Australian Property Update – July 2022

Terry’s View – Terry Ryder is Australia’s Leading Independent Property Researcher

The key messages in property market data are being distorted by organisations with the motivation of achieving media profile rather than informing consumers.

The latest statistics show that house prices continue to rise in 12 of the 15 market jurisdictions (8 capitals and 7 regions) but the headlines claim prices are falling across the nation.

The latest “pain and gain” report shows that the vast majority of vendors are making a strong profit and the rate of gain has risen in most market jurisdictions, yet media reports tell us that the rate of gain has dropped.

Even when the data is overwhelmingly positive, businesses publishing the information will emphasise any negatives in the figures because they believe that will maximise their chances of free publicity.

It means that Australian consumers are being misinformed regularly about housing markets. And the forecasts published by economists suggesting big drops in prices are exacerbating the problems.

Fortunately, a survey by Finder indicates most Australians are ignoring the pessimistic headlines: the survey finds that very few consumers think property prices will fall in the next year.

 

Shortage Looms As Migration Picks Up

Migration is what will have the biggest impact on the Australian property market in the next few years, according to property investment expert James Fitzgerald.

He says Australia will welcome more than 200,000 people a year over the next few years and this will drive demand for housing with about 70,000 to 100,000 houses needed every year to accommodate the new migrants.

Since the pandemic started, Australia has barely built 70,000 new dwellings.

“Yet we are going to need to build a minimum of that every year just to keep up with the demand over the next two to three years,” Fitzgerald says.

“Adding to that challenge is the 1% vacancy rate across Australia, the lowest since 2006. That lack of supply is the reason rents in most capital cities have increased.”

Fitzgerald says the markets which traditionally benefit the most from overseas migration are Sydney and Melbourne, although there are also flow-on effects for the smaller capital cities like Brisbane, Adelaide and Perth.

He says in the coming years Brisbane’s market will also benefit from the 2032 Olympic Games as a result of the huge amount of spending on infrastructure in the lead-up.

“That spending on infrastructure is important because it creates jobs, improves amenity and ensures the city is capable of handling population growth,” he says. Sydney’s median house price doubled between 1998 and 2003 in the lead up to and immediately following the 2000 Olympic Games.

 

Australian Values Top 10 Trillion

The total value of Australia’s 10.8 million residential homes has broken the $10 trillion mark for the first time.

According to Australian Bureau of Statistics figures, the total value of dwellings rose $221.2 billion in the March 2022 Quarter, lifting the total value to $10.2 trillion.

ABS head of price statistics Michelle Marquardt says the latest figures mean the value of homes increased by $1.8 trillion in the past 12 months.

New South Wales properties make up the largest proportion of Australia’s total value of dwellings, accounting for $4.1 trillion worth of property.

Victoria is next with $2.7 trillion and Queensland third with $1.7 trillion.

ABS figures show it is the smaller capital cities which are performing the best with the median house price in Brisbane up by 29.3% to $787,500 in the past 12 months and up by 23.8% in Adelaide to $650,000.

While there has been much speculation about prices dropping in Sydney and Melbourne, median house prices are still higher than 12 months ago, according to the latest ABS figures.

The median house price in Sydney is up 16.4% to $1,245,000 and Melbourne is up 9.4% to $930,000.

 

Stamp Duty Changes Loom

While economists and industry experts are unanimous that stamp duty needs to be abolished, it remains unlikely until a solution is found for how to replace the $25 billion worth of revenue it raises nationally.

The Australian Property Council says stamp duty distorts behaviour, lowers turnover, locks people into inappropriate housing, dampens construction and reduces affordability.

The 2010 Henry Tax Review recommended using either an extension of the GST or a new broad-based land tax to replace it, but it is yet to change.

The New South Wales Budget does include some stamp duty reform measures and introduces an optional annual land tax rather than upfront stamp duty.

Victoria’s housing industry is backing the plan and would like to see it introduced in that state as well.

The move to a land tax would be permanently linked to the property which means future owners would have to pay land tax if that is what the previous owner had opted to do, so the tax is attached to the property not the owner.

Urban Development Institute of Victoria, chief executive Matthew Kandelaars says stamp duty is a “terrible, inefficient tax” and urged the government to seriously consider a similar overhaul.

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