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Paddles B'mere said..
but so is oil and iron ore and they are called commodities aren't they?

They might be technically finite, but not in any practical sense.

Land is just land - it is unique it terms of categorisation.

Ok cool, and economically speaking the price is still the same though? ie the net present value of future benefits derived from ownership of the land?

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AUS1111 said..

Paddles B'mere said..
... it is fact without emotion, real estate is just another commodity.

I have to take exception to that statement PB; land is specifically not a commodity. Whilst it can be bought and sold, the quantity is finite and it can be neither produced nor consumed. Land is just...land.

Unlike virtually any other form of asset, land is a zero-sum game; if I own it, everyone else is excluded from it. That is not the case with other forms of wealth.

So different rules apply.

Everyone needs a place to live. So if you're born today into a world where all of the spots are taken, what then? How is that fair? You work hard and compete with others in circumstances similar to yours, and you bid up the price of a spot that may have cost its current owners very little, or even nothing. Perhaps an unreasonably large proportion of your wages go to paying for unfunded pension liabilities of past generations.

It's a form of inter-generational theft. The burden of higher prices ultimately falls on future generations doesn't it?

The answer is higher land taxes reflecting the fact that if you want to own (use) a piece of land, you should be making a greater contribution to the other members of society who are denied that right. You should give something up; either a proportion of your labour or of your capital. It's a neat way to address inequality of opportunity.

What do you think?

I agree that land taxes are an efficient way of extracting a social benefit from this inter-generational wealth and may help curb some of the worst most selfish forms of speculation. At the same time, the complete removal of highly inefficient and unfair stamp duty taxes would be essential.

Land is not a commodity of course. It is in my opinion almost worthless. It's only true value is the improvements we make, like infrastructure. It's real value, is the essential human need for habitation and civilisation.

Putting monetary value on land is unfair much like claiming that "the earth is mine", and only slightly less ridiculous.

All other monetary value we attribute to it is a form of inter-generational theft, now so bad that young people can't afford what their grandparents could buy with an ordinary wage

...

Paddles, you still don't get the subtle point I've been making about how property markets differ from commodities like petrol. I've never said property markets aren't still subject to supply and demand dynamics. The point I was making, is that at present, many vendors, not all, but many, are in denial about what buyers are prepared to pay for property and that they are under the illusion that they are in control of the price. That is the reason properties have been on market for record periods. It's certainly not the buyers who are in denial...

Well I say one thing
You're rates are based on the land values.
They all went up with the boom but they will never drop back with the fall in prices because councils are greedy
So in a way I'm right in saying Sydney prices will never drop because the rates will never drop they will always be at the valued at the highest price & council will tell you your land is valued at that even if you could never sell for the valuation prices

That's another scam and it makes the inter-generational theft AUS is talking about worse.

I don't however agree with your assertion about the link between Sydney property "prices" and council rates. That's like saying that the price of petrol is intrinsically tied to the rate of fuel excise....

Perhaps a better analogy is gambling, alcohol and smoking taxes - the taxes of vices that damage our society.

I do get what you're saying Adriano, but I still can't get away from my thoughts that the purchase price paid by the buyer should be just like any other purchase which is the net present value (to the buyer) of future benefits of ownership; either tangible economic benefits in the form of future capital gain on sale or future production that may occur on the land; or intangible benefits such as you'r own personal enjoyment or what makes you happy. My belief is that a lot of people ignore this basic financial valuation when they participate in the property market and simply pay too much for something that might not have the future benefit.

Another thing that we witness is the "gambler's mentality" that proudly tells you about the $160k profit???? they made on a property without factoring in all the costs and taxes. We know of a case, where when we crunched the numbers, a couple worked for less than $25/hour, sacrificed all their recreational time with their family for about 18 months and then suffered a relationship breakdown, when they could have just worked some overtime and saved themselves the grief. Marketing is a magician's game of smoke and mirrors to stir up interest from the unknowing.

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Adriano said..

Paddles, you still don't get the subtle point I've been making about how property markets differ from commodities like petrol. I've never said property markets aren't still subject to supply and demand dynamics. The point I was making, is that at present, many vendors, not all, but many, are in denial about what buyers are prepared to pay for property and that they are under the illusion that they are in control of the price. That is the reason properties have been on market for record periods. It's certainly not the buyers who are in denial...

I don't think anyone is in denial. You say supply and demand dynamics apply, so that will take care of this so called "denial".

I think it is simply a case that people don't need to sell something cheap when they have confidence it will be worth more if they wait. They would kick themselves for if they sell now at what the market will pay and it is worth 20% more in 2 years. Of course if someone is willing to pay what they are asking in a depressed market, they will take it, so they leave it on the market. How long are they willing to wait? I think most would expect typical cycle conditions which would be a return to growth in a few years.

I upgraded my residence back in 2012. It was at the lowest point of the market. I got about $200k less for my old house than I would have been likely to get about 2 years earlier.... but I got my new place for about $500k cheaper than what it was 2 years ago, so it was a good move for me. If only I knew, and sold my house old house and then rented for 2 years!! There are opportunities coming for upgraders!

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actiomax said..
Well I say one thing
You're rates are based on the land values.
They all went up with the boom but they will never drop back with the fall in prices because councils are greedy
So in a way I'm right in saying Sydney prices will never drop because the rates will never drop they will always be at the valued at the highest price & council will tell you your land is valued at that even if you could never sell for the valuation prices

Rates don't increase in line with the property value. The property value is simply the way of allocating the total council budget to the residents. Total council budget and property values are not linked.

If your property value increases compared to your neighbour then you start paying a greater share of the total council budget compared to your neighbour. The absolute amount you pay is whatever the council's total budget multiplied by your % share of total property value within that council's boundaries.

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actiomax said..
Well I say one thing
You're rates are based on the land values.
They all went up with the boom but they will never drop back with the fall in prices because councils are greedy
So in a way I'm right in saying Sydney prices will never drop because the rates will never drop they will always be at the valued at the highest price & council will tell you your land is valued at that even if you could never sell for the valuation prices

In my area the valuations just came in and I think I would be flat out selling for their 'land value'. As for appealing the valuation, I thought about it, but laziness got in the way, and I figured that they would justify it some way.

I think council rates are akin to turning around to someone and saying 'we will pay you what you want.' Followed by 'Okay, you have spent all that lot, just ask us, and we will give you more'.

Seriously, if anyone of us was in the same situation, we would spend like its Christmas every day of the year. On the other hand if you turned around and said 'no, you have overspent, you need to prioritise your capital works' things might be different, but the argument seems to be every year that capital works need more money as blah blah blah has changed and we need it.

This is like health fund premiums. Allow them to spend it all and then automatically get increases each year, and what do you think the outcome will be?

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Cambodge said..

actiomax said..
Well I say one thing
You're rates are based on the land values.
They all went up with the boom but they will never drop back with the fall in prices because councils are greedy
So in a way I'm right in saying Sydney prices will never drop because the rates will never drop they will always be at the valued at the highest price & council will tell you your land is valued at that even if you could never sell for the valuation prices

Rates don't increase in line with the property value. The property value is simply the way of allocating the total council budget to the residents. Total council budget and property values are not linked.

If your property value increases compared to your neighbour then you start paying a greater share of the total council budget compared to your neighbour. The absolute amount you pay is whatever the council's total budget multiplied by your % share of total property value within that council's boundaries.

I don't know what its like in Vic, but in NSW I think it does work like that. Rates are pretty much based on property land value. Just recently my council even increased the minimum rates as a lot of units are only paying the minimum, and there are tonnes of new units. To me this makes sense as us house owners are paying a proportionaly higher amount for common services and infrastructure that unit owners share equally. The fact that they only 'own' 5% of the area that their unit occupies does not mean they use less facilities.

Edit: If it did work like way you suggest, in NSW, I would expect that my rates would go down now that they have increased the minimum rates for unit owners. They haven't.

Rates are a separate thing to land-tax though eh...

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FormulaNova said..

Cambodge said..

actiomax said..
Well I say one thing
You're rates are based on the land values.
They all went up with the boom but they will never drop back with the fall in prices because councils are greedy
So in a way I'm right in saying Sydney prices will never drop because the rates will never drop they will always be at the valued at the highest price & council will tell you your land is valued at that even if you could never sell for the valuation prices

Rates don't increase in line with the property value. The property value is simply the way of allocating the total council budget to the residents. Total council budget and property values are not linked.

If your property value increases compared to your neighbour then you start paying a greater share of the total council budget compared to your neighbour. The absolute amount you pay is whatever the council's total budget multiplied by your % share of total property value within that council's boundaries.

I don't know what its like in Vic, but in NSW I think it does work like that. Rates are pretty much based on property land value. Just recently my council even increased the minimum rates as a lot of units are only paying the minimum, and there are tonnes of new units. To me this makes sense as us house owners are paying a proportionaly higher amount for common services and infrastructure that unit owners share equally. The fact that they only 'own' 5% of the area that their unit occupies does not mean they use less facilities.

Edit: If it did work like way you suggest, in NSW, I would expect that my rates would go down now that they have increased the minimum rates for unit owners. They haven't.

I will go back on what I wrote now, as I actually looked it up! I was wrong! According to my council's website, they are allowed to increase the rates income each year based on IPART, which is 2.3% for the current financial year. So, an increase in property values doesn't affect the rate income, just the proportionate part that you pay, as Cambodge has said.

I will now ban myself from Seabreeze for 2 years, or until Adriano posts. Whichever occurs first.

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vosadrian said..I don't think anyone is in denial. You say supply and demand dynamics apply, so that will take care of this so called "denial".

Adriano said..

Paddles, you still don't get the subtle point I've been making about how property markets differ from commodities like petrol. I've never said property markets aren't still subject to supply and demand dynamics. The point I was making, is that at present, many vendors, not all, but many, are in denial about what buyers are prepared to pay for property and that they are under the illusion that they are in control of the price. That is the reason properties have been on market for record periods. It's certainly not the buyers who are in denial...

I think some vendors are in denial. That of course won't affect the supply and demand dynamics....it's just that vendors take a little longer in the weak market to accept the reality....and hence the long listing times.

I know of several cases in my area where vendors are asking 20-30% over the previous street record for property, even though the local area in general has seen a 10% fall.

I suspect you're taking this a little too personally.

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FormulaNova said..I don't know what its like in Vic, but in NSW I think it does work like that. Rates are pretty much based on property land value.

Cambodge said..Rates don't increase in line with the property value.

actiomax said..Well I say one thing You're rates are based on the land values.

Same in Vic FN. Rates are tied to the bi-annual Valuer General's assessment of the land value and are part of the formula.

This rises in line with real estate sales figures, albeit with a delay.

I don't know what cambodge is talking about, but it's not correct. From DWELP:

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Adriano said..
That's another scam and it makes the inter-generational theft AUS is talking about worse.

The intergenerational theft situation is far worse in the US, where hundreds of municipal bodies are sitting on literally trillions of dollars of unfunded "defined benefit" pension liabilities. It's sad that they stuffed it up so badly and it's fortunate that we don't have this issue to any great extent in Australia.

Should the burden fall upon the next generation of taxpayers, or on retirees who completed their working lives in the expectation of a comfortable retirement that was promised to them?

^ No. Not in my opinion - it should not.

I dispute your reasoning that it's not so much a problem in Australia, given the number of youngsters who can't afford a one bedroom flat and need to wait for the parents to pass on to buy their own home with an inheritance.....if there is one left.

I also find it interesting that you raise retirees, since their property speculation practices have partially led to the inflation problem and high land costs.

The issue is, we need to stop thinking about land as a cash cow for personal gain and start thinking about it as a public good.

If you "win" in a transaction, like vosadrian, that means clearly that someone's loosing out. I think that may be why it becomes personal for some....they know it's about self interest to make a buck on land but it's still presently the respectable norm in Australia.

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Adriano said..

I suspect you're taking this a little too personally.

I suspect you like to belittle people who have a view different to yours. It would surprise me very much if many of the vendors of the ridiculously priced properties actually expect them to sell at that price... I am sure a small proportion would. But it does make them look stupid to say they are in denial so go for it!

I think a hard working and committed Australian should have the right to buy a property to live. In Sydney this is not the case, but it generally is outside of the busy cities. Is it even possible for this to be the case in these big cities? I mean, if the population of people that want to live in Sydney is growing, but the land is finite, does this not in itself create low supply and high demand? I think regardless of the rules at play and the behaviour of investors etc, the end result of this scenario is going to be that an equilibrium of supply and demand will be reached where the haves will get to buy property there and the have-nots will be unable to buy property. Sure changing some things can push the pendulum one way or the other, but it will always end the same way eventually. Although I think it should be the right of every Australian to buy a property to live in, I do not consider it to be a right for that property to be where they grew up if it is in a high demand area.

Perhaps this problem can only be addressed with decentralisation of work/amenities? I mean people want to live in Sydney because they want a good job and access to amenities. If these were available elsewhere, demand for Sydney would reduce.

I don't think that changing tax rules, or anything will make much of a difference. I am not in a position to change anything that will. But in the meantime, since I choose to live in Sydney, I have to play this game, so I will do my best to play within the rules to my best ability. I'm pretty sure the renters in my place are happy enough with the way I am playing it.

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vosadrian said..

Adriano said..

I suspect you're taking this a little too personally.

I suspect you like to belittle people who have a view different to yours. It would surprise me very much if many of the vendors of the ridiculously priced properties actually expect them to sell at that price... I am sure a small proportion would. But it does make them look stupid to say they are in denial so go for it!

I think a hard working and committed Australian should have the right to buy a property to live. In Sydney this is not the case, but it generally is outside of the busy cities. Is it even possible for this to be the case in these big cities? I mean, if the population of people that want to live in Sydney is growing, but the land is finite, does this not in itself create low supply and high demand? I think regardless of the rules at play and the behaviour of investors etc, the end result of this scenario is going to be that an equilibrium of supply and demand will be reached where the haves will get to buy property there and the have-nots will be unable to buy property. Sure changing some things can push the pendulum one way or the other, but it will always end the same way eventually. Although I think it should be the right of every Australian to buy a property to live in, I do not consider it to be a right for that property to be where they grew up if it is in a high demand area.

Perhaps this problem can only be addressed with decentralisation of work/amenities? I mean people want to live in Sydney because they want a good job and access to amenities. If these were available elsewhere, demand for Sydney would reduce.

I don't think that changing tax rules, or anything will make much of a difference. I am not in a position to change anything that will. But in the meantime, since I choose to live in Sydney, I have to play this game, so I will do my best to play within the rules to my best ability. I'm pretty sure the renters in my place are happy enough with the way I am playing it.

I suspect you know that you are in the market for self interest and that interest is partly responsible for creating the highly unaffordable housing market. I'm not judging you for that but it is the truth I suspect.

It has nothing to do with belittling others. Just stating the truth. Your position reminds me of the person stuck in traffic complaining that "they're stuck in traffic", when in fact, they ARE TRAFFIC.

When I bought my house the land value set the rates ,unfortunately they made a mistake & had my property listed at twice the size .
I questioned this & basically was told to get stuffed we still value your land at that much & that's what I have to pay.
I still to this day believe that is a blatant rip off .
How can land value be exactly the same at half the size ?
I also have had my land value increase & therefore my rates increase.
The land value is set by the surveyor general & they increase it when property prices go up .
But they never decrease it even when you prove the land is half the size of what they calculated it at
So in some circumstances Sydney land never falls in price .

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Adriano said..

FormulaNova said..I don't know what its like in Vic, but in NSW I think it does work like that. Rates are pretty much based on property land value.

Cambodge said..Rates don't increase in line with the property value.

actiomax said..Well I say one thing You're rates are based on the land values.

Same in Vic FN. Rates are tied to the bi-annual Valuer General's assessment of the land value and are part of the formula.

This rises in line with real estate sales figures, albeit with a delay.

I don't know what cambodge is talking about, but it's not correct. From DWELP:

Thought you could follow a mathematical formula Adriano. I guess not. That formula you pasted is exactly what I wrote in words. Your property's value defines the proportion of the total municipal budget you pay, not the absolute amount you pay.

Read it again.

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Cambodge said..

Adriano said..

FormulaNova said..I don't know what its like in Vic, but in NSW I think it does work like that. Rates are pretty much based on property land value.

Cambodge said..Rates don't increase in line with the property value.

actiomax said..Well I say one thing You're rates are based on the land values.

Same in Vic FN. Rates are tied to the bi-annual Valuer General's assessment of the land value and are part of the formula.

This rises in line with real estate sales figures, albeit with a delay.

I don't know what cambodge is talking about, but it's not correct. From DWELP:

Thought you could follow a mathematical formula Adriano. I guess not. That formula you pasted is exactly what I wrote in words. Your property's value defines the proportion of the total municipal budget you pay, not the absolute amount you pay.

Read it again.

It sounds like you think I don't understand the logic of two numbers multiplied together.....mmmm.

Sorry, but your statement is not correct. Each council area is given a Rate In The Dollar factor and this is multiplied by the Value Of Your Property. It's two numbers multiplied together. How does this mean one's property value does not directly affect rates?

So yes, rates do increase in line with the value of a property's value, by a direct land value factor.

Explain how the multiplication of two numbers together doesn't lead to something increasing directly "in line" with one of the factors.

Explain to actiomax how his rates haven't increased in line with the value of his property.

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Adriano said..

Cambodge said..

Adriano said..

FormulaNova said..I don't know what its like in Vic, but in NSW I think it does work like that. Rates are pretty much based on property land value.

Cambodge said..Rates don't increase in line with the property value.

actiomax said..Well I say one thing You're rates are based on the land values.

Same in Vic FN. Rates are tied to the bi-annual Valuer General's assessment of the land value and are part of the formula.

This rises in line with real estate sales figures, albeit with a delay.

I don't know what cambodge is talking about, but it's not correct. From DWELP:

Thought you could follow a mathematical formula Adriano. I guess not. That formula you pasted is exactly what I wrote in words. Your property's value defines the proportion of the total municipal budget you pay, not the absolute amount you pay.

Read it again.

So yes, rates do increase in line with the value of a property's value, by a direct land value factor.

Explain how the multiplication of two numbers together doesn't lead to something increasing directly "in line" with one of the factors.

I think the significant point is if every property were to rise proportionally the same, then your rates should remain the same percentage of the overall rate revenue for the council. I.e. the market has gone up, but your rates haven't.

I wonder what the effect of this is if unit prices go up, but the land value does not go up as much. The house on a block of land doesn't seem to account for much of the overall value if the valuer general's 'land value' is to be accepted. Yet in the case of apartments the land value is probably a minimal part of the rise in value.

Interesting theoretical point but since when does every property "rise proportionally the same"?

It never does.

So that would make your point totally insignificant....

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FormulaNova said..

Adriano said..

Cambodge said..

Adriano said..

FormulaNova said..I don't know what its like in Vic, but in NSW I think it does work like that. Rates are pretty much based on property land value.

Cambodge said..Rates don't increase in line with the property value.

actiomax said..Well I say one thing You're rates are based on the land values.

Same in Vic FN. Rates are tied to the bi-annual Valuer General's assessment of the land value and are part of the formula.

This rises in line with real estate sales figures, albeit with a delay.

I don't know what cambodge is talking about, but it's not correct. From DWELP:

Thought you could follow a mathematical formula Adriano. I guess not. That formula you pasted is exactly what I wrote in words. Your property's value defines the proportion of the total municipal budget you pay, not the absolute amount you pay.

Read it again.

So yes, rates do increase in line with the value of a property's value, by a direct land value factor.

Explain how the multiplication of two numbers together doesn't lead to something increasing directly "in line" with one of the factors.

I think the significant point is if every property were to rise proportionally the same, then your rates should remain the same percentage of the overall rate revenue for the council. I.e. the market has gone up, but your rates haven't.

I wonder what the effect of this is if unit prices go up, but the land value does not go up as much. The house on a block of land doesn't seem to account for much of the overall value if the valuer general's 'land value' is to be accepted. Yet in the case of apartments the land value is probably a minimal part of the rise in value.

Exactly. Good to see that some people have the capacity to understand pretty simple stuff.

Except that FN's point is totally theoretical and the scenario never happens....

The statement that "rates don't increase in line with property prices" is still not correct, theoretical points aside.

There's no issue with the understanding of the total rates pool and I'm pleased the denigration of my mathematical abilities has been dropped...

The significant point is that individual properties change value independently of others in a council area. If someone decides to build a first class school down the road and placements are in high demand, your property price will rise and so will your rates.

A fairly simple concept. Your rates do increase in line with YOUR property value. That's the only point I was making.

It didn't read to me that you were making a hypothetical point on the basis that all properties rise equally in value...

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Adriano said..

I suspect you know that you are in the market for self interest and that interest is partly responsible for creating the highly unaffordable housing market. I'm not judging you for that but it is the truth I suspect.

It has nothing to do with belittling others. Just stating the truth. Your position reminds me of the person stuck in traffic complaining that "they're stuck in traffic", when in fact, they ARE TRAFFIC.

Is it possible to own property in a desirable area for not self interest? I mean owning something someone else wants is self interest right?

I'm not complaining about the current situation in Sydney... I am just observing that it can't change without significant cultural change that would need to be driven at a high political level with lots of voter support. The fact remains that if you want to work in a career that only has jobs in a highly populated area and want to live close to that job, you have to get in the traffic whether you like it or not.

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Adriano said..
...
A fairly simple concept. Your rates do increase in line with YOUR property value. That's the only point I was making.

No, that is clearly not the case all the time. In this scenario, you can have your property value increase in value and your rates go down if other properties increase to a greater percentage.

I.e. if you and joe are the only ones in the rate pool, have properties and his goes from 500k to 1500k and yours goes from 500k to 700k, your rates should go down.

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vosadrian said..

I'm not complaining about the current situation in Sydney... I am just observing that it can't change without significant cultural change that would need to be driven at a high political level with lots of voter support. The fact remains that if you want to work in a career that only has jobs in a highly populated area and want to live close to that job, you have to get in the traffic whether you like it or not.

Its pretty stuffed isn't it! You want to move across the other side of Sydney for access to work, even into an area with similar house values, and you lose a bunch of money in stamp duty. So, you become part of that great traffic problem.

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FormulaNova said..

Adriano said..
...
A fairly simple concept. Your rates do increase in line with YOUR property value. That's the only point I was making.

I.e. if you and joe are the only ones in the rate pool, have properties and his goes from 500k to 1500k and yours goes from 500k to 700k, your rates should go down.

You're an expert of the hypothetical FN.

How often does one's rates go down!?

Even if they did, it would be a small minority.

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Adriano said..

FormulaNova said..

Adriano said..
...
A fairly simple concept. Your rates do increase in line with YOUR property value. That's the only point I was making.

I.e. if you and joe are the only ones in the rate pool, have properties and his goes from 500k to 1500k and yours goes from 500k to 700k, your rates should go down.

You're an expert of the hypothetical FN.

How often does one's rates go down!?

Even if they did, it would be a small minority.

I don't think that they ever do. I still think the councils somehow get more each year, more than the 2.x% they got last year. My council is copping flack for increasing the minimum rate charge as a lot of units were just paying the minimum, and now they have to pay more. In theory this should mean my rates go down, so maybe I should ask my council how this is then calculated.

I think the unit owners have gotten a sweet ride for a while as they still use almost the same resources that I do, yet pay less.