Bubble speculation making us miss the real issue

by Julia Corderoy05 Jun 2015
A leading housing association has added its voice to those challenging claims that there is a property price bubble in Australia, saying that widespread speculation about a housing bubble ignores the real culprits of Australia’s housing affordability problems.

According to Housing Industry Association chief economist, Harley Dale, we wouldn’t be having this conversation if Australia would get the “disproportionately high level of taxation” off new homes and improve the supply of new housing.

“The truth is that most of the problems having an impact on housing affordability are caused by governments and therefore governments can fix them,” he said.

“The two biggest taxes on a new home are stamp duty and GST – the latter which doesn’t apply to existing homes – and when combined with all the other taxes, levies and charges on a new home can be over 40% of the final price.”

In fact, new housing is the second most heavily taxed major sector of the Australian economy, according to Dale.

Further, Dale says that delays in planning and restrictions on land supply mean that new housing is not reaching the market quick enough to respond to demand, which ultimately puts upward pressure on prices.

This argument echoes what Mortgage Choice chief John Flavell said, who has also dismissed claims that there is a property price bubble in Sydney, and to a lesser extent Melbourne, instead saying it is more just a case of supply and demand.

“If you are prepared to believe basic rules of supply and demand do not apply to the Sydney and Melbourne property markets, and if you believe the population is about to go backwards overnight.

“If you believe that we will be able to manufacture new land close to the heart of our busiest urban centres, if you believe that we are all about to flee to the country and there is a fleet of trains that could take us there and if you believe we all want to move our families into studio apartments and forego our houses, then you just might believe that a property bubble exists in Sydney and Melbourne.”


  • by Joe Siragusa 5/06/2015 9:57:07 AM

    I tend to agree with the article in relation to Supply Vs Demand. If you look at the states with low property appreciation the common factor is low population growth and falling or static employment growth. The issue of Stamp Duty creates a poor use of housing at it discourages older people from selling their large family home to go and buyer a smaller / cheaper home. I would like to see people over 60 being able to sell their existing family home and be able to put some of the proceeds into their superannuation funds without penalty and thus help them grow their retirement fund in a tax effective manner.

  • by John 5/06/2015 10:23:38 AM

    Having worked in the building trade I have no doubt that the lack of supply of land and the associated greed of governments are the main reason house prices are so high. Go 20km from any town/city centre and there is land as far as the eye can see. Land in this country should be really cheap given the amount that we have but as long as greedy governments manipulate the market home ownership will continue to be a dream.

  • by Les 5/06/2015 10:40:35 AM

    Now there is an unbiased point of view, from the Housing industry?
    So we are to believe that builders, land developers and suppliers are not getting rich?