Time for Governments to Roll Out Incentives

Time for Governments to Roll Out Incentives

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I was reading a piece this week at MacroBusiness where it was pointed out that it has been 24 years since we went through the global recession. Then 8 years later we went into the Tech Wreck, then 8 years after that we hit the Global Financial Crisis (GFC) and now 8 years on we have hit Brexit – or as Australians will soon call it Bex – it (as it will probably cause some major headaches.)

Whilst Australia continues to post some very positive data, we need to pay closer attention to the data post June 30 as we now enter a period of uncertainty. Having said that, this should also be viewed as an exciting time as it is now clear that every eight years businesses need to adapt and recalibrate in order to survive.

One statistic we can’t hide from when the GFC hit in 2007 is that debt has grown much faster than GDP in every country. Some may say that this is an economic consequence as globally cash rates have been crashing down where in Australia we sit at a record low 1.75 per cent. Furthermore, many commentators are now stating that the cash rate in Australia will come down even more as a direct result of Brexit.

Whenever an economy reaches that financial standoff, and investors hate uncertainty, we need to be overly protective of investors as they are a particular and crucial economy driver. So there needs to be closer scrutiny as to why the ALP want to change the Negative Gearing goal posts, which will definitely drive up rents, and why the NSW Government wants to drive foreign investors from our property markets with their 4 per cent surcharge plus a 0.75 per cent land tax surcharge on residential real estate only.

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Makes one seriously question exactly where governments expect the new buyers to evolve from? The real estate industry is hearing foreign investors are moving away from our markets in droves. Once again we need to be mindful of Brexit and life and results after June 30. Australia is now all but guaranteed that lending will now tighten, which is a good thing, however if we cast our minds back to the GFC we kept hearing two words – “green shoots”.

The sad part about emerging “green shoots” is that governments immediately see them as a new form of taxation – this in turn will bring about market stagnation which is the last thing our economy needs.

Having said that, existing property markets, otherwise known as the established household markets, are now 60 per cent down when compared to property listings two years ago. This is good news for established houses – we are now seeing record low listings which only strengthens the markets. For example, when I go back five years for Mosman houses you will see the pattern that has emerged.

  • 30 June 2011 – 97 houses on the market in Mosman
  • 30 June 2012 – 80 houses on the market in Mosman
  • 30 June 2013 – 68 houses on the market in Mosman
  • 30 June 2014 – 63 houses on the market in Mosman
  • 30 June 2015 – 43 houses on the market in Mosman
  • 30 June 2016 – 42 houses on the market in Mosman

What this tells us, and we should point out that these results are reflective across Sydney, is that since the GFC homeowners are taking advantage of record low cash rates by paying down debt faster. On the flip side they are renovating over selling as they see no economies of scale in donating a few hundred thousand dollars to our NSW Government in the form of Stamp Duty. In other words, the Stamp Duty component is then redirected to home renovations.

The NSW Government will recognise very quickly that it has a cash flow problem when the effect of the new surcharge stamp duty and the already declining established markets see the property market transactions coming to an abrupt halt. Don’t be surprised to see a total back-flip with the foreign buyer surcharges but not the land tax.

As for the established household markets the NSW Government should look at the amount of stamp duty previously paid on the past acquisition and give that household a 33 per cent deduction from the next stamp duty so long as that household has been in that property between five and ten years.

In business you offer incentives – it’s a shame governments struggle with the concept of that word.

MOSMAN – 2088

Number of houses on the market this time last year – 36

Number of houses on the market last week – 48

Number of houses on the market this week – 42

Number of apartments on the market this time last year – 33

Number of apartments on the market last week – 41

Number of apartments on the market this week – 33

CREMORNE – 2090

Number of houses on the market this time last year – 3

Number of houses on the market last week – 11

Number of houses on the market this week – 7

Number of apartments on the market this time last year – 16

Number of apartments on the market last week – 18

Number of apartments on the market this week – 17

NEUTRAL BAY – 2089

Number of houses on the market this time last year – 2

Number of houses on the market last week – 10

Number of houses on the market this week – 10

Number of apartments on the market this time last year – 39

Number of apartments on the market last week – 22

Number of apartments on the market this week – 23

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: APM Price

2 Responses to “Time for Governments to Roll Out Incentives”

  • Olaf says:

    If you read Macrobusiness then you must know you are peddling nonsense with respect to negative gearing. There is no evidence the abolition of negative gearing will raise rents. As for foreign buying of residential property, can I as a foreigner buy freehold in China?

    • rsimeon says:

      Olaf – lets take Mosman as an example where are very few new developments being built. On average over the last five years Mosman averages 25 new apartments per annum. So if 50 per cent of those go to investors under the Labor plan then rents have to go up as investors are not permitted to buy existing. And no you can’t buy real estate in China.

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