Comment by cletus | Hacker News Reader

Comment by cletus | Hacker News Reader

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> I'd suggest to keep working in the U.S. and invest in housing back in Australia.

As it happens I do own a house in Australia that is rented out but when you're paid in one currency and your costs are in another you open yourself up to exchange rate risk. So I'm way of overweighting myself in AUD liabilities. It's not a currency I'd be betting against in the next 10 years. Likewise, the USD looks like it'll only get weaker in the short to medium term. Pretty much every government here has a budget in deficit and you may find local and possibly even state governments defaulting in years to come.

The US governments (at every level) seem to have made the same mistake as many individuals: when times are good they simply increase spending to match or exceed revenue. When revenues drop they're in a bad position. The US has this huge Sword of Damacles hanging over its head in the form of Social Security. It's ultimately unsustainable in its present form. Everyone knows it. Nobody wants to do anything about it.

At least in Australia we've been moving towards funding our own retirements for decades. We're not there yet but we're a damn sight better off.

As for buying houses near the beach, not in any capital city I know about (except maybe Brisbane now). Certainly not Perth or Sydney. In Perth you'd have to go 50km+ north of the city to get anything remotely close to the beach for under $500k.

And the idea that property near the beach "will never go down" is exactly the kind of thinking that led to the subprime meltdown.

As for the Australian tax system, mine was't a criticism, merely an observation. Frankly I think any system that encourages people to create homes for others to rent as doing a public good. After all, when someone rents, somebody else by definition has to own that house.

One other difference worth pointing out between the US and Australia is that in Australia interest rates are typically variable. They move mostly in lockstep with the official (Reserve Bank) cash rate. You do get fixed mortgages but they're rarely for more than 5 years.

In the US, mortgages seem to be fixed for the 30 year life of the loan. This actually makes buying in the short to medium term attractive in the US as interest rates can only really go up. 4% fixed for 30 years is a hell of a deal.

> Frankly I think any system that encourages people to create homes for others to rent as doing a public good.

All good and well, but land releases have not kept up with demand. A supply of cheap money from the US, the mining boom and negative gearing have lead to massive increases in housing prices in the past 10 years. It's not sustainable, IMO.

We in Australia brag about sailing through the GFC, but if inflation breaks out, the Reserve Bank will hike up rates mercilessly and a lot of people won't be able to cover the interest on their $3-500k McMansions.

> All good and well, but land releases have not kept up with demand

This point I've heard too often and it's one I vehemently disagree with.

Australians need to get over this quarter acre with a 250sqm house nonsense. What's more the government should stop subsidizing it to the degree that they are. It's not simply a question of land but all the infrastructure that goes along with it: water, power, roads, schools, etc.

There is no God-given right to build out rather than up.

I've heard your argument too. It's been the guiding thought behind slow land release -- that it will lead to higher density. That and the fact that it expands stamp duty receipts.

But that overlooks the fact that overly complex zoning laws, NIMBYist resistance from residents and the odd spot of outright corruption has basically prevented density from increasing.

Density has its costs too. It's cheaper to extend a sewerage and water network in a greenfield project than it is to dig up and replace it in a densely settled area. It's cheaper to maintain small streets than large streets.

FWIW http://www.wired.com/science/planetearth/magazine/16-06/ff_h...

As far as stamp duty goes, IMHO that system needs to be abolished. Property taxes should be applied smoothly rather than transactionally. For one thing, stamp duty reduces the flexibility of the labour market.

Consider: someone owns a house in Sydney worth $1 million. They're offered a job in Perth for, say, $150,000. Now to sell up and buy a new house in Perth they'd need to pay $50,000+ in stamp duty before you even get into agents commissions and whatnot. Why should someone take such a huge initial hit? Unless they didn't have a job where they are or the new job was substantially better, they're best off not moving.

You're right that the carbon footprint is lower, but that doesn't change the fact that the collision of politics and economics has prevent urban density from increasing in Australia. We need both to release land and increase density or will are beggaring ourselves unnecessarily.

As for stamp duty, the states rely on it too much to give it up.

Urban density has been increasing markedly in Australia over the past few decades, at least in Sydney. Not quite as fast as some folks would like (ie everybody with a spare quarter acre that they'd rather put up twenty units on) but density is certainly going up.

In my opinion, though, what Australia really needs to do is to develop the infrastructure outside the major cities to persuade people to move out there. Australia can easily accommodate another ten million people, but not if they all want to live in Sydney and Melbourne. Why can't Broome and Mildura and Wagga Wagga have two hundred thousand people?

Generalising enormously, the capital cities are already perched in the best locations. A successful city needs two major things: ready access to water and ready access to trade. That's why most major cities are on rivers or around major harbours.

Take my home town Darwin, for example. It is not destined to be one of the world's great cities because it is poorly positioned. There's buckets of water but due to the flatness of the country it's hard to dam. The harbour is large but shallow. The approaches from East and West are not friendly to bulk shipping.

Sydney, Melbourne, Adelaide, Brisbane and Perth are already hogging the best spots for large cities.

This type of thinking doesn't explain Houston, Las Vegas, Phoenix - the list goes on. These are large cities by Australian standards but fit very few of your criteria. Las Vegas depends on the Hoover Dam, but certainly not trade or shipping.

Water supply is the major issue in Australian cities, but this can be solved (see Kalgoorlie) if people put their mind to it. I agree that Australia needs to develop the regional areas more.

Houston is actually the 2nd biggest port in the USA and 6th biggest in the world. It's also surrounded by oil and natural gas. Phoenix and Vegas are weird ones, but most large cities in the USA are on a big lake, river or ocean, or some combination of those.

My bad with Houston. I must have been thinking of Dallas.

The factor with Las Vegas and Phoenix are that they are modern growth cities. You don't need a deepwater port to facilitate growth in a modern city, just a good airport, good road/rail links and good communications infrastructure. You could argue that Phoenix is propelled by retirees and golf players and Las Vegas by gambling - but the reason doesn't matter, just the fact that a city can be sustained does.

My understanding is that Vegas is on a major highway and has a natural trade (gambling). Other Nevada gambling towns which are not on that route are less successful. Is that correct?

To cover myself, refer again to my prefatory remark that I was generalising enormously.

Las Vegas has trade and shipping... tourism.

This is more up to councils and state governments, and there is movement in this direction, encouraging high to medium density housing rather than low density.

I don't really understand land releases, surely this could happen faster, it feels like its geared towards maximum profit to only release in small chunks when there are large areas they will eventually be subdividing.

Somewhere like Melbourne though, I think things need to become a little less inner city focused. As in new suburbs are popping up but not a lot of employment is close to them meaning that transportation becomes worse as there are ever increasing numbers of people making long trips to work from the outer suburbs. I've always thought it would make sense to stick another inner city like hub somewhere and put high speed rail or something between them, rather than forever branching out from a central hub.

It suits both government and developer to do small releases. The developer can charge a premium and the government maximises stamp duty.

3-500k won't get much of a McMansion in Australia. It might cover a townhouse.

> Frankly I think any system that encourages people to create homes for others to rent as doing a public good.

I don't see the tax breaks as a good thing as it skews market forces and inflate property prices. They also throw up a moral dilemma: Why should property investors get tax breaks (offset interest payments against personal tax) and not home owners.

What you start to see some single young professionals in Australia doing is buying an investment property to lease out and then renting another property to live in themselves. This is to take advantage of the government-funded tax breaks. So the flow of money goes a little something like: government tax revenue -> property prices. I can't see this helping the public good at all.

Moral Dilemma? It seems a logical way of treating it.

The additional income is treated as taxable income. The additional expense (aka Interest) is treated as a deductible expense.

1. It's deducted against personal income. 2. Nobody is allowed to do it on their own home

So is a company car if you're a sole trader... But I can't write off my normal car.

It's relatively consistent.

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