The Misinformation on Australia’s Affordability Crisis

Source:REIV

Melbourne Market Wrap March 19th, 2017

A clearance rate of 81 per cent was recorded this weekend compared to 82 per cent last weekend and 74 per cent this weekend last year. There were 1057 auctions reported to the REIV, with 852 selling and 205 being passed in, 89 of those on a vendor bid. Last month was the strongest February on record with more homes going to auction than ever before as well as a record number of homes selling at auction. (REIV)

Melbourne Prices Hold Up

Since our last wrap a couple of weeks ago there was a sense of what i call the “Uber Effect” going on.

Uber increases in popularity on the back of a news story depicting striking taxi drivers around the world. Similarly every time the media dishes up a story about Housing Affordability in Australia more people panic buy property in Melbourne and Sydney.

We’ve now seen a number of Super Saturday’s (over 1000 auctions are held) to test the property market in Melbourne and Sydney. Both markets performed well with clearance rates above 80%, Sydney being the stronger of the two cities.

Incentives due to be introduced in Victoria for First Home Buyers will only cause more invetsors to buy sub $600k property, further stimulating prices. For my mind the bottom end of the market is looking very strong in Melbourne as FHB’s scramble to buy a property stamp duty free (up to $600k) from July 1st this year!

Source: PIXABAY

The Misinformation on Australia’s Affordability Crisis

Housing Affordability has become a political centerpiece for both State and Federal governments, with voters exerting enormous pressure to bring “The Great Australian Dream” within reach, especially for first home buyers.  Whether new measures by government will increase housing affordability remains to be seen. When Kevin Rudd stimulated the housing market through stamp duty incentives post GFC, what actually happened was property prices soared to new highs to ultimately boom in 2010 (Melbourne). Many sceptics feel these new incentives outlined by Victorian Premier Andrews and those due to be proposed Federal Government could do much the same.

From 1^st July 2017, Victorian first home buyers will be exempt from paying Stamp Duty on new and existing properties valued up to $600k as well as having access to a $20k FHBG for new and existing rural properties. This will apply to apartments, units and off the plan properties as well as houses, which must be lived in for at least 12 months, therefore does not apply to investment properties.

The Andrews Government has also announced it will be piloting the “HomesVic” program from January 2018. The scheme aims to give 400 first home buyers the chance to purchase a property in partnership with the Victorian Government which will own a share of up to 25% equity. Singles earning up to $75,000 and couples earning up to $95,000 per year will be eligible and be required to provide a 5% deposit.

According to Dr Andrew Wilson from The Domain Group and ABC’s business reporter, Michael Janda, these incentives to first home buyers will have the opposite affect and not increase affordability. While these new measures might open the door to more buyers, they will also increase competition and drive prices up even further. As a result, savings provided to first home buyers will be absorbed by price increases. Such activity was seen after State and Federal governments first introduced the First Home Owner Grant, history repeats! We are just widening the gap between the haves and have nots.

Many argue that increasing housing supply instead is a better path to housing affordability.  This view is shared by Prime Minister Malcolm Turnbull and Treasurer Scott Morrison who propose to set up an “Affordable Housing Implementation Taskforce” and introduce new incentives to address the shortage of Community Housing. These will be further discussed in May’s Federal Budget.

What I’m seeing are both political parties playing into the hands of the media who appear to be driving this “affordability” hysteria. In my 20 years of real estate I cannot remember a time when housing was ever considered affordable.  So what makes this real estate boom any different?

There is no one size fits all. Yes the government needs to increase the supply of housing but the problem is that everyone wants to live within 10kms of the CBD in a brand new house with a back yard all for under $500,000. This is not realistic nor is it possible.

The current apartment glut in Melbourne has brought enormous opportunity for those wanting to buy a new or an established property at a heavily discounted rate. The only caveat to this is that buyers’ need to know what they are buying into, in terms of build quality, body corporate fees etc. However the point I am make is that there is affordable housing available now, unfortunately this is not to everyone’s liking, which is another issue altogether. This is an important part of the story which needs to be reported.

Retirement has been made more difficult by the Federal Government. According to AMP

“Changes to the assets test, effective 1 January 2017, will see more than 50,000 additional Australians receive the full Age Pension. Meanwhile, roughly 300,000 retirees on the part pension will have their entitlements reduced, with about 100,000 losing all entitlements.”

Many retirees with money in the share market witnessed huge losses during the GFC, while property prices soared in Melbourne and Sydney, rising over 100% in Melbourne since that time. Buying property has been a logical choice for many.

Affordability cannot be fixed with one solution. Both Federal and State governments need to consult, investigate and understand why property is considered to be unaffordable and look at a number of solutions to this perceived problem. FHB’s want to get a foothold in the market, retirees want to be able to downsize and unlock the equity in their home to live out the rest of their life without being penalized.

Feel free to call me if you have a property question on 0418 740 606 or 9863 7514

Street Advocate Client Reviews

Peter,

Just a short note to thank you once again for your help in selling the property.

Dealing with you Peter was a pleasant experience, you were very professional with all aspects of the sale including:

·         Your knowledge of the real estate industry

·         Negotiating down the agents fee.

·         You understanding what marketing campaign was needed and directed the agent accordingly

·         Keeping me up to date by communicating via phone, text , email and weekly meetings

Not only will I use you in the future but I would have no problem recommending other vendors to you.

Thanks once again, Arnie Nuzzo

6 Highett Rd, Hampton

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