents would be pushed pretty high for starters.