Sydney vacancy rates now at 0.07% – no license to thrill!

Sydney vacancy rates now at 0.07% – no license to thrill!

How can we make sense of the Federal government’s latest immigration plan to bring almost 300,000 into the country in the next twelve months ? (You don’t have to answer that one). For some inexplicable reason this frightening statistic failed to crack a mention in recent media reports. We now have the lowest ever vacancy rates creating a chronic housing shortage. This is now the twentieth month in a row that the vacancy rate has remained at below 2% – the benchmark figure. To put this into greater perspective, in August 2007 the figure was 1.5% in Sydney. Nine months later, the news is getting worse with household rents now at record highs and climbing even higher.

With Australia’s population growing at its fastest pace in 18 years – throw in a new housing slump and bingo! Research by Residex identified that for the year to April, the median weekly rent for a Sydney house rose 19.05% and that is “after tax” money. New dwelling starts in NSW are forecast to fall by 2 per cent to 29,000 in 2007/08, and increase by just 1 per cent in 2008/09. Underlying demand for new housing stock is presently growing at well over 40,000 with absolutely no chance of meeting demand. Some may suggest that those in rental accommodation should buy – well the Housing Industry Association/Commonwealth Bank first home affordability index slumped in the three months to March 2008 by 3.5 per cent which is the worst result since the series began back in 1984. Certainly the cash rate being at a 12 – year high does not help where the average home loan repayment in Sydney now stands at $3064.00 per month.

The Federal budget sugar-coated the rental and housing affordability crisis with the announcement of a $2.2 billion housing package (an absolute no brainer). When the Sydney vacancy rate falls from 1.5% to 0.07% in just nine months, at this rate (by Christmas) Sydney vacancy rates could be at 0.00%.

The only way that this problem can be fixed (immediately) is for the Federal government to encourage investors by removing Capital Gains Tax and get the State governments to remove Stamp Duty and Land Tax for investors. The investment properties must be held for ten years to qualify and once the vacancy rates reach 2.00% this incentive is then removed. This is, in my opinion, the only logical answer given that rents are increasing annually by 20%.

The rental crisis keeps leaving clues and even the Prime Minister is catching a few (ever so slowly). He described the 100,000 people who are homeless each night as a “national obscenity”. Well he is the only person who can correct this and releasing his green paper on the homeless, seeking “bold new ideas” which will take years to implement, identifies the mental complexities of politicians. Talk is cheap which is exactly what rents are not. It is time for action, which we all know speaks much louder than words and pieces of “green” paper. The stark reality of this crisis is that now, the Federal government must act (unlike our State government) which (fundamentally) created this problem as a result of excessive taxation mandates.

The writing has been on the wall for some considerable time. If you look at the 2006 – Census of Population and Housing release by the Australian Bureau of Statistics.

• A smaller number of Australian homes were fully – owned in 2006 (2,478,267) than in 1996 (2,657,971). Over this time the proportion of dwellings that were fully owned also decreased from 41% to 33%, and the proportion that were being purchased increased from 26% to 32%. These changes in home ownership have occurred mostly since 2001.

• From 1996 to 2006, the proportion of occupied private dwellings that were rented decreased slightly from 29% to 27%.

Simply put, investors have reached the point of no return (courtesy of taxes) where elected governments diluted the incentives by over-zealous tax policies. Investors are taxed on the way in, during, and again at exit.

The Prime Minister fired off a few parting shots at the $80 million retirement package of Alan Moss from Macquarie Bank. This identified just how out of touch he is, given that some actors earn $20 million per movie! I would much prefer to see a brilliant brain like Alan Moss assisting the property crisis in Australia, than Cate Blanchett, who co-chaired the 20/20 Summit.

No point in reading a “green paper” (politically correct) where acting should not be construed as action implementation. Lights, camera, action! Kevin, be active not inactive – the rental crisis requires purpose not paper. After all, you did put your hand up for the job!

The one and only cure necessary to correct the rental crisis is for Kevin Rudd to make a decision. Not a matter of paper, rock and scissors! Cheers ^__^

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