I completely agree, also the relative yield had been pretty attractive in 11/12. However, even accounting for that many people were stating there was a “shortage” – I was just noting a hypothetical point about differing types of “values” for a housing service 😉

The lounge may not have appropriate lighting or ambiance for the types of Tupperware parties I host. This is the importance of getting it custom built!

Or are you saying houses with big lounges are not the sort of houses that become rentals?

Indeed, housing is a massive status good – and I think that can help support the idea of “multiple equilibirum” in house prices/price to rent ratios. A world with falling material scarcity will see status good prices bid up after all!

With more microdata becoming available, hopefully we can shed more light on these types of hypotheses!

Is it a relative price issue or an income adequacy issue? That is a harder one. We know that each decile spends a similar amount on housing services (a fact that surprised me initially) – and so this points me towards income adequacy. But I’d need to think a bit more, within a broader framework, to make much sense of it.

swat board matric result 2014M

In March 2013, 42.5% of renters either received the accommodation supplement or social housing assistance. Even with the low growth rate of rent, a significant number of people still need state assistance to pay rent.

All up, including rest home subsidies, the government spends around $3.1 billion a year on housing assistance.

As well the Tax Working Group estimated in 2008 that the rental sector as a whole runs at a operating loss.

Without capital gains, and the previous favourable tax treatment, total rent appears too low. Yet even at this relatively low rate of rent, large numbers of people struggle to afford rent without assistance.