Politicians cannot be trusted to tell truth about rental crisis

April 25th, 2007

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We saw this interesting article: Tenants take landlords to tribunal over rents surge. In that article, it reported that:

The Prime Minister, John Howard, yesterday backed away from an offer of rent relief, blaming the crisis on the states’ failure to release land. The federal Treasurer, Peter Costello, blamed a pause in home building.

As we can see from this example, it is another load of nonsense from politicians? mouths. Either they are ignorant or they are lying.

Suppose the state government release vast tracts of land for home building. Will it really solve the problem? As we said before in Australian property good investment??Part 1: how money printing distort the property market,

The additional investments by builders into building houses can only be completed if you have complementary capital (e.g. land, infrastructure, equipment, labour, etc) already invested. Because monetary inflation distorts the price signals to the builders, they engage in an investment boom that will be doomed to failure because these complementary capitals did not suffice.

If the state government really do that, and assuming that builders really build houses on these newly released land, we will have a lot of houses built in the middle of nowhere (i.e. houses built with no complementary infrastructure). In that case, who would want to buy or rent such houses?

Next, why is there a pause in home building? As we said before in Australian property good investment? Part 2?Rental & affordability crisis,

Builders soon faced problems of land scarcity, lagging infrastructure, soaring labour cost and so on. This is what the Austrian School calls mal-investment of capital.

The previous excess and imbalance led to the current dearth and bust.