It seems we’re in for a ‘spring of discontent’. The release of the long-awaited carbon tax details were intended to produce an element of certainty. It’s been spruiked as a simple effective plan ensuring pollution is reduced ‘at the lowest cost to the economy’ with a large spoon of sugar for us ‘ordinary folk’ designed to sweeten the pain and lessen any complaints.
BY CATHERINE CASHMORE
The question is simply one of trust. As any good sales rep understands, you don’t sell the product, you sell trust. And let’s be honest – with questions and retaliations flying from the right and left, we’re doing little more than swimming against a tide of economic uncertainty.
There’s a good degree of wisdom behind the saying ‘seeing is believing’, because until the model has been tested, tax cuts granted and bank accounts debited and credited no one is going to fully grasp the implications of this policy, or believe the spruiked outcome. The economic model produced by treasury already has a large question mark because there has been little, if any, consultation with companies in control of dictating price rises, and now we find the results were modelled on a $20 per tonne estimate, not the $23 per tonne reality. The truth is, no one really knows how much prices will rise – and more importantly, it seems the majority have little trust in those who sit at the controls.
It’s inevitable that the cost of building will increase, and as a consequence, be passed onto the purchaser. The Housing Industry Association has estimated an increase of roughly $6000 to the average house and land package – and this doesn’t begin to factor in providing internal facilities such as fridges, furnishings and other such essentials. Even with the tax benefits, first homebuyers will be hit hard.
It’s been suggested that Canberra’s market may see a boost in house prices as staff recruited to administer the new tax place extra demand on the inner city ring stock supply. But across the rest of the market affordability and consumer sentiment will continue to moderate price rises, and as a consequence the rental sector will likely fall under high demand. Gross yields across Australia have already risen to five per cent, according to figures from RP Data, and predictions point to a further increase.
However, whether fear and uncertainty will keep us in the atmosphere of what has widely been spruiked a ‘buyers’ market’ is questionable. Lending to homebuyers rose 4.4 per cent in May after a 4.6 per cent rise in April, agents are starting to report dwindling stock supplies and the seasonal change from winter to spring will likely result in a greater optimism as the traditional ‘buying season’ commences. It could be the first light on the horizon for vendors, many of which have been forced to moderate expectation if they wanted to sell during the first half of 2011.
The arguments surrounding the carbon tax should not focus on the scientific evidence, rather it should focus on the policy changes we’re facing. While everyone has a desire to reduce harmful emissions and create a better world for future generations, we have a natural adherence to authoritative dictation on how we should conduct our lives. It’s fair to suggest that any reduction in carbon emissions will result in some element of short-term pain and therefore not be popular, but the question mark should be over how much pain our economy can take after a post global financial crisis year of floods, cyclones, an unprecedented strong Aussie dollar and other large policy expenditure such as the NBN. Continued eruptions over the Middle East oil supply and growing debt levels in America and Europe have done little for stockmarket confidence, and as a result, buyer sentiment has been firmly focused on saving rather than spending.
Our worm’s eye view is hardly going to present us with the answers we require, however we’ve had flat interest rates since December 2010, continued low rates of unemployment, strong growth in the wage sector and the soon-to-be-felt effects of a commodities boom set to kick in. While we’re not looking at sharp price rises any time soon, and caution will prevail, rising rents and population increases will keep the property wheel turning. We’re already starting to see possible upswings in the property market as the shift between supply and demand gradually moves in favour of the seller. With education and guidance it’s possible to purchase well in any market atmosphere, however it’s always preferable to enter in while negotiation is taking place behind closed doors, rather than in the public arena of ‘deepest pockets wins’.
There will be some interesting times ahead.
Catherine Cashmore is a senior property adviser and buyer advocate for JPP Buyer Advocates – the largest dedicated buyer advocacy in Melbourne. With extensive experience in all matters regarding real estate, JPP successfully purchases and negotiates over $100m worth of property each year for clients. http://www.jpp.com.au