BIG BUCKS & BUCK PASSING
Vested interests sink the interests of homebuyers.
Australia will never solve the problem of housing affordability until the major players stop protecting their own patch.
The parties who contribute to the high cost of homes - federal politicians, state governments, developers, builders, local authorities and real estate agents - are sabotaging the affordability debate with arguments twisted by vested interests.
They all pretend to care about young families shut out of home ownership. Quite frankly, my dears, they don't give a damn. They're too busy counting their cash with one hand while pointing the finger of blame with the other.
The Federal Government blames the high cost of home ownership on state taxes. The states blame federal taxes. Agents blame stamp duty, but refuse to discuss the impact of their commissions and marketing costs on the price of houses. Developers and builders blame everyone else.
This pointless finger-pointing has undermined the Productivity Commission report released on 23 June.
The commission was set up to find answers to housing affordability, which is at record low levels. No sooner had it released its findings than all the major parties who reap windfalls from the property industry went into action to scuttle its recommendations.
The commission suggests that federal government concessions to property investors have generated a buying spree which has driven prices beyond the reach of young families.
John Howard and Peter Costello immediately announced their refusal to consider the commission's proposals on the impact of concessions such as negative gearing. They also refused to consider proper targeting of the $7,000 first home buyers grant, despite strong evidence that it's falling into the wrong hands.
One wonders whether they even read the report before rubbishing its conclusions. Rather, they have directed blame at state taxes such as stamp duty.
The states have replied with predictable self-interest. They dismiss the commission inquiry as a witch hunt against stamp duty and blame the GST for the prohibitive cost of housing.
Real estate agents have waded in, blaming all the ills of the property industry on stamp duty. "Housing affordability is being eroded each year by the taxation burden placed on home buyers," says the president of the Real Estate Institute of NSW, Rowen Kelly.
Kelly complains that stamp duty adds $18,000 to the cost of buying the typical Sydney house.
He fails to mention that the standard agency charges (commissions and unnecessary marketing costs) add far more to the cost equation. While these costs are paid by vendors, they are a major factor in the sale price of homes.
Kelly protests that stamp duty rates have not been adjusted to reflect the rise in home prices, earning governments more and more in dollar terms. The same complaint can be directed at agents, who have failed to adjust their commission rates to reflect their own windfalls from rising property prices.
There have been similar self-serving arguments from the Real Estate Institute of Queensland since the release of the Productivity Commission report.
The reality is that housing is a gravy train which feeds all levels of government and a succession of businesses, including land developers, home builders and agents. When a typical house and land package is sold in Brisbane for $350,000, more than $65,000 is sucked out of the deal in federal, state and local government taxes. The developers and builders walk away with tidy profits while agents to such a deal pocket over $10,000. Bankers, mortgage brokers, valuers, solicitors and many others benefit handsomely.
They all have the same solution to the high-cost problem: someone else has to give up their windfall. While politicians and businesses pass the buck, homebuyers continue to pay big bucks.
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