Poll Fixing Crisis

Top economists are unanimous in believing Australia's housing market is in crisis, according to a new poll.

And I have to say, Wow, we had to go to a group of “top economists” to achieve that startling revelation.

It comes from a survey in which the Economic Society of Australia offered these top economists a choice of 14 measures identified by as likely to restrain prices for buyers and renters – in other prevent property prices and rents from continuing to rise.

Therein lies the first problem: they polled economists rather than real estate experts.

If there’s one thing we’ve learnt in the past four or five years of observing real estate analysis and commentary is that economists, generally and collectively, have a very poor understanding of real estate markets, which is why they are so incredibly bad at predicting outcomes.

But, ignoring that reality, the survey asked 49 people described as “leading economists” to respond to this question:

"Here is a list of measures governments could take to increase housing affordability (to reduce the cost of purchasing or renting relative to wages). Which would you most support? Pick up to three."

Among them, apparently, are former heads of government agencies, a former Reserve Bank board member, and former Treasury, International Monetary Fund and Organisation for Economic Co-operation and Development officials.

Sadly, but rather typically, the poll didn’t include any property experts. Just a group of individuals who have typically occupied ivory towers a long way from the coal face of property markets.

And here’s the next problem with this process:

the tick-box options presented to the leading economists did NOT include the only measure likely to ease the rental shortage and therefore restrain rental increases – providing incentives for people to become landlords.

You have to wonder why not.

So, whoever designed the poll – yes, a group of economists – failed to understand the problems they were exploring.

Of the options the panel of non-experts were given to choose from, two-thirds of them picked "ease planning restrictions" as most important fix. Almost as many picked "provide more public housing".

So, most believe that creating more dwellings will fix everything. Which, again, shows a fundamental lack of understanding of the problems, how they were created and where the solutions lie.

But it gets worse.

About one-third wanted to "tighten negative gearing and capital gains tax concessions".

You have to wonder about the thought process here. How does causing a major deterioration in the financial position of the people who provide the homes tenants occupy cause rents to fall?

And given that investors are less than 20% of the buyers competing in the market, how does this stop prices from rising.

Surely you would have to introduce measures to curtail home buyers, who comprise almost 80% of buyers competing in the market, if you wanted to stop prices from rising.

Back to the survey: about a third of the respondents wanted to "replace stamp duty with land tax applying to family homes".

Okay, so that’s a measure that might slow down home buyers a little.

Also popular were removing barriers to building prefabricated homes (31 per cent), fast-tracking the training of h ome builders (18 per cent) and fast-tracking the immigration of home builders (14 per cent).

Again, all are measures to increase housing supply and this appears to assume that building more dwellings will stop prices and rents from rising.

Ten per cent of those surveyed wanted to include the family home in the age pension assets test, 8 per cent wanted to remove first homeowner grants and concessions, and 6 per cent wanted to apply capital gains tax to family homes.

So, those measures at least at targeted on home buyers and appear to recognise their part in causing prices to rise, but these were the least popular of the tick-box choices.

The most popular were all measures which assume that building more homes and curtailing property investors will fix all problems.

But doesn’t explain how clamping down on the providers of rental homes will cause rents to fall – or stop prices from rising