Quarterly Essay 92: The Great Divide: Australia's Housing Mess and How to Fix It (Unabridged)
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4.5 • 16 Ratings
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Publisher Description
One of the great mysteries of Australian life is that a land of sweeping plains, with one of the lowest population densities on the planet, has a shortage of land for houses. As a result, Sydney’s median house price is the second most expensive on Earth, after Hong Kong’s.
The escalation in house prices is a pain that has altered Australian society; it has increased inequality and profoundly changed the relationship between generations – between those who have a house and those who don't. Things went seriously wrong at the start of the twenty-first century, when there was a huge and permanent rise in the price of housing. But what actually happened? And what to do now? As Alan Kohler explains, “the solutions are both complex and simple, difficult and easy: supply must be increased and superfluous demand reduced.”
In this crisp, clarifying and forward-looking essay, Alan Kohler tells the story of how we got into this mess – and how we might get out of it.
Alan Kohler is finance presenter on ABC News and a columnist for The New Daily. A former editor of The Age and The Australian Financial Review, he founded the Eureka Report and has written for The Australian, AFR, The Age and The Sydney Morning Herald. His books include It's Your Money.
Customer Reviews
Where there’s a will…
The author is a celebrated Australian finance journalist, who provides an excellent historical overview of housing since Federation and the many factors, both governmental and private, which have resulted in the less than ideal situation we find ourselves in today. The genesis, according to Mr K, was the aspiration to a quarter acre of one’s own fostered by PM Menzies (although not just him) for political purposes in the post-war period.
A mass market uptake of motor vehicles at the same time drove urban sprawl before higher density inner city living with appropriate transport and other infrastructure support was established in our only cities of any significant size (Sydney and Melbourne). Later policies embraced by both major political parties, such as first home owners’ grants in various forms, made matters worse.
Worst of all, according to Kohler, was the halving of capital gains tax payable on investments held for greater than 12 months introduced by Treasurer Costello in 1999-2000. The discount applied equally to share investments as property, but the value of land had a powerful hold on the Australian psyche due, at least in part, to the tax exempt status of the family home. Add in the tax incentive of negative gearing and housing became a cash cow. You could buy or build an investment property, lose money renting it, write off your losses as a tax deduction against other income, roll the property over for a profit inflated by the capital gains discount in two to five years, then repeat.
And what sort of property are we talking about? Not the medium to high density dwellings close to schools, shops, and cheap rail transport that we needed, but more single occupant dwellings on a tenth rather than a quarter of an acre at progressively increasing distances from the city centre and from inadequate existing infrastructure. NIMBYism and sluggish State and local government bureaucracies also played their part.
What to do? Mr K says get rid of negative gearing, cut the capital gains tax discount, and build better higher speed rail connections to places like Ballarat, Bendigo, Woolloongong, Bathurst, Toowoomba, Gold Coast, Sunshine Coast etc. The trains don’t need to run at 300km/hr. A reliable 150km/hr commute to the capital city that takes one hour opens up all those regional centres as viable places to live and still work in the big bad city.
Kohler might be right, although I doubt it’s that simple. The new millennium heralded a host of other financial shenanigans apart from CGT ones. Even if he is right about the cause, finding the political will for his solutions seems as likely as finding a lasting peace in the Middle East.
Mr Kohler’s narration is satisfactory.