Housing has jumped to the front of the political queue again, thanks to the leadership ructions in the conservative parties that in large part rest on the anti immigration sentiment that’s blamed for high prices.
Another thing that will soon take centre stage in the housing wars is the mooted rise in capital gains tax.
Watch the fireworks. It will make the brouhaha over the mining tax a few years ago look like a picnic.
Already there are rumblings and outrage appearing fomenting in the deep core of the property state. From the tone and hurt from these people you’d think tax was theft.
On Tuesday morning Stockland managing director Tarun Gupta told ABC Radio that about 30 per cent of the cost of housing was thanks to taxes.
But is it?
There’s another way to think about it. The taxes that developers pay and then pass onto buyers is, by and large, the cost of the infrastructure that allows the developers to build those houses – roads, bridges, schools, hospitals and so on.
We the taxpayers pay for that.
Without this infrastructure the developers would be looking at a hippie village in the sticks.
The same goes for capital gains.
To be clear capital gains are a windfall profit for the dudes and dudettes luck enough to have the capital in the first place.
They invest and then sit on their bum waiting for the market to lift prices with no particular effort needed other than a bit of leg work on the computer to deal with the accountant.
It’s why property is called a passive investment!
The market does all the work – and its fundamental fuel is the public investment in the economic and political stability that other nations would kill for.
It helps that the supply of the product is constrained, so that pushes up prices further. Do developers and investors really want so much supply to come on that prices fall. We think not.
Currently, investors need to declare only half the gains for their taxable income, and the suggestion is that it should go to 75 per cent.
Obviously, there is a part of this capitalised class that feels they are entitled to a tax-free 50 per cent gain, if not more.
Those taxes are – in general – ploughed back into the economy to benefit other parts of our society, much the same way a business is expected to run when they re-invest profit.
Of course, the market sometimes turns and makes the formerly popular housing unpopular – like a mining town that’s run out of the resources that made it rich.
It happens.
In this case the investor is rewarded with losses they can claim later.
Any actual investment in the property can also be deducted as a legitimate cost – no tax on that!
This windfall for investors under the current regime stretches to a full 100 per cent when it comes to the private home.
Fairness would dictate that over a certain amount these home owners should also give back to the country that made them rich, a bit more of what they gained, with no effort of their own.
The question of housing supply remains, but the continued blame on planning is ridiculous when you realise that over the past few years of steep price rises there were no major planning changes.
The cost of money rose and so too the cost of materials and labour.
But the property lobbies continue to misdirect attention and keep the repetitive mantra going. It tends to work. Look at Trump!
But if business and government truly want to raise productivity and improve our standard of living they could do worse than look at what motivates people to work “harder, faster, longer”. Not much beats a home of one’s own and place from which to create families, or your “happy place” regardless.
Is technology the answer to productivity? Meh… maybe it’s performed a big structural lift to get out agrarian society a few hundred years ago – but today it’s just a sugar hit (and just as addictive).
AI may change the game – and we tremble at the thought.
But to really create deep structural change and give our society the impetus it needs to build a strong resilient economy nothing we can think of so far beats a big ramp up in public housing, for rent or sale.
Remove profit from the cost of housing, use existing government land, like the defence housing sites coming onto the market, and you could give this country a lasting leg up to put it on top of the world.
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