Dennis K's original post on housing affordability is excellent and IMO correctly identifies many of the causes of the housing affordability crisis in Australia's major cities.
With that said, I'd take issue with one small point; that being the role played by low interest rates. The key problem facing Australians today is that housing is unaffordable. Affordability entails more than just the price of the property. For the vast majority of us who need a mortgage to buy a home, affordability is affected by (1) the amount borrowed to buy the property, (2) the borrowers capacity to repay the loan - ie their income and (3) the interest rate charged on the loan.
Dennis notes that low interest rates have allowed borrowers to obtain bigger loans and that this has, in turn, contributed to the rising cost of property. This is all true. But what would happen of interest rates were to rise?
Firstly, those with existing mortgages would be placed under greater stress, because the cost of servicing their mortgage would increase and most wage earners are not in a position to easily increase their incomes to compensate. The extra repayments required will likely have to come from reduced savings or, more likely, reduced spending in other areas.
Secondly, the price of property might (?) come down because buyers could no longer afford to borrow as much as they had in the past. But here's the thing. The only reason that they can't borrow as much any more is because with higher rates of interest, the amount that they can afford to borrow and repay is reduced. The monthly mortgage repayments over 25 years are the same, whether you borrow $250K at 4% or $171K at 8%. So even if property prices were to fall by an astounding 20%, housing would still be less affordable than today if interest rates were around 8%. Lower house prices don't help with affordability if your monthly mortgage repayments stay the same, or go up.
Thirdly, who benefits from higher interest rates? The standard answer is those who have savings invested with the bank. But this is not at all accurate. The vast majority of money loaned out by banks is not your hard earned savings, but rather new money that is created ex nihilo (from nothing) by the banks as a book keeping exercise. When you make a repayment, the principle component of your repayment is written off the books (destroyed) by the bank in the reverse process to that by which it was created. But the interest component of your repayments is not written off, it is retained by the bank and used to help meet the costs of the bank, to pay investors interest on their savings and to generate dividends for the shareholders of the bank.
So, if interest rates on borrowings were to rise, it's possible that banks would increase the interest paid to savers but IMO more likely that most of the benefit would be dished out to shareholders as fatter dividends.
In any case, while a rise in interest rates might - possibly - lower property prices, it would be very unlikely to result in an overall improvement in affordability.
The effect of interest on the economy has been closely studied by Ellen Brown and also Anthony Migchells, both of whose writings can be easily found on the internet.
The other initiatives proposed in Dennis' article are very sound, I think. A reduction in immigration would have wider benefits than just those related to housing affordability, as would a major change to the way that negative gearing applies to property.
Zika virus in Brazil
There is a massive mosquito threat in Brazil. Health Minister Marcelo Castro said the country will mobilize hundreds of thousands of troops to battle the mosquito blamed for spreading the Zika virus, suspected of causing birth defects. Despite those efforts, he reportedly said Tuesday, the battle is being lost.
The arrival of Zika in Brazil last year initially caused little alarm, as symptoms of infection by the virus are generally much milder than dengue’s. It didn't become a crisis until late in the year, when researchers made the link to a dramatic increase in reported cases of microcephaly, a rare condition in which babies are born with unusually small heads, causing lasting developmental problems.
Brazil has thrown everything it has against the mosquito-borne epidemics ravaging the country: education programs, planes full of insecticides, hundreds of thousands of health inspectors, and even the army. None of those have stopped the march of dengue and Zika, which are estimated to have infected nearly 3 million Brazilians—that is, more than one in 100—in 2015.
The jump in cases has prompted a global health scare, with several countries cautioning pregnant women against traveling to the 22 nations in the Americas where the virus has been reported. Genetically modified male mosquitoes were released in parts of Piracicaba city in Southern Brazil as a pilot project in April 2014. Studies have shown that these GM mosquitoes have reduced the wild mosquito population by 82% in areas covered under the pilot project.
Mutant mosquitoes to be deployed to stop Zika outbreak in Brazil (26/1/16) | Digital Jpurnal
El Salvador is advising all women in the country not to get pregnant until 2018. This small nation is already home to an epidemic of gang violence, pushing tens of thousands of its young people to flee north every year and stretching the government's resources. There seems little impediments available to stop human overpopulation! The drive to reproduce at whatever cost seems to be alive and well in humanity.