I could write here about why I hardly ever blog anymore, but I won’t. I’m trying to figure out what to do with this blog and have decided to stop thinking and just do a little more (no promises on how long that will last).
So, housing. In Melbourne Specifically.
I turned 30 this year. That means that a lot more of my conversations around the dinner table revolve around housing prices (thankfully they haven’t descended in to mortgage rate comparisons just yet). Moreover, I’m increasingly interested in buying a little place of my own.
Housing is unaffordable. At the moment, one bedroom flats in Coburg are going for over $500,000. There are no real signs of the housing market cooling off. Melbourne has a housing shortage and Australia’s economy is quite buoyant due to the country being one giant quarry and China having an insatiable appetite for energy (ie coal). Both these things mean that the housing bubble isn’t likely to pop anytime soon. But if history teaches us anything, it is that bubbles pop.
For example, I understand that in Tokyo the median price for an apartment dropped to one third of it’s price at the height of Japan’s economic bubble.
So don’t buy a house right now. Interest rates continue to go up, but they are still at incredibly low levels. As they continue to climb more an more people will be defaulting on their loans and those people are going to be in real trouble when the bubble has pops. They will no longer be able to afford their mortgage and their house will be worth less than their loan – particularly if they have cashed in on any equity in the mean time.
The situation is just untenable.
I believe that it should be affordable to own a home and that this should be a solid investment for most people as it is probably the most expensive thing you will ever buy. But to keep housing prices down, investment properties should be discourages. The property boom is partly due to the huge growth in people investing in property. A key culperate in this whole thing is negative gearing. It has to go because of the way it encourages investment properties and artificially inflates the market.
Incentives like this mean that property is the investment of choice for middle Australia. But even negative gearing will become a major problem when the property bubble pops:
The ATO says people earning between $30,000 and $75,000 represented the largest group of taxpayers who held property investments and they claimed $3.6 billion in losses.
So the answer is not in releasing more land on Melbourne’s burgeoning fringes, but to address a system that encourages people to buy investment properties and driving prices up. But that doesn’t address the supply side of the issue.
Which brings me to my final point: housing is an environmental issue as well and an economic one.
By area, Melbourne is one of the biggest cities in the world (last I checked it was second only to Mexcio City and LA but that may have changed since). This means that we are a very car-dependent city which is an ecological disaster. There is also no public transport infrastructure to address this car dependancy on these urban fringes.
To make matters worse, Australia now has the largest houses in the world which is an ecological disaster no matter how you look at it (land use, energy use etc). Not to mention that housing density is surely a major cause of the lack of housing supply.
So this is what gets me. The Greens are increasingly dominated by a group of upper middle class inner-city dwellers who don’t want new housing developments. But high density living is a must in a country where our population will increase by about 50% over the next 40 years (and it must do that – but we can save that argument for another post).
Now, I’m no friend of developers. The whole industry is ripe with corruption (witness the growing number of Local Councils in strife over developments) and they have an active interest in keeping housing prices up. They are certainly not beyond using tactics such as withholding the release of land as quickly as they might like to reduce supply levels.
Moreover, I think the attitude towards local residents taken by the Victorian Government is undemocratic and an utter disgrace. There must be consultations with the community, and compromise. Developments need to be ‘appropriate’. But the government isn’t interested in having the discussion.
But we MUST have an increase in housing density in Melbourne’s inner city. It already has public transport infrastructure and everything is just closer anyway which reduces our dependance on carbon fueled modes of transport.
So I am deeply frustrated by all the NIMBY groups, often aligned with the Greens, opposing development after development.
We need more housing and the inner city must be able to accommodate more people so that less people are reliant on cars to get everywhere.
So there you go, an incoherent rant on housing in Melbourne.