Spruiker spooked

Washington Irving's short story, The Legend of Sleepy Hollow, in which the Headless Horseman dashes about on autumnal New York nights, is a Halloween favourite.




It's creepily fitting, then, that a week out from the holiday another rider is losing his head.

Terry Ryder, property spruiker, hurls the following pumpkin at the campaign group, Australians for Affordable Housing, in the business pages of The Australian:

SOME activists see property investors as the great enemies of first-home buyers.
Their core belief, unsupported by evidence or logic, is that homes are unaffordable because investors drive up prices.
Australians for Affordable Housing appears to think that nobbling investors will strike a telling blow for first-time buyers: remove negative gearing and increase capital gains tax, and homes will be affordable.

Our own modest attempt at furnishing some evidence and logic about negative gearing's contribution to the high cost of housing can be found here. Ryder, on the other hand, supports his argument by referring to a survey of opinions of first home buyers (conducted by an originator of residential mortage-backed securities) as to whom they're having to outbid.

Evidence and logic? Riiight.

The argument itself is a strange one too. Ryder says that it's not investors (we call them speculators) who are pushing up prices, it's other owner-occupiers. We might agree up to this point: as we've noted previously, the tax preferencing of owner-occupied housing is at the heart of house price inflation.

But then Ryder makes an abrupt about-turn: he says that to 'attack Australians who buy rental properties' is to 'undermine the financial base of 70 per cent Australians' [ie those who own a house].

Sounds like those speculators have been pushing up prices after all. Good thing too, says Ryder: there's a 'strong national interest in having people invest in this way.'

There's heavy pressure on people to plan for a self-funded retirement, given the stress our ageing population is placing on the taxation and welfare systems.

Let's be clear: as an investment strategy, negatively geared property speculation is not 'self-funded'. It is 'funded' by a greater fool coming along to pay more for the property than the speculator paid (being the price paid to the person from whom they bought it, and interest to the bank from which they borrowed the money) – and every other tax payer who foots the public services bill that the negatively geared speculator is allowed to cast aside.

In fact, about $6 billion worth of the 'stress our ageing population is placing on the taxation and welfare systems' comes precisely from 'having people invest this way'!

Ryder wheels about again. Too bad, he warns:

There are limited options. Buy shares or buy real estate. Superannuation alone won't cut it.

No, actually, just buying real estate won't cut it (particularly if, as Ryder says, the population is ageing – are there going to be enough greater fools to buy all the property?). Here's another option: put your money (or, if you're game, your credit-worthiness and some borrowed money) to something that makes more than it costs. Something productive.

A final pass by Ryder:

The anti-property voices in the community not only wish for a big devaluation of our homes but are lobbying government to make it happen.
It's an extraordinarily irresponsible stance...

No, actually, encouraging people to think that they can fund their retirements by unproductive speculation in real estate on the basis that prices will keep going up has a much greater claim on 'extraordinary irresponsibility'.

For a much more sensible discussion of the issues than provided by Ryder, follow this link to a recent piece by Australians for Affordable Housing spokesperson, Sarah Toohey.

Well done, Australians for Affordable Housing: you've got at least one spruiker spooked.