Senin, 17 Agustus 2009

Freud on the Brown Couch

There's a couple of interesting pieces in the opinion pages of today's Sydney Morning Herald. Please do have a look.

First, Damon Young takes apart the cliche of the 'dream' of homeownership, observing that the high cost of owning is an oppressive nightmare for many. Life-long renter Sigmund Freud, who knew a bit about dreams, preferred to spend his money on things that made his home-life beautiful, rather than interest payments.

(Sigmund Freud, tenant)

Secondly, in a letter to the editor Marco Fante of Katoomba has put together just about the neatest critique of the Australian housing bubble - and recent comments on the problem by Reserve Bank Governor Glenn Stevens and Prime Minister Kevin Rudd – that you'll find expressed in less than 200 words.

The bubble is there, but it has been with us for nine years. The higher cash grants have merely sustained an already inflated market. As reassuring as it is to see these misgivings emerge among banks, it seems to be a case of too little, too late.

The concerns of Mr Stevens about land values are well-founded, but supply factors do not come close to accounting for the near trebling of house prices in the earlier phase of the boom (when the word bubble was rarely heard).

The bubble may eventually burst or slowly deflate, but the lasting improvement in supply and affordability Stevens wants to see will never eventuate as long as government policy encourages speculative investment in established homes.

In his recent 6000-word essay, Kevin Rudd promised a tax system "that encourages productive investment". His Government could begin by reconsidering the largesse that successive administrations have heaped on the housing market in the form of grants, negative gearing and capital gains tax concessions.

The least it could do is ensure that the bulk of these benefits are directed toward those who would build new dwellings rather than those who gamble on the price of existing properties.

Well said, Mr Fante!