Comment by jmyeet
2 days ago
> In Australia we've treated the family home as an investment
That's true of most of the Western world, unfortunately.
> a primary mechanism for wealth creation
I don't disagree but this needs to be correctly framed publicly as simply stealing from the next generation because that's what it is.
> Tax incentives
For anyone unfamiliar, Australia has a system called negative gearing. In the mid-2010s the then Labor party proposed scrapping it and lost the election. It really is the third rail of Australian politics. This is a shame because it needs to be scrapped.
It allows you to deduct losses on property against your ordinary income. So if you have a mortgage payment of $3000/month but only earn $2000/month in rent then your income is reduced by $1000/month. That's waht drives a lot of small investors to essentially speculate on property.
The US actually has a better system than this, which is that if you earn over a certain income level, you cannot deduct passive losses (like the above situation) against ordinary income. That would be better but still not enough.
So many upper income Australians essentially end up just hoarding property. They'll call it "investment properties" but really it's speculation. Historically, property was treated as an income producing asset, not a speculative capitals gains asset.
Oh and capital gains on non-primary residences should be like 70%. If you want to stop rampant speculation, that's how you do it.
> Tangent: how should we approach changing the housing mix in a city like Perth where 95% of new homes are large four-bedroom detached houses?
Perth like every Australian city is an urban planning disaster. It's just endless sprawl up and down the coast and inland to the hills. A generation or two ago it was a quarter acre block. Those days are long gone unless you're wealthy or you're 50km+ from the city (less if you go east).
So it's a car-dependent soulless hellhole. I say this as someone who knows Perth well. So even now if you build higher-density housing along transit routes, as they're doing, you still need a car (or 4) to go anywhere but work. And high land values make infrastructure projects incredibly expensive. Like imagine trying to build the Perth to Mandurah train line now instead of 30+ years ago when it was actually built. I guess they could utilize the Freeway they already had but what about the fremantle or Midland lines?
What you should do as you build out is reserve space for future infrastructure. AFAIK no Australian city, especially Perth, has never done. So Guildford Road or Great Eastern Highway should really be a freeway. Same with Albany Highway.
In 2024 Western Australia did really relax ADU (granny flat) development rules. The rules used to be really strict. Now you can basically always build one with normal building approval if you meet the minimum lot size requirements (generally 450sqm, sometimes as low as 350sqm, depending on the council).
Single family home zoning is really cancer to any decently sized city.
Anyway, the truth is, I'm not sure it can be fixed now. Big infrastructure projects are prohibitively expensive even with tools like eminent domain. We need to look at why it's so expensive to build apartments.
I think the only thing you can do now is for the government to become a significant suplier of housing to increase supply and stabilize rents.
Good points, thoughtfully made. As a resident of Perth, I (largely) endorse that description.
So much of the wealth of our middle- and upper-class is dependent on property ownership and rent-seeking, it's depressing. That population essentially needs to vote against their own self-interest to help improve housing affordability, so it's hard to see that ever happening. The best I could foresee is a government forecasting a stepped reduction of relevant tax benefits over time (e.g. in three years negative gearing gets reduced by half, then half again the following year, etc.) and then future governments honouring that commitment. As you pointed out though, it's a surefire way for any Australian political party to shoot themselves in the face.
I sometimes wonder how strong the demand needs to get for more-affordable housing before the market responds enough to matter. State and local govt could likely have a role in unlocking infill developments and increasing the allowed densities, but I'm not plugged into the planning system. I also strongly agree that state government should be more proactive as a housing supplier (in conjunction with private industry).
Lots of the issues would be "solved" by adequate supply of new dwelling units (which is a way of driving the prices down). There's really no other way of solving the "X people lived here, now 1.4X do, but dwelling units have only increased 1.2 times."
In the past this effect was localized and when housing prices went insane, it was usually in a city, or a region, not a whole country. And high prices would encourage development in the cheaper areas, and people would move "out there".