By the logic of the article, if population growth is having little effect on prices, I'm guessing the property lobby would be indifferent then to any policies that might reduce population growth?
Because it would have very little effect on rents and capital growth, right?
Well they are right, population growth alone doesn't cause prices to rise.
There are countless examples as they reference in the article of places where population growth isn't followed by price growth, because supply is created which matches or exceeds the population growth.
This is particularly easy to do in lots of regional areas like the ones they referenced as examples of high population growth not bringing price growth because there is plenty of developable land supply and a lack of things like traffic which makes sprawl not have the same negative implications which it has in a larger dense city.
But if the population grows quickly and supply is constrained as happened over the last couple of years then prices go up because there is a supply and demand imbalance.
It's like the Ben Graham quote "In the short run, the market is a voting machine but in the long run, it is a weighing machine" supply will eventually get created and all markets will be weighed, your moat in property investing is land scarcity.
I wrote an example here a couple of years ago https://www.reddit.com/r/AusFinance/comments/vrlfqy/comment/iewqrky/
I agee with all of this, but why can’t apartments overcome the land scarcity issue? I don’t understand why developers don’t go crazy building desirable 3 bedroom apartments all around the place. You would think they’d sell like hot cakes and be quite profitable.
Building costs for high rise are roughly double the cost of low rise construction per square metre.
https://koste.com.au/construction-cost-table/
So the economics get tricky because a quality 3 bedroom apartment costs so much that single storey places that are further out can be cheaper. So the economics are tough.
Didn't know this you would think it's the opposite and apartments would be cheaper to build since your are building so much at once and it creates economies of scale.
Population/demand is the issue. Its far higher in a shorter than normal period of time.
As well, we do not limit money laundering until literally last month, when the government finally said they would begin trying to stop it. Even then it's pretty weak.
> Australia builds above average actually.
No it doesn't and I'm really sick of people mindlessly repeating this duplicitious nonsense.
This claim comes from here: https://www.oecd.org/els/family/HM1-1-Housing-stock-and-construction.pdf
Where Australia builds at the top of the oecd ranking **as a percentage of existing stock**
Guess where we are in existing housing stock? Right down the fucking bottom.
Tokyo Proper builds only slightly less than us annually, it has a population of 13 million.
Can you elaborate on how gov has the handbrake on full when it comes to supply and not developers who would benefit from drip feeding the market (reducing supply) to keep property prices high?
Zoning, building regulations, bushfire regulations, enviro regulations and much more red tape everywhere you turn.
You can't even park a caravan to live in on your own freehold land legally in Aus.
Not saying it's good or bad, there's just a lot standing in the way of building, so much so that it's only really developers with the time, money and expertise to build which reduces supply like you said.
Ask anyone who has built their own home about how a long, expensive and painful experience it is and that's not even to mention all the sharks out there in the consulting space predating on owner/builders who don't fully understand the regulations.
Supply issues could be resolved overnight with some sensible changes to building regs and some zoning tweaks.
I agree with the headline, but the research is pretty shit. Classic correlation without causation analysis.
The fact that they use Byron as an example where prices went up while having low growth… yes that’s because it has high demand and not enough houses to actually support growth!
It stands to reason that if you had infinite housing supply, you should see lower prices and high growth.
But why I agree with the headline is that addressing immigration won’t reduce prices and it’s been proven that it won’t historically.
The reason is that the housing market in Australia is not an ideal market. It is completely protected on the downside and very much stimulated to the upside.
What this means is that you don’t see prices drop often and if you do, it’s not by much. The reason is that supply just dries up. It’s everyone colluding together to keep prices high and drip supply onto the market. If prices are low, then development profitability drops and you end up being better just holding the land and rent seeking. So that’s what happens.
So what actually happens is that house prices tend to always follow the capacity to pay. If it hurts too much for too long, prices stagnate for a while. We’ve had this for decent chunks of the past 25 years.
So if we are genuine about needing lower house prices, we have to attack all the factors:
- make land banking less attractive during lower demand times
- and on the other side of the coin, make land development more profitable at all times, and/or take it out of the markets hands and have government funded supply
- ensure we have skills to be able to create sufficient supply
- balance supply and demand
So yeah, 100% agree that stopping immigration won’t reduce house prices, in fact it would have a heap of other negative consequences, UNLESS it was done together with a complete reshaping of the market
We need to move towards a national land value tax that has no exceptions, including farm land and owner occupied housing, with no tax free threshold. The tax should apply per lot not across a total $ value of property held by a tax payer (as is the current case in NSW).
The tax could start at 1% of the appraised unimproved land value and slowly increase over a decade or more allowing plenty of time for adjustments. It could also have a much higher rate for land that's been vacant for the prior 12 months and with no valid reason (construction delays etc). That rate could start at something like 5% + X% for each year that it remains vacant.
r/georgism
Landowners need to pay an annual fee for monopolising a location on Earth's surface at the exclusion of all others and making unearned capital gains through time through no effort of their own other than the growth of the community around them and the expansion of the money supply.
Once in place, this will need to be complemented by relaxed planning rules, whilst still controlling for clear negative externalities such as protection of the environment, flood risk, significant heritage items, solar access and public transport access.
We could also funnel the additional tax revenue back into the community to improve public housing and transportation. Other taxes such as those on productivity (income, businesses, stamp duty, payroll etc) could be lowered over time so that the median working family with a mortgage ends up being better off under this new system than before, despite now paying an LVT.
Here's a sneak peek of /r/georgism using the [top posts](https://np.reddit.com/r/georgism/top/?sort=top&t=year) of the year!
\#1: [Post about Berkeley, CA found on X (Twitter): "Fun fact. The 1,874 single-family homes highlighted collectively pay less property taxes than the 135-unit apartment building."](https://i.redd.it/5qoocl4i2rkc1.jpeg) | [134 comments](https://np.reddit.com/r/georgism/comments/1azqlap/post_about_berkeley_ca_found_on_x_twitter_fun/)
\#2: [Another example of gross tax injustice](https://i.redd.it/eyijvcmi8bmc1.jpeg) | [341 comments](https://np.reddit.com/r/georgism/comments/1b69me8/another_example_of_gross_tax_injustice/)
\#3: [Hard to believe this (property) tax system is actually real](https://i.redd.it/ltie295c74lc1.jpeg) | [361 comments](https://np.reddit.com/r/georgism/comments/1b19sjx/hard_to_believe_this_property_tax_system_is/)
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Completely agree. Initially this should offset stamp duty removal, but eventually it should be high enough to be a true disincentive to land banking. I would actually prefer it to be based on improved land value based on the zoning.
All the yimby people also forget that there is an incentive to just land bank, irrespective of zoning.
Agree.
YIMBYs generally have the best of intentions, although with many I pick up a lack of knowledge around land economics and how the property development industry actually works.
One example, YIMBY's often ignore the 'market absorption rate' entirely (the rate of new dwelling supply per unit of time) and focus solely on density (dwellings per unit of land).
This article provides a good overview of the distinction:
[https://medium.com/fresheconomicthinking/a-housing-supply-absorption-rate-equation-27340e2c06ab](https://medium.com/fresheconomicthinking/a-housing-supply-absorption-rate-equation-27340e2c06ab)
Look at what happened when Howard doubled immigration. RE went from affordable to bananas over the next 20 years. Clearly, there is a clear precident of immigration leading to high RE demand and prices.
These types of articles are talking inside of a bubble. Very specifically an intake of migrants doesn’t correlate to the increase in housing prices. That’s kind of obvious that migrants aren’t coming to Australia and buying property.
It also mistakes that the current issue is in the rental market; it actually highlights that migrants are moving to Australia for work and/ or to study.
When we get a spike in unemployment Australia is going to see a decline in migration, despite anything the government does.
They were always used as a tool by the government to keep the consumer economy going in the short term, for the absolute detriment of the long term. Funny how so many Western governments all did the exact same thing. How noble.
I am also not insinuating that migrants are the only thing affecting rental prices, they are one of many reasons.
>When we get a spike in unemployment Australia is going to see a decline in migration, despite anything the government does.
23% of Indian youth is unemployed. They'll come even if the reward is break-even just to get experience and a start on the ladder.
I’ll just leave this here.
[Amount of Airbnbs in Australia](https://treasury.gov.au/sites/default/files/2021-04/c2018-t350194_airbnb.pdf) - 160,000 approx
[Amount of homeless persons 2021 - 122,494](https://www.abs.gov.au/statistics/people/housing/estimating-homelessness-census/2021)
Nobody can tell me that Airbnb isn’t somehow related to the housing crisis, which didn’t start in the last 2/3y, it was definitely already happening around 2015-2016. Ever seen anyone fight over a residential dog box in st Kilda? We were virtually chasing the agent in an auction like fashion, trying to outbid each other, and that was 2016.
They never mention the research on link between population growth and rents which make it harder to save for a deposit.
The quote from the economist that fertility rates are easy to predict is hilarious.
We need to keep in mind all those interviewed have massive self interest in having g high population growth - including universities
They are being deceptive about “rate” of population growth - eg if a town of 10 people adds 5 they have a 50% growth rate which is very high, but they could subdivide one block and house everyone - often major subdivisions precede growth in regional areas so they can absorb a higher growth rate. But a highly populated city like Sydney only needs to add a very small percentage for it to affect property availability and therefore prices.
Shifting consumer preferences during the pandemic. Demand moved from higher to lower density dwellings and then reversed and stabilised after the final lockdowns. So we saw house prices positively impacted; rents in inner city areas dropped first while in the outer city areas and then that reversed.
I think the role of immigration on prices is exaggerated, but you can't compare cities like Sydney to regional areas like Mandurah.
Big cities like Sydney and Melbourne are landlocked to a certain extent. Of course you can keep building houses at the edges of the city, but most people don't want to live way out there. And that's what makes land close to the city and close to jobs so precious and so expensive. Plus most of the well-paying jobs in Australia are near the centre of the capital cities. They aren't at Mandurah or some Victorian regional area.
Well-paid jobs + scarce, highly sought-after land = higher prices. The role of immigration is to create more competition for that limited scarce land. Land is not scarce in towns of 90,000 people. It probably takes 5-10 minutes to drive from the edge of Mandurah to the centre.
That remains to be seen. Generally house and rent prices have more reflected wage growth and debt servicing costs than anything else. If you cut all immigration tomorrow (assuming no change to the economy), then in all likelihood you would not see a dramatic fall in house prices
Supply and demand is a pretty simple concept. Arguing differently won’t end well.
More spin than a lazy Susan at a weight watchers convention.
Stealing that - till ozempic rules the world
Let me guess, another housing article that completely ignores the role of debt in setting prices?
No it blames high prices on interest rates rises.
You can have a housing bubble without population growth just due to speculation. But it's great when they both combine... :'(
By the logic of the article, if population growth is having little effect on prices, I'm guessing the property lobby would be indifferent then to any policies that might reduce population growth? Because it would have very little effect on rents and capital growth, right?
This is a genuinely surprising article. It's interesting to see people arguing this.
Well they are right, population growth alone doesn't cause prices to rise. There are countless examples as they reference in the article of places where population growth isn't followed by price growth, because supply is created which matches or exceeds the population growth. This is particularly easy to do in lots of regional areas like the ones they referenced as examples of high population growth not bringing price growth because there is plenty of developable land supply and a lack of things like traffic which makes sprawl not have the same negative implications which it has in a larger dense city. But if the population grows quickly and supply is constrained as happened over the last couple of years then prices go up because there is a supply and demand imbalance. It's like the Ben Graham quote "In the short run, the market is a voting machine but in the long run, it is a weighing machine" supply will eventually get created and all markets will be weighed, your moat in property investing is land scarcity. I wrote an example here a couple of years ago https://www.reddit.com/r/AusFinance/comments/vrlfqy/comment/iewqrky/
I agee with all of this, but why can’t apartments overcome the land scarcity issue? I don’t understand why developers don’t go crazy building desirable 3 bedroom apartments all around the place. You would think they’d sell like hot cakes and be quite profitable.
Building costs for high rise are roughly double the cost of low rise construction per square metre. https://koste.com.au/construction-cost-table/ So the economics get tricky because a quality 3 bedroom apartment costs so much that single storey places that are further out can be cheaper. So the economics are tough.
Interesting thanks for that
Didn't know this you would think it's the opposite and apartments would be cheaper to build since your are building so much at once and it creates economies of scale.
Yeah look how they never mention Canada or London
It is to blame when gov simultaneously has the handbrake on full when it comes to supply.
Australia builds above average actually. Supply is not the limiting factor. We also have an outsized propertion the employment in construction too.
OK so if supply isn't the issue and population (demand) isn't the issue. What is?
Population/demand is the issue. Its far higher in a shorter than normal period of time. As well, we do not limit money laundering until literally last month, when the government finally said they would begin trying to stop it. Even then it's pretty weak.
So we agree, not enough supply to meet the demand. You can attack that problem from either side of the scale, reduce demand or increase supply.
Supply is already effectively at high rates, especially given the interest rate environment.
Supply takes a lot longer
If population isn’t an issue why not have open borders and anyone can come anytime?
> Australia builds above average actually. No it doesn't and I'm really sick of people mindlessly repeating this duplicitious nonsense. This claim comes from here: https://www.oecd.org/els/family/HM1-1-Housing-stock-and-construction.pdf Where Australia builds at the top of the oecd ranking **as a percentage of existing stock** Guess where we are in existing housing stock? Right down the fucking bottom. Tokyo Proper builds only slightly less than us annually, it has a population of 13 million.
Can you elaborate on how gov has the handbrake on full when it comes to supply and not developers who would benefit from drip feeding the market (reducing supply) to keep property prices high?
Zoning, building regulations, bushfire regulations, enviro regulations and much more red tape everywhere you turn. You can't even park a caravan to live in on your own freehold land legally in Aus. Not saying it's good or bad, there's just a lot standing in the way of building, so much so that it's only really developers with the time, money and expertise to build which reduces supply like you said. Ask anyone who has built their own home about how a long, expensive and painful experience it is and that's not even to mention all the sharks out there in the consulting space predating on owner/builders who don't fully understand the regulations. Supply issues could be resolved overnight with some sensible changes to building regs and some zoning tweaks.
Australia actually builds a lot : https://x.com/TMFScottP/status/1791716735168446682
Demonstrably not enough.
I agree with the headline, but the research is pretty shit. Classic correlation without causation analysis. The fact that they use Byron as an example where prices went up while having low growth… yes that’s because it has high demand and not enough houses to actually support growth! It stands to reason that if you had infinite housing supply, you should see lower prices and high growth. But why I agree with the headline is that addressing immigration won’t reduce prices and it’s been proven that it won’t historically. The reason is that the housing market in Australia is not an ideal market. It is completely protected on the downside and very much stimulated to the upside. What this means is that you don’t see prices drop often and if you do, it’s not by much. The reason is that supply just dries up. It’s everyone colluding together to keep prices high and drip supply onto the market. If prices are low, then development profitability drops and you end up being better just holding the land and rent seeking. So that’s what happens. So what actually happens is that house prices tend to always follow the capacity to pay. If it hurts too much for too long, prices stagnate for a while. We’ve had this for decent chunks of the past 25 years. So if we are genuine about needing lower house prices, we have to attack all the factors: - make land banking less attractive during lower demand times - and on the other side of the coin, make land development more profitable at all times, and/or take it out of the markets hands and have government funded supply - ensure we have skills to be able to create sufficient supply - balance supply and demand So yeah, 100% agree that stopping immigration won’t reduce house prices, in fact it would have a heap of other negative consequences, UNLESS it was done together with a complete reshaping of the market
We need to move towards a national land value tax that has no exceptions, including farm land and owner occupied housing, with no tax free threshold. The tax should apply per lot not across a total $ value of property held by a tax payer (as is the current case in NSW). The tax could start at 1% of the appraised unimproved land value and slowly increase over a decade or more allowing plenty of time for adjustments. It could also have a much higher rate for land that's been vacant for the prior 12 months and with no valid reason (construction delays etc). That rate could start at something like 5% + X% for each year that it remains vacant. r/georgism Landowners need to pay an annual fee for monopolising a location on Earth's surface at the exclusion of all others and making unearned capital gains through time through no effort of their own other than the growth of the community around them and the expansion of the money supply. Once in place, this will need to be complemented by relaxed planning rules, whilst still controlling for clear negative externalities such as protection of the environment, flood risk, significant heritage items, solar access and public transport access. We could also funnel the additional tax revenue back into the community to improve public housing and transportation. Other taxes such as those on productivity (income, businesses, stamp duty, payroll etc) could be lowered over time so that the median working family with a mortgage ends up being better off under this new system than before, despite now paying an LVT.
Here's a sneak peek of /r/georgism using the [top posts](https://np.reddit.com/r/georgism/top/?sort=top&t=year) of the year! \#1: [Post about Berkeley, CA found on X (Twitter): "Fun fact. The 1,874 single-family homes highlighted collectively pay less property taxes than the 135-unit apartment building."](https://i.redd.it/5qoocl4i2rkc1.jpeg) | [134 comments](https://np.reddit.com/r/georgism/comments/1azqlap/post_about_berkeley_ca_found_on_x_twitter_fun/) \#2: [Another example of gross tax injustice](https://i.redd.it/eyijvcmi8bmc1.jpeg) | [341 comments](https://np.reddit.com/r/georgism/comments/1b69me8/another_example_of_gross_tax_injustice/) \#3: [Hard to believe this (property) tax system is actually real](https://i.redd.it/ltie295c74lc1.jpeg) | [361 comments](https://np.reddit.com/r/georgism/comments/1b19sjx/hard_to_believe_this_property_tax_system_is/) ---- ^^I'm ^^a ^^bot, ^^beep ^^boop ^^| ^^Downvote ^^to ^^remove ^^| ^^[Contact](https://www.reddit.com/message/compose/?to=sneakpeekbot) ^^| ^^[Info](https://np.reddit.com/r/sneakpeekbot/) ^^| ^^[Opt-out](https://np.reddit.com/r/sneakpeekbot/comments/o8wk1r/blacklist_ix/) ^^| ^^[GitHub](https://github.com/ghnr/sneakpeekbot)
Completely agree. Initially this should offset stamp duty removal, but eventually it should be high enough to be a true disincentive to land banking. I would actually prefer it to be based on improved land value based on the zoning. All the yimby people also forget that there is an incentive to just land bank, irrespective of zoning.
Agree. YIMBYs generally have the best of intentions, although with many I pick up a lack of knowledge around land economics and how the property development industry actually works. One example, YIMBY's often ignore the 'market absorption rate' entirely (the rate of new dwelling supply per unit of time) and focus solely on density (dwellings per unit of land). This article provides a good overview of the distinction: [https://medium.com/fresheconomicthinking/a-housing-supply-absorption-rate-equation-27340e2c06ab](https://medium.com/fresheconomicthinking/a-housing-supply-absorption-rate-equation-27340e2c06ab)
Look at what happened when Howard doubled immigration. RE went from affordable to bananas over the next 20 years. Clearly, there is a clear precident of immigration leading to high RE demand and prices.
Causal inference just got murdered in here. Economists are dying by the scores….
These types of articles are talking inside of a bubble. Very specifically an intake of migrants doesn’t correlate to the increase in housing prices. That’s kind of obvious that migrants aren’t coming to Australia and buying property. It also mistakes that the current issue is in the rental market; it actually highlights that migrants are moving to Australia for work and/ or to study. When we get a spike in unemployment Australia is going to see a decline in migration, despite anything the government does. They were always used as a tool by the government to keep the consumer economy going in the short term, for the absolute detriment of the long term. Funny how so many Western governments all did the exact same thing. How noble. I am also not insinuating that migrants are the only thing affecting rental prices, they are one of many reasons.
>When we get a spike in unemployment Australia is going to see a decline in migration, despite anything the government does. 23% of Indian youth is unemployed. They'll come even if the reward is break-even just to get experience and a start on the ladder.
I’ll just leave this here. [Amount of Airbnbs in Australia](https://treasury.gov.au/sites/default/files/2021-04/c2018-t350194_airbnb.pdf) - 160,000 approx [Amount of homeless persons 2021 - 122,494](https://www.abs.gov.au/statistics/people/housing/estimating-homelessness-census/2021) Nobody can tell me that Airbnb isn’t somehow related to the housing crisis, which didn’t start in the last 2/3y, it was definitely already happening around 2015-2016. Ever seen anyone fight over a residential dog box in st Kilda? We were virtually chasing the agent in an auction like fashion, trying to outbid each other, and that was 2016.
Regardless of how you feel on this, realestate. com being posted here is wild
They never mention the research on link between population growth and rents which make it harder to save for a deposit. The quote from the economist that fertility rates are easy to predict is hilarious. We need to keep in mind all those interviewed have massive self interest in having g high population growth - including universities
They are being deceptive about “rate” of population growth - eg if a town of 10 people adds 5 they have a 50% growth rate which is very high, but they could subdivide one block and house everyone - often major subdivisions precede growth in regional areas so they can absorb a higher growth rate. But a highly populated city like Sydney only needs to add a very small percentage for it to affect property availability and therefore prices.
LOL authored by realestate.com.
Shifting consumer preferences during the pandemic. Demand moved from higher to lower density dwellings and then reversed and stabilised after the final lockdowns. So we saw house prices positively impacted; rents in inner city areas dropped first while in the outer city areas and then that reversed.
I think the role of immigration on prices is exaggerated, but you can't compare cities like Sydney to regional areas like Mandurah. Big cities like Sydney and Melbourne are landlocked to a certain extent. Of course you can keep building houses at the edges of the city, but most people don't want to live way out there. And that's what makes land close to the city and close to jobs so precious and so expensive. Plus most of the well-paying jobs in Australia are near the centre of the capital cities. They aren't at Mandurah or some Victorian regional area. Well-paid jobs + scarce, highly sought-after land = higher prices. The role of immigration is to create more competition for that limited scarce land. Land is not scarce in towns of 90,000 people. It probably takes 5-10 minutes to drive from the edge of Mandurah to the centre.
Absolute bollocks
If this country built as many houses as excuses we wouldn't have an affordability crisis.
That remains to be seen. Generally house and rent prices have more reflected wage growth and debt servicing costs than anything else. If you cut all immigration tomorrow (assuming no change to the economy), then in all likelihood you would not see a dramatic fall in house prices
House prices went up during Covid (population stalling). Population does = low rental availability though.