Is This Déjà Vu or What?

A few weeks back I published a hugely popular sarcastic article for the Swedish Mises Institute, roughly translated into "To Chase Everything but the Culprit". The point was to ridicule the Swedish government's silly attempt recently of "solving the housing crisis" by forcing households to pay down their mortgages by fixed percentages every year. I say silly, because the reason Swedish households have high debt levels is because housing prices are exceptionally high, which in turn is due to a combination of housing regulations, pathetically low interest rates, governmental subsidies of mortgage payments and intentionally preventing construction - all of which, paradoxically, are consequences of various governmental policies.

They are, in other words, going after the wrong guy. Completely.

Same thing can now be said about the New South Wales government. Earlier today, they announced a new punitive stamp duty on housing levied on foreign buyers - a 4% additional surcharge as well as an extra annual 0.75% land surcharge, payable by foreign buyers only. In doing so they are following Victoria's even crazier money grab, and Queensland's plans on imposing similar taxes.

One of the reasons is to cool down the Sydney housing market, since allegedly Chinese investors have fuelled the boom in recent years - colloquially a no-brainer; "The Chinese are buying up all our properties", as heard in every other pub. Right.

NSW Treasurer Berejiklian is quoted saying the following:

"The Victorian experience has demonstrated that the measures have not had an adverse impact on the property market".

Yes, love - because foreign investors are not what is driving the housing market. Of course it won't have much effect on housing prices.

As usual, neither politicians nor economically illiterate voters care two straws for what actually happens (see my rampage on 3 Things Australian Politics Is Mistakenly Obsessed About). The fact that Chinese buyers are a very marginal part of the Sydney market is completely ignored. Neither does anybody care to investigate that they mostly contribute to new constructions (which both state and federal governments paradoxically want, since it provides jobs and tax revenue..) and so literally creates their own supply - and no, this is not some crazy nut-head talking, the RBA said so two months ago and high-profile economists have been saying the same thing.

And of course, nobody talks about the giant elephant in the room, the main culprit to increasing housing prices: the abominably low interest rates.

That is, by no stretch of the imagination are Chinese investors creating Sydney's housing prices. The story is, and has always been, one of interest rates.

Tony Sherlock, a Sydney-based analyst at Morningstar Inc., gives Bloomberg the only sensible explanation:

“For the state government, there is an element of a money grab plus the opportunity to generate some amount of political goodwill.” 

It's like they read my blog posts and articles and decide to go ahead with exactly the policies I just told them were mind-blowingly, senselessly, unimaginably stupid.

Déjà vu from a few weeks back - I wonder what mischief they'll come up with during the next couple of weeks.