THE SMH has an article about The Greens' economic policies, particularly that of a steady state economy.
This concept is far more radical than anything from Liberal or Labor and is as different from today's capitalism as communism was.
Indeed steady state may even be more different - both capitalism and the lead-up to communism envisaged an intensification of productivity and worshipped growth, whereas steady state does not.
http://www.smh.com.au/federal-election/the-watermelon-party-20100730-10zsb.html
The most significant parts of this for property investors are:
I think the most important aspect of a steady state economy is that the existence of inflation can't be taken for granted.
Inflation is what makes leveraged property investment work - it lowers the effective value of debt (even if borrowed interest only) and allows today's (increased) rent to pay off yesterday's (decreased) debt, so improving equity and cashflow over time.
Banning borrowing would cause those assets whose values are supported by it to collapse.
Even without borrowing it is concievable that house values could rise if demand rises. But the pursuit of zero population growth reduces demand compared to now, although without coercive population settlement policies there will still be areas with faster population growth than others.
Hence building activity would be limited only to construction of new dwellings in faster growing areas or as redevelopments of inner-city sites. It would be a lot less than now. There'd likely be an emphasis on making do or renovation rather than building new.
I am not sure what would happen to affordability given that both wages and house prices will slump. Or at the least they will not grow.
The economy is inherently unstable, and it seems easier to keep it moderately inflating (2-4%) than 0% inflation. But steady state economies appears to require this.
Though house prices and wages might fall, it's likely house prices will fall faster due to the removal of credit. There will however be some people who can't afford to buy (despite this boost in affordability). Hence there will continue to be landlords.
Property will thus be seen as an income source rather than a capital growth play. This requires either rents to go up or values to go down; the latter is probable if credit is withdrawn. Steady state will reward renovation and conversions, especially of medium density housing near transport hubs.
Highly leveraged investors will lose greatly as the adjustment from an inflationary to a steady state economy will be painful. In contrast those with little leverage will survive, though future capital gains are less likely without population and credit growth.
This concept is far more radical than anything from Liberal or Labor and is as different from today's capitalism as communism was.
Indeed steady state may even be more different - both capitalism and the lead-up to communism envisaged an intensification of productivity and worshipped growth, whereas steady state does not.
http://www.smh.com.au/federal-election/the-watermelon-party-20100730-10zsb.html
The most significant parts of this for property investors are:
Incomes are lower but working hours are reduced.
The credit/debt system is phased out; consumers and investors must save.
Population growth is retarded; the average age increases.
I think the most important aspect of a steady state economy is that the existence of inflation can't be taken for granted.
Inflation is what makes leveraged property investment work - it lowers the effective value of debt (even if borrowed interest only) and allows today's (increased) rent to pay off yesterday's (decreased) debt, so improving equity and cashflow over time.
Banning borrowing would cause those assets whose values are supported by it to collapse.
Even without borrowing it is concievable that house values could rise if demand rises. But the pursuit of zero population growth reduces demand compared to now, although without coercive population settlement policies there will still be areas with faster population growth than others.
Hence building activity would be limited only to construction of new dwellings in faster growing areas or as redevelopments of inner-city sites. It would be a lot less than now. There'd likely be an emphasis on making do or renovation rather than building new.
I am not sure what would happen to affordability given that both wages and house prices will slump. Or at the least they will not grow.
The economy is inherently unstable, and it seems easier to keep it moderately inflating (2-4%) than 0% inflation. But steady state economies appears to require this.
Though house prices and wages might fall, it's likely house prices will fall faster due to the removal of credit. There will however be some people who can't afford to buy (despite this boost in affordability). Hence there will continue to be landlords.
Property will thus be seen as an income source rather than a capital growth play. This requires either rents to go up or values to go down; the latter is probable if credit is withdrawn. Steady state will reward renovation and conversions, especially of medium density housing near transport hubs.
Highly leveraged investors will lose greatly as the adjustment from an inflationary to a steady state economy will be painful. In contrast those with little leverage will survive, though future capital gains are less likely without population and credit growth.