Is There A Minister In The House?

Is There A Minister In The House?

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A fascinating week with the Abbott government establishing its Commission of Audit in order to return the budget back to surplus which will require wide – ranging cuts.  Return to budget will be ‘a herculean task’, says Deloitte Access Economics so the leading question then is where are these “rivers of gold” that the government will release in order to get the budget back to surplus?

I can’t see this happening anytime soon given these new cuts (whatever they will be) won’t be introduced until after the next election. The Abbott government’s preferred approach is to submit their reforms (cuts) to the voters at the next election seeking a mandate.

Front and centre will be property – housing is Australia’s great boondoggle. If Joe Hockey’s audit committee is looking for a way to save a lazy $43 billion a year, the middle and upper – class welfare that is Australia’s housing policy might be a good place to start.

The Grattan Institute’s Renovating Housing Policy has determined that this massive wealth transfer puts $36 billion in the hands of existing homeowners and a further $6.8 billion goes towards subsidising owner – investors into a product that delivers yields that are generally lower than equities or fixed interest. Between them, owner occupiers and investors receive over 90 per cent of government funding directed towards the housing market.

The report confirms that government tax and welfare policies are contributing to housing unaffordability in Australia, with most of the welfare pie directed towards home owners and high income earners. Investors benefit from negative gearing and discounts on capital gains tax. First home buyers receive the first home buyer’s grant, which while popular, largely accrues to home owners via higher prices.

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SYDNEY AERIAL PHOTOGRAPHY 

BUY PRINT

This motivated me to do a Case Study on Mosman and the conclusions sent alarm bells ringing. I went to the Mosman Council website and looked at the 2011 Census data.

MOSMAN
  • Number of Houses: 4,746
  • Number of Apartments: 8,079
  • Combined Total: 12,891*

*Includes 3 houseboats, 8 other and 55 not stated. The Census also showed at the time it was conducted that 1,242 dwellings not occupied.

I am advised that Mosman has approximately 6,000 properties for rental which in itself is a staggering number – 46.6 per cent. If the government were then to be heavy handed on negative gearing the Mosman property market would be absolutely decimated with investor exit strategies.

NORTH SYDNEY
  • Number of Houses: 4,518
  • Number of Apartments: 30,188
  • Combined Total: 34,897

We don’t know how many properties are leased in the Municipality of North Sydney.

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Leave negative gearing alone: REIA which was an expected response although the argument that carried the most weight REIA persists with negative gearing lies. Reserve Bank of Australia data clearly shows that the overwhelming majority of investors – over 90 per cent – buy pre – existing dwellings, and the proportion of investors buying new dwellings has fallen spectacularly since negative gearing was re – introduced in September 1987.

On the other hand – Political capital locked up in house prices One area that could be looked at is the GST that applies to new homes. It is around one – quarter of the taxes and charges that “drive a wedge between home builders and buyers”. Taxes and charges, including having to pay infrastructure bills up front, make up 40 per cent of the cost of a new dwelling. This would explain why Australia’s new home construction is in the doldrums – and won’t be changing anytime soon. Furthermore this also sheds light on why so many of Australia’s construction companies have been forced into liquidation.

For the first time in ages it looks like the number of houses for sale in our peak selling period will struggle to break 100 – given this week it matched last week’s number of 88.

MOSMAN – 2088

• Number of houses on the market this time 2012 – 116
• Number of houses on the market last week – 88
.Number of houses on the market this week – 88
• Number of apartments on the market this time 2012 – 105
• Number of apartments on the market last week – 50
.Number of apartments on the market this week – 57

CREMORNE – 2090

• Number of houses on the market this time 2012 – 13
• Number of houses on the market last week – 10
.Number of houses on the market this week – 11
• Number of apartments on the market this time 2012 – 20
• Number of apartments on the market last week – 17
.Number of apartments on the market this week – 14

NEUTRAL BAY – 2089

Number of houses on the market this time 2012 – 20
• Number of houses on the market last week – 8
.Number of houses on the market this week – 10
• Number of apartments on the market this time 2012 – 60
• Number of apartments on the market last week – 32
. Number of apartments on the market this week – 32

Source: Australian Property Monitors
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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 opens for inspection
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If the government does submit to abolish negative gearing at the next election it would win overwhelmingly given one third of Australia’s population rent, one third own with a mortgage and one third own without a mortgage.

Sydney beats $700,000 price barrier in the September quarter the median price jumped 4.2 per cent to $722,718 – as one commentator remarked “We are in uncharted territory now.”

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If ever we needed a Minister in the House – I see no better time.

Cheers ^__^

One Response to “Is There A Minister In The House?”

  • Gordon says:

    Negative gearing is a normal commercial arrangement of borrowing to buy an income producing asset. Left wing think tanks hate it, because like all good Lefties they think the State should tax everything and centrally-plan everything.

    We’ve just had six years of that sort of government, and what a great success it was. If the new government wants to do something productive about taxation, they could have a look at the capital gains tax exemption for housing, which seems to severely distort many investment decisions in this area.

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