Page 1979 - Week 06 - Wednesday, 25 June 2008
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MR SESELJA (Molonglo—Leader of the Opposition) (8.08): The opposition will not be supporting this bill. The land rent scheme is, of course, perversely predicated on an assumption by this government that low income earners can no longer afford to own a home in this town. The land rent policy is a result of the government’s deliberate policy to drive up land prices by constricting land supply. According to HIA data on first home buyer affordability, in the March quarter of 2008 Canberra became more expensive than Perth and Sydney, a position it has not been in for years. Canberra has also edged closer to overtaking Brisbane to become the most unaffordable capital in Australia for first home owners.
Housing affordability for first home buyers is significantly worse than when Mr Stanhope’s Labor Party came to office in the ACT. According to the HIA affordability index, first home owner affordability has dropped by 59 per cent under Mr Stanhope.
In 2008 we have heard mixed messages from Mr Stanhope on land supply. Earlier this year Mr Stanhope insisted he was releasing enough land. I refer to his column in the B2B magazine on 21 February. Then the opposition put pressure on him over Canberra’s housing affordability crisis and we embarrassed him with our policy of no stamp duty for first home buyers. Subsequently, in a hurried reaction Mr Stanhope belatedly promised, after seven years of stifling supply, that he would release more land. But under the new announcement land supply will not exceed demand until at least Christmas, we are told, which means another six months of supply shortage this year. Given that the promise is not to be delivered on until after the election, you have to wonder if the promise can be believed at all.
Land rent is a weak response to a problem of constricted land supply. It is also a very risky policy option. Some window dressing policies can have minor positive effects. This policy has dangerous effects. The estimates committee has received a range of evidence indicating that land rent is a risky proposition. It is a well-established point that land generally increases in value over time whilst buildings depreciate. It is for this reason that bank lending on property almost always involves lending against combined house and land security or lending against vacant land.
The Chief Minister has made some ridiculous criticisms of the opposition’s policy of no stamp duty for first home buyers. He claims that stamp duty exemptions have an inflationary effect. If this were true, then the same criticism would apply to other schemes, such as the ACT government concession scheme. He thinks it is responsible and non-inflationary of him to have concessions, but it is inflationary for an alternative government to propose concessions. He cannot have it both ways.
Moreover, there is an even bigger weakness in the government’s claims that stamp duty concessions will cause inflation. If stamp duty concessions are inflationary, then this could only be so in a market where there is constricted supply. The government has a queer view that housing supply should remain stationary and the number of people who can afford to enter the market should not be increased. It is a pretty backward view of how markets operate.
If this government had any understanding of supply and demand, then they would realise that in a balanced market supply should be loosened to keep pace with demand
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