Catherine Carter |
Tuesday, 9 August 2011 2:00 PM |
One Comment
Those who have recently accused the property sector of ‘rent seeking’ are doing no more than creating a ‘straw man’. This accusation deserves further evaluation.
It’s easy to take a swipe at the property industry and those developers who may make a commercial return from investing in our city by providing office space and housing for the people of Canberra, and to try to make an ‘enemy’ out of the development sector.
But the accusation rests on a series of falsehoods.
Firstly, the property sector has never said or believed that government or the community owes it a living. Those in the property sector take their own risks, and take the rewards, or losses, as they come.
Secondly, the property sector has never expected government to reward it for rent-seeking behavior, despite what some might say.
Thirdly, as those in government would know from their economic advisors, once government-owned property has been released to the market, economic rents do not exist in the ACT property market because of the level of competition.
Economic rents can only be available in a market where gains over and above the ‘normal’ level of profit can be made because that margin cannot be competed away. The principle condition for the creation of economic rent is control of supply. In the ACT there are many owners and developers of buildings so any potential economic rent from withholding supply from the market quickly vanishes as competitors move in.
The only economic rent on property in the ACT in fact accrues to the government because it is a monopoly supplier. It is able to potentially reduce the supply of land and is able to drive up prices beyond those that would prevail in a competitive market simply because it is able to control supply, instead of having to respond to market forces.
In addition to increasing its monopoly rents through delays in land releases and zoning restrictions, the government imposes unreasonable taxes such as the new lease variation charge. The cost to the community is both through high land prices and land not being put to its most productive use.
So, it is government – the monopolist – who is the rent seeker and collector, not the property sector.
Catherine Carter |
Tuesday, 9 August 2011 2:00 PM |
One Comment
