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Tuesday, August 01, 2006


An interesting interview found courtesy of John Ray's Greeniewatch on house pricing. It appears housing costs depend heavily on the degree of government regulation & hardly at all on the amount of land available. The author is Australian so he is particularly annoyed that regulations limiting the amount of land available is pushing house costs above the international average of a whole 3 times average annual income. I guess that would be about £90,000 (or £60,000 if talking about post tax income) in UK terms. If there isn't enough land in Australia to satisfy the regulators who say where we can't live the demand of regulators for land where people shouldn't live is truly insatiable.
Some excerpts
Wendell Cox: That's right. We looked at housing affordability in 100 markets in six nations. My great interest in that has to do with the recognition that home ownership is the principal driver of economic growth. What we found is that in Australia things are pretty bad. As I think most Australians know, housing affordability has been greatly lost. The great Australian dream, I would argue, is in the process of being destroyed for hundreds of thousands, if not millions, of future households. As you think, for example, in the Sydney area, housing prices relative to incomes are three times what they should be, three times what they are in Atlanta or Houston. In places like Brisbane, Adelaide, Melbourne and Perth, housing prices relative to incomes are about double what they should be, and this is being caused principally by the kind of regulations you've mentioned and that's the extreme regulation of land going under the name urban consolidation, anti-sprawl, et cetera, and it is doing to have, I believe, very serious impacts on the Australian economy in the long run.

......What we did is we looked at median house price and compared it to median household income in each of the countries. Essentially, historically, whether we talk about Australia or the United States or the UK, that measure is normally about three where the market is allowed to operate

......Atlanta, Dallas, Fort Worth and Houston are the three fastest-growing large urban areas in the first world, housing affordability...with the huge demand those guys have got, housing affordability is down in the three range instead of the eight-and-a-half range or the six range

....Whyhy do you think urban consolidation was and still is so popular?

Wendell Cox: It is principally popular among a group of planners for whom what the city looks like aesthetically is the most important thing. They have done all sorts of research that's largely wrong, you hear them complaining about land being taken out of agricultural production because of urbanisation when in fact, for example, in Australia all of the land taken out of agricultural production for the last quarter century exceeds the size of the state of Victoria because you've gotten better at producing agricultural products.

......Michael Duffy: I once gave a lecture, not that long ago, at a university on urban planning and at the end one of the horrified students in the class said to me, 'But you can't just let people do what they want!'

Wendell Cox: Yes, but the interesting thing is all sorts of economic studies around the world show that economic growth and affluence happen where people are allowed to do what they want, and that's what is really at risk here. I don't know what the impact is going to be but it is not a good impact when you significantly increase the price of housing for no good reason.

So all the bull we have from the politically correct numptys in Holyrood about "affordable housing" is merely to cover the fact that the only thing that makes housing unaffordable to even relatively well paid people like teachers & policemen is the regulations they saddle us with. In my opinion if the government were also to give some support to off site modular manufacturing of homes they could get the prices down even below the 3Xincome figure. Currently, of course, regulations act to ensure all that mass production cannot be applied because houses need individual rather than type planning approval.

Finally here is a remark on public transport which I wish I had seen before doing a bit on the 29th June on why building a bullet traibetweenen Glasgow & Edinburgh is insane.
Looking around the world at all the cities you've studied, is there any evidence you can actually shift people out of cars and onto things like light rail?

Wendell Cox: Not a shred. For example, when they built the Portland Oregon light rail line they found a reduction of traffic congestion along the adjacent freeway for a matter of about 30 days. The fact is that the basic problem with public transport, while we all love it, is that it only gets you to one place. If you go to any city, I don't care if it's Sydney or Portland or Perth or Paris, what you will find is public transport gets you to the core but is absolutely useless and uncompetitive in terms of getting you around the urban area otherwise. You think about Sydney, for example, only 13% of employment is downtown. That means 87% of the employment can't reasonably be reached by public transport.


this article is quite accurate. Housing prices are artificially inflated in Australia - but especially on the east coast in Sydney, New South Wales. With the Australian Reserve bank set to increase official interest rates again for the third time in the space of eighteen months (and probably a fourth rise before the end of 2006), increasing inflation, a persistently strong Australian dollar hurting exports, rising fuel costs (since the US adventure in Iraq in 2003)hitting the daily essentials of life leading to a massive jump in credit card usage & debt (due to hardship NOT affluence as the Reserve Bank assumes)which prompts the Reserve Bank to increase rates yet again in response thus further increasing the financial hardship.

Most people with a mortgage are getting to the stage of living at or below the poverty line just to keep up with their monthly mortgage and credit card repayments to the banks - particularly in New South Wales - prompting the Premier there, Morris Iemma to plead with the PM, John Howard, to use his influence with the RBA to forestall any further increases in the official cash rate.

And yes, public transport is woefully inadequate as far as getting to urban areas quickly and efficiently outside of the CBD of the capital cities.I have a friend whom resides in Sydney and despite the massive increases in fuel costs since 2003,Sydney residents are still overwhelmingly using their private vehicles to get to work - cummuters just cannot rely on public transport to get to work reliably on time anywhere say 10 Kilometres or more outside of the CBD.

The "great Australian dream" of owning your own home will remain just that for many: merely a dream.
That's what happens when you have career bureaucrats in government regulating almost every aspect of life.
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