A broken system – investors are laughing all the way

A broken system – investors are laughing all the way


One does not need to be Albert Einstein to see that for decades and decades the Australian real estate industry has been running blind so it’s very interesting to observe that now a cavalcade of seeing eye-dogs have been brought in to add some vision and clarity. Having said that, there is plenty of work to do of which the Federal and State Governments will have to do plenty of the heavy lifting for a change. Again the spotlight keeps shining away from the main accelerants that have seen investors not just entering the market but dominating it coupled with overseas investors lunging at every off-the-plan sale that hits the market. Australia simply does not have enough property to meet the demands given our population keeps increasing at a growth rate of 1.7 per cent. In the year to March 2014 the Australian population increased by 388,400 to reach 23.400 million.

Instead of continually slugging the taxpayers’, overseas investors should be hit with a surcharge as well as those investors who prefer to keep their properties vacant should be hit with a Vacancy Tax. The Senate Inquiry into overseas investors has led to glaring holes in how the Foreign Investment Review Board operates (or attempts to) with a staff of under ten people. Again this highlights that Australia does not even have a Housing Minister – so who then is taking responsibility and managing this?

Yes – it’s reasonable to suggest that Australia is fast becoming a country of landlords and renters although one needs to ask, had the Rudd Government implemented the recommendations from the Henry Tax Review how would the Australian property landscape look today? You’re correct that we will never know however, isn’t it time we had this conversation again?

CobblersBeach

SYDNEY AERIAL PHOTOGRAPHY

We have the David Murray Financial System Inquiry deadline now just over two months away and there is much speculation about how much they will recommend the banks keep in their piggy banks. How much capital should the banks hold in the event of a property market downturn to avoid the domino effect?

This week the worst kept secret was all but confirmed where the Reserve Bank of Australia (RBA) and the Australian Prudential Regulation Authority have almost certainly agreed to introduce macro-prudential policies in an attempt to ease property prices.

It’s a start however; it will hardly put a dent in it. To really have a closer examination; look no further than the report filed last year by Saul Eslake – 50 Years of Housing Policy Failure. In a nutshell he writes that cynical politics had kept policies in place that made it harder for people to buy their first home. “While political parties and governments profess to care about first home buyers, the reality is that in a typical year fewer than 100,000 people succeed in attaining home ownership for the first time; whereas there are some 5.8 million households (and over eight million people) who already own at least one property.”

This week RP Data revealed that the number of properties listed for sale in all capital cities, excluding Perth, is 11.6 per cent lower than in September 2013. So introducing macro-prudential policies will hardly affect investors who are borrowing against their existing property portfolios.

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Property investors have entered the market with “eyes-wide-open” given that just a few years ago they witnessed firsthand what happens to property prices when we inherited the Global Financial Crisis (GFC) – this is a long term investment. Many are taking a safer punt on property and have walked away from the share market (which has had a shocking run of late) to lock and load into bricks and mortar.

There will be major changes ahead for Australia’s tax system where many of the changes will be made to the property taxation benefits that investors are currently taking full advantage of. It’s a win-win for the property investors given with all new taxes they are generally retrospective so the investors will be working from a 100 base – history shows this very clearly.

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On the assumption that eventually the GST will be increased to 15 per cent this will slow construction down further which is exactly what happened in Australia previously following the introduction of the GST. The developers wear the GST so that it then comes off their respective bottom lines by significantly reducing their profit margins – GST on construction has been a dismal failure which clearly explains why construction is in decline.

So there is a lot of method to the present investor madness – where for those looking at this from a different perspective the vast majority are on a win-win property formula. No doubt they will be smiling even more when the read a recent article in The EconomistBirth Right – Where to be born in 2013.

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MOSMAN – 2088

• Number of houses on the market this time 2013 – 85

• Number of houses on the market last week – 64

• Number of houses on the market this week – 60

• Number of apartments on the market this time 2013 – 53

• Number of apartments on the market last week – 44

• Number of apartments on the market this week – 41

CREMORNE – 2090

• Number of houses on the market this time 2013 – 5

• Number of houses on the market last week – 10

• Number of houses on the market this week – 9

• Number of apartments on the market this time 2013 – 13

• Number of apartments on the market last week – 16

• Number of apartments on the market this week – 18

NEUTRAL BAY – 2089

• Number of houses on the market this time 2013 – 6

• Number of houses on the market last week – 7

•Number of houses on the market this week – 6

• Number of apartments on the market this time 2013 – 36

• Number of apartments on the market last week – 33

• Number of apartments on the market this week – 35

For this week’s sales in Cremorne real estate, Cremorne Point real estate, Mosman real estate, Beauty Point real estate, Clifton Gardens real estate, Balmoral real estate, Neutral Bay real estate, Cammeray real estate

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For this week’s open for inspections

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Source: Australian Property Monitors

Cheers ^__ ^

One Response to “A broken system – investors are laughing all the way”

  • Ann says:

    Hi Robert,

    You are sbsolutely correct. Overseas investors should be hit with a surcharge, Further overseas investors should not be allowed to own rural lands, sure they can invest, but not own.

    Also agree with you Vacancy Tax. Needs work on how it can be enforced.

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