This Week in Real Estate: 15 Oct 2017

By October 15, 2017News

Vacancies Fall Across the Nation

The national vacancy rate has fallen from 2.3% to 2.2%, with rental markets tightening in most major cities, according to SQM’s data for August.

The Melbourne and Sydney markets were tight at 1.7% and 2%, respectively, unchanged from July, while vacancy rates contracted significantly in Brisbane, Adelaide and Darwin.
The research indicates the risk of oversupply in some city markets is not as bad as previously thought.

SQM managing director Louis Christopher says, “We now have mounting concerns for significant rental shortages in 2019 in Sydney and Melbourne”. His forecast is based on projections that building completions will peak early next year, while the number of houses and flats ¬approved for development is sliding.

Christopher’s comments contrast with warnings from the Reserve Bank that the Melbourne and Brisbane apartment markets are facing oversupply.

Land Tax To Replace Stamp Duty?

States would have to find a new way of raising revenue if the proposed GST reforms are implemented. The new structure could see GST revenue shared on a per-capita basis and include incentives to scrap payroll tax and stamp duty.

However, the proposed Productivity Commission modelling shows Queensland would have been up to $730 million worse off under the new system if it had been adopted this financial year.

The Productivity Commission’s draft report found states were penalised if they engaged in reformist tax policies because they could lose GST revenue.

Treasurer Scott Morrison says any final position would ensure states could grow their revenue basis, such as replacing stamp duty with land taxes, without being penalised under the current system.

Quote of the week

“While debt levels are high, the value of household and housing assets are considerably greater than the level of debt.”
Cameron Kusher, research analyst, CoreLogic

Chinese Not To Blame For Prices

A new report from research group Cross Border Management has found no evidence that Chinese investment is pushing up Australian house prices.

Instead, it found that major price growth in some cities is being driven by low interest rates and high population growth.

“The idea of malevolent effects from Chinese investment has gained a significant following in relation to the property market, where it’s become common to attribute the rapid growth in housing prices to the insatiable appetite of Chinese buyers,” says the director of Cross Border Management, CT Johnson.

Pointing to the rising popularity of political groups like One Nation and figures like Clive Palmer, Mr Johnson said: “Groups like Pauline Hanson’s One Nation and the Party For Freedom have made opposition to Chinese investment in Australian real estate one of their signature political issues, and with some success.”

Investors Less Indebted Than O/O’s

New RBA figures place the ratio of household debt to disposable income at 194%. Of this, 136% relates to housing debt, says CoreLogic research analyst Cameron Kusher – and, out of that 136%, only 33% is held by investors.

The other 103% belongs to owner-occupiers. This indicates investors are keeping their exposure to debt under control better than owner-occupiers.

Kusher says that while Australian households are heavily indebted, largely due to housing, the value of household and housing assets is considerably greater than the level of debt.

He says assets are pulling their weight and are supporting debt levels. Further, recent years have shown the ratios of household and housing debt to assets have been declining. As of June 2017, the ratio of household debt to assets was at 20.7%.
One of the reasons behind the declining ratio, Kusher says, is the fall in interest rates.

Haggle To Get Interest Discount

Financial comparison website Mozo’s property expert Steve Jovcevski says haggling over interest rates with banks could result in discounted loan rates of up to 82 basis points or the equivalent of three rate cuts.

When carrying out a mystery shop with the big four banks, Jovcevski has found when he posed as a first-home buyer, investor and refinancer, on every occasion he received discounts on their advertised rates.

This resulted in savings of tens of thousands of dollars over the life of the loan.

Mortgage Choice chief executive officer John Flavell says interest rate offers continue to fluctuate and in the last few weeks multiple lenders have reduced their deals.

“Australia’s lenders are actively and aggressively competing for business at the moment,’’ he says.

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