ART02: Why Land is Bananas

15 Oct 2006 - by Stewart Glass

Before the cyclone hit Queensland in 2006 you would pay $4kg for bananas.  Now you pay around $11kg.  What bought this monumental shift?

This is simply the law of supply and demand.  

High demand + small supply = high prices.  

Small demand + high supply = low prices.

 And when it comes to land we are a few bananas short of a bunch.  What’s that you say?  How can land prices be high when you know if there is one thing Australia is full of - its land?  What about those broad meadows you saw recently?  Did it sink into the sea one night – Atlantis style?

 Well, not really.  Even with the land right in front of your eyes, the reason remains invisible.

Let me introduce a couple of little men called “Urban Boundary” and “Land Zoning”.  This mischievous pair, sponsored by the State and Local Governments has chained up huge tracts of privately owned land.

Land Zoning means the government tells you what it can be used for i.e. Rural, Residential, Industrial.  The outcome of this is that a land owner cannot split up their block and sell it off.  Urban Boundary is the artificial divide that the State Government has put saying “this is country” and “this is suburbia”.

 

So although you may own the land you do not control it.  But what does ownership mean if not control?  It’s like buying a car from someone and then finding in the glove-box a notice – “this vehicle may under no circumstance be driven on a Sunday”.

Now this Urban Boundary may sound good but you are not going to stop the Urban Sprawl unless people stop having kids.  The other alternative is Sardine City as promoted by their other catch phrase – “Urban Infilling”.  Basically this means when you look at a map of the city and you see gaps, these are potential “urban infills”.  Eventually this may mean the park around the corner from you.

 One side effect of these policies is the reduction of block sizes.  Now this is fine if you are retired and have an empty nest, but a 350m2 doesn’t leave much room for kids to kick a footy, and if Mum or Dad are cooking dinner and can’t take them down to the park, the kid probably ends up watching TV or playing a video game.  Thus one of the consequences of the loss of liberty in the property market is its contribution to childhood obesity.

 Consider also these points:

*    at the least the State Government has a vested interest in the land tax it receives from land sales.  The higher the land price the more the State Government gets.

*     The LMC (Land Management Corp. – the land selling arm of the State Government) can make more money by the slow release of land than by flooding the market.  It’s a bit like diamonds – they remain expensive because for a long time the market has been monopolized, and the supply deliberately limited.

*     The SA government totes infrastructure cost as a reason for planning restriction.  Yet houses can function independently (sewers, electricity, water) as they have for many people for many years.  If you move to the country, I do not think you can demand the same services as in suburbia, but why not let the people weigh-up the infrastructure costs when considering to move?  It is true that an upgrade of roads are required if large numbers move to more of the fringe, yet if the government doesn’t provide proper roads what does it provide?  If large numbers are moving, let the funding move with them.

 

I am not saying that farmers need sell their land, nor that a bigger block is for everyone, nor that people should be forced to move from the city.  What I am saying is this is a choice for the people to individually make, not for government.

And when did the government ever start making a better choice for your family than you did?

Links:

No Opportunities on the Property Market - Aug 2006 - by Alan Moran