With the stock market surging to record territory this week it is no wonder that top end real estate agents marvel at the money being thrown at residential property. The market to June 30, has the potential to exceed all expectations, as a million dollars here or there, is of little consequence. Australian property markets are on the global menu as long as you have Foreign Investment Review Board (FIRB) approval and this insatiable appetite is a driving force when the stock and property market is in unison.

The financial market has created a property monster, with record bonuses and profits and current data reveals that in April 2007, our market achieved a record level of investment. Market indicators for all states are cash positive. Affordable home ownership is escalating and a US report by Demographia revealed this week that Australian real estate is now the most expensive in the world after adjustments to median household incomes.

With the Federal budget to be announced next week, a surplus of $15.6 billion is anticipated thanks to a windfall of $3.5 billion from income tax which goes back to financial market gains, company taxes and the mining boom. What we have today is incomes determining postcodes and the more you earn, the closer you live to the blue water.

Whilst the Federal government will gloat over its brilliant management of the economy, you won’t hear from the Sate government, that we now have 30,000 fewer houses in the public housing sector, than we had ten years ago. The Financial Review Housing Congress 2007 noted – “Following the first of our postwar house price booms in 1974 – 75 we had the Priority Review Staff report. Following the 1989 – 90 boom we had the National Housing Strategy and in 2004 we had the Productivity Commission report on home purchase affordability. All good and comprehensive reports, but none led to any substantive policy reform that would deal with the nature and scale of the problem. Thus we find that, despite the proliferation of reports, we have a worse problem than ever.”

Today, we find our market in rental crisis with a combination of record-low vacancy rates and escalating rents. Housing finance rose in February (because of escalating rents) to 3.3 per cent seasonally adjusted, to $20.852 billion. This defies what economists predicted, as their train of thought was that the market would be flat. Commonwealth Bank of Australia’s chief economist Michael Blythe said “when you have rising migration, rising rentals and low vacancy rates you have a powerful set of underlying forces pushing the housing market along.”

For many today, home ownership is just a dream – which explains why so many have left NSW in search of greener pastures in Queensland and Western Australia. However if you own a property in a post code that remains cash positive, where house prices are riding the wave of prosperity, the future is brilliant – given that capital appreciation on the principal place of residence is tax free. Many suggest that our financial market is simply overdosing on the “rivers of gold” that superannuation provides each year and this money needs to be “parked”.

Many are also scratching their heads and wondering why today, the lucky country, with a population of just 20,264,082 (July 2006 est.) has the most expensive real estate on the planet. The problem is (and we are learning fast) that when on a good thing, not everyone can stick to it.

In March 2007, The Australian Prudential Regulation Authority (APRA) released its Annual Superannuation Bulletin – June 2006. “Total superannuation assets increased by 19.5 per cent during the year to 30 June 2006 to $912.0 billion. Of this total, $570.1 billion is from APRA – regulated superannuation entities and $211.5 billion is regulated by the Australian Tax Office (ATO). The remaining $130.5 billion comprises exempt public sector superannuation schemes ($86.6 billion) and the balance of life office statutory funds ($43.9 billion).

Industry funds showed the largest growth in the year to June 2006, with assets increasing by 26.0 per cent. Small funds and retail funds experienced strong growth during the year and increased by 22.4 per cent and 22.0 per cent respectively.”

No point in asking – where did they get the money for that ? Cheers ^__^

Leave a Reply

Your email address will not be published. Required fields are marked *