Yet again economic paralysis emerged out of Canberra this week when the Turnbull government refused to debate the problematic property markets. Instead the Treasurer performed an amazing backflip where he contradicted Australia’s property sheriff the Australian Taxation Office (ATO).
On October 28, I wrote Property debate is barking up the wrong tree – “The Australian Taxation Office has entered this debate by announcing that “Under subsections 15(4) and (5) of the Foreign Acquisitions and Takeovers Act 1975, a dwelling is considered to be sold when an agreement becomes binding.” Meaning “If a property is on sold after the contract becomes binding, and prior to settlement, then this is considered to be an established dwelling.”
Developers are now up in arms over this announcement with many offshore buyers trying to flip their existing contracts to other buyers.
We know that the clear majority of these sales came from offshore buyers so will the treasurer intervene in this?”
Exactly 30 days it took for the Treasurer to bow to the developers by allowing off – the – plan foreign investors to flip the properties they can’t settle on. His explanation was somewhat amazing “housing more affordable for more Australians” – hello! The conversation was about foreign buyers who just so happen to be non – Australians. Does the Treasurer acknowledge that a vast number of these offshore buyers simply land bank their acquisitions? Where is his legislation for that?
Then the discussion turned to negative gearing where the Prime Minister delivered a robust – don’t argue, nothing going on here, so move on explanation. That’s the problem, Australia’s politicians refuse point – blank to table the much-needed tax reform discussions. Make no mistake housing affordability will be a key subject at the next federal election where the silent majority are seething.
Let’s look why. The University of Melbourne has been collecting data on approximately 20,000 Australians since 2001. The proportion of adults who own their home has fallen from 57 per cent in 2002 to 51.7 per cent in 2014 so we can now expect that this figure will fall below 50 per cent for the very first time – a national disgrace.
There is a pattern here where in 2014 the family home accounted for 43 per cent of household assets although the share of households that owned investment properties jumped from 17 per cent to 21 per cent between 2002 and 2014.
This week also saw the eight-year anniversary (nobody mentioned this) for foreign buyers being offered 100 per cent off – the – plan development. Prior to December 8, 2008 they could only be offered 50 per cent but Wayne Swan changed that. I find it quite ironic that on the anniversary our Treasurer back flips and then allows foreign buyers who can’t settle to then be allowed to flip the property to other foreign buyers.
Now that you have me started let’s look at more dumb decisions. The UNSW’s City Futures Research Centre estimated that Sydney has approximately 90,000, yes 90,000 investment properties sitting empty in some of Sydney’s most sought – after suburbs. Property investors are simply chasing capital gains over rental returns.
When the NSW Premier Mike Baird started demanding an increase in the GST this week plus changes to negative gearing he should be firstly taking a closer look at his own back garden. An additional 100,000 (it would easily be there by now) investment properties should be charged a Land Banking Tax. Hypothetically if the government charged these property owners $10,000 per annum for land banking then there is $1 billion each year to the state’s coffers.
What many don’t realise is that in the case of NSW, the government holds the rental bonds for millions and millions of investment properties where it accesses these funds whilst paying peppercorn interest in return.
This further explains why Sydney is the least affordable for Generation Rent with Melbourne rental affordability reducing at the fastest rate. In the case of Sydney, the average renting household spends nearly 28 per cent of its total income to pay the median rent of $480.00 per week.
In Australia, the property rule of thumb is one – third rent, the next third own with a mortgage and the final third own without a mortgage. The rental third is now much greater and they all vote and they have had enough of governments and their inability to make intelligent decisions.
Finally, on dumb decisions look no further than local councils. A recent report conducted by JBA – Zoned out: an analysis of residential rezoning in Metropolitan Sydney, the report was conducted over four years. The study revealed that 64 per cent of residential Local Environmental Plan (LEP) amendments – used to assign land for development – were led by the private industry, with only 29 per cent led by councils.
For developments over 100 dwellings – 81 per cent were driven by developers and just 15 per cent were council driven.
And politicians wonder why the silent majority are calling for blood – the next federal election, could well be known as the Baseball Bat Election.
MOSMAN – 2088
Number of houses on the market this time last year – 65
Number of houses on the market last week – 54
Number of houses on the market this week – 48
Number of apartments on the market this time last year – 60
Number of apartments on the market last week – 42
Number of apartments on the market this week – 43
CREMORNE – 2090
Number of houses on the market this time last year – 15
Number of houses on the market last week – 5
Number of houses on the market this week – 5
Number of apartments on the market this time last year – 18
Number of apartments on the market last week – 21
Number of apartments on the market this week – 17
NEUTRAL BAY – 2089
Number of houses on the market this time last year – 8
Number of houses on the market last week – 8
Number of houses on the market this week – 8
Number of apartments on the market this time last year – 33
Number of apartments on the market last week – 27
Number of apartments on the market this week – 30