The First Home Buyers Strike started by Prosper Australia a little over two weeks ago has just started making international headlines.
Here is an article posted online for The Telegraph:
Australian home buyers 'strike' over inflated house prices
What started as a small campaign by land tax lobby group Prosper Australia has grown into a sizeable movement, with more than 5,600 people signing a statement saying: "I undertake not to bid at auction or negotiate by private treaty to buy real estate until prices moderate, just as they have in all the countries we compare ourselves to."
The campaign has captured the imagination of the public because house prices in major Australian cities are believed to be overvalued by more than 50 per cent, with many average income earners unable to afford a first home even on the fringes of Sydney, Melbourne and Brisbane.
A recent survey of 20 countries by the Economist magazine found Australian property prices were the most inflated in the world, at 56 per cent over their long-term average, beating those in Hong Kong and France.
Other research suggests that just three out of ten lots for sale in new housing estates are affordable to average-income first-home buyers. Australian property prices did not fall during the global recession, unlike like those in Britain and the US, because the nation escaped the worst of the downturn.
Prosper Australia believes the situation has created a property bubble that will burst when first home buyers abstain from paying over the going rate for properties.
Further to the above the strike has also just been covered by well known econoblogger Mish on his blog Global Economic Trend Analysis where he suggests the following:
I think those buyers' strike vote are somewhat wasted. Buyers will do what they will do and buyers are already on strike.
From my way of thinking it would be better to pressure the Australian government to abandon its ludicrous first time home buyers' grant.
That "Home Buyers' Grant" program sounds very much like President Bush's failed "Ownership Society".
Simply put, government has no business promoting personal choices unless it purposely wants to create bubbles.
If you have votes to spare (or if you have not yet registered) I suggest you cast every one of your votes to Stopping the First Home Buyers Grant. It's time to end the insanity.
I agree with Mish's comments above. As I have mentioned previously I think it's great that the strike has gained so much attention for the affordability issue, it's now time to focus on what we can do to sustainably improve the situation.
Both Prosper Australia and Steve Keen have recently made suggestions on how this could be achieved. I already covered Keen's in a previous post, if you want to see them again they are available on his blog here.
Prosper Australia has proposed the following:
What We Want
* 10,000 people to sign our Total Abstainers Pledge
* Negative gearing limited to new home construction, then phased out completely
* Stamp Duty eliminated
* Abolishing First Home Owner Grants (never again!)
Prosper’s longer term aims include:
# Funding the abolition of stamp duty and negative gearing with a higher and flatter Land Value Tax
# Reducing the threshold on Land Tax to zero
# Continuing to transfer taxes off incomes, GST and onto fixed assets like land, iron ore and the electromagnetic spectrum.
I think both Keen and Prosper have made valid proposals for changes that could improve the property market (and affordability), making it a fairer system for all.
Let's just hope this strike has the political clout to bring about some permanent changes for the better.