Thursday 27 April 2017

Building plan solid but must avoid new boom

The mortgage insurance scheme proposal is far less distortionary than stamp duty or property tax, writes Marc Coleman

Are we headed for another bubble?
Are we headed for another bubble?
Marc Coleman

Marc Coleman

In an article on the property and construction sectors on January 14 last I wrote the following: "2014 is the ideal year to design and implement a thorough seven-year plan to get them back to normal."

Exactly four months later – last Wednesday – the Government came out with a seven-year plan entitled Construction 2020. Its timing (before an election) and content (back to boom/bust?) has been criticised. Certainly the plan isn't perfect. Few are. But a step in the right direction it definitely is. And as for arguments that it could stoke another boom, they are totally wrong.

To see why, think of someone on a crowded escalator in a shopping mall. To get more comfortable they might adjust their posture by taking a single step up or down. But they can't control the speed of the escalator. Likewise governments can change the market with a tax relief or, as proposed now, a mortgage deposit insurance.

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