API Blog :: Have your say!

Like any good political and public policy enthusiast, I spent much of last night glued to my television for the announcement of the 2013 Budget and subsequent analysis from a whole host of wonks.

BY SHANNON MOLLOY

Similarly, like any good generation Y tech geek, I did so in tandem with a scanning of social media platforms like Twitter and Facebook. What struck me immediately wasn’t the seemingly equal split of public opinion on the slashing of the Baby Bonus, but the degree to which every Tom, Dick and Harry became an economic expert.

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Contrary to the shrieking of some commentators and bleeding hearts, negative gearing is not welfare for the rich. Many investors who provide rental accommodation stock and enjoy this modest tax perk are mum and dad investors.

BY SHANNON MOLLOY

We’re less than a week away now from the next Federal Budget and it’s unlikely to be a cause of celebration. The government has been at pains to ease the blow that’s likely to come, by announcing some measures early – the Medicare levy increase and changes to top tier super tax rates.

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With a base of ambition, a sprinkling of confidence, dash of fiscal maturity and thick layer of realistic expectations, first-time buyers can be well on their way to cooking up a successful foray into the property market.

BY SHANNON MOLLOY

When I’m going through an especially busy period in either my work or social lives, I tend to become incredibly lazy at home. The ironing doesn’t get done and vacuuming goes from a twice weekly to a twice-monthly chore.

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The oft repeated claim that property doubles in value every seven to 10 years is, of course, a generalisation. Some areas do indeed achieve a 100 per cent increase in price, while many others don’t – and for a variety of reasons.

BY SHANNON MOLLOY
It’s possible to tip with relative success the areas that will perform well in the medium to long-term from a house price perspective. There are growth-inducing factors, such as population changes (housing demand) and construction of new dwellings (supply), which paint a pretty good picture.

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Whine, whine, whine. That’s all we seem to do lately, about everything from taxes to economic strength. Our penchant for pessimism has almost overtaken cricket and amateur cooking shows as the nation’s new favourite pastime.

BY SHANNON MOLLOY

The minutes from the latest meeting of the Reserve Bank of Australia (RBA) give a clear insight into the various economic factors at play, both here and abroad. It shows that relative stability prevails domestically and that there’s a continued cautious optimism when it comes to Europe, the US and China.

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An op-ed piece in a Sydney newspaper last week divided readers and social media users. Uniquely, the author tackled the meaty issue of housing affordability, claiming bricks and mortar are now so expensive that they’re unattainable for young buyers – and that’s effectively ruining lives.

BY SHANNON MOLLOY

The author bemoaned how he was “sick and tired” of everything from the house search process to living in a crappy rented flat. The inability of him and his girlfriend to find a home that suited their needs, strict criteria and budget was a disaster and that he’d had a gutful.

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Sydney’s population is expected to hit 5.6 million in two decades and the city will need to accommodate 80,000 more dwellings than originally thought. It’s predicted Melbourne will be home to seven million people by 2030.

BY SHANNON MOLLOY

Where will all these extra people live? How will our capital cities look after their populations increase so substantially? What style of housing will accommodate that residence boom and the ones that’ll inevitably follow it?

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Positive data. It’s almost everywhere you look lately. Jobs, house prices, new home sales, retail spending and consumer confidence to a name a few. So, why has there been a mass exodus of first-time buyers from most markets?

BY SHANNON MOLLOY

An economist once described first homebuyers as the “key ingredient” to market momentum. When they emerge in force, demand for lower-end properties soars and the folks who own and live in those types of homes are buoyed to move on and up.

It’s that upgrader market that really drives things, he told me. You can have a good number of mums and dads, investors and top end buyers out there, but it won’t make much of a difference without the first-timers in the mix.

Australian Bureau of Statistics figures released last month showed first homebuyers made up just 15.8 per cent of all home loans financed in November – the lowest level since July 2004. And that’s smack bang in the traditionally busy buying period.

On a state-by-state basis, the figures are grim. In New South Wales, first homebuyer numbers are now at a 20-year low and collapsed to 9.5 per cent of all home loans financed in November. In Queensland, the number of first-timers is down a whopping 33 per cent.

Both of these states ditched their First Home Owner Grant (FHOG) schemes last year and replaced them with bonus incentives for people building a new home. These figures indicate they’ve been a resounding failure, as I tipped they might be.

Last September when the Queensland Government axed its FHOG for existing properties in place of a First Home Owners’ Construction Grant for new dwellings, I declared that it’d have “all the success of a one-legged giraffe trying to parallel park a Volkswagen in a swimming pool”.

Who knew it’d be worse. Since launching the scheme, just 126 people have taken up the $15,000 grant. Wow. That’s what I called a failed experiment.

In New South Wales, the FHOG for existing dwellings was also axed in favour of a grant for new builds. Andrew Wilson, senior economist for Australian Property Monitors, believes the collapse of first homebuyer numbers late last year was due to an earlier rush to take up the old grant before it ended.

“Demand (was) brought forward earlier in the year as a consequence of changes to State Government buyer incentive schemes,” he says. “Numbers have collapsed in New South Wales and Queensland.”

Getting into your first home is hard enough since the GFC. Lending criteria is stricter and you need a much larger deposit. A grant for an established property would provide a big help and instill a greater sense of confidence. Plus, it’d almost certainly be for a home near where these people work and play – not a house-and-land package in some manufactured outer suburbs community.

Sure, some first-timers want to live in a brand spanking new house in a masterplanned community… but I dare say they’re the minority. The numbers surely prove that.

I think Real Estate Institute of New South Wales president Christian Payne says it best: “First homebuyers are an essential link in the chain of the entire market and by excluding them it causes a great disturbance.”

In his view, the idea of ditching incentives for established homes in favour of building grants is severely flawed. If governments really want to help, they should get out of the way – and take convoluted planning schemes and outrageous taxation with them.

We’ve got so many pieces of the puzzle in place for market stability and wider recovery. It’s frustrating to see inept politicians making decisions on a whim without considering the wider implications – that first-time buyers will be stuck in a painful rental cycle for longer, unable to kick-start their version of the Australian dream.

The final word goes to Payne, who sounds about as frustrated as me about these grants.

“First homebuyers are a unique category of property consumers and the jump they have to make from a standing start to acquiring a property can be the biggest that any property buyer has to make.

“We need to recognise they need special assistance… it’s imperative that the first homebuyer incentives for the purchase of existing property be reintroduced.”

Shannon Molloy is the deputy editor of Australia Property Investor magazine www.apimagazine.com.au

I was chatting to a buyers’ agent recently about new trends in different buyer groups and he made an interesting prediction. When it comes to sniffing out the next big urban market, he reckons the key is to follow the hipsters.

BY SHANNON MOLLOY

You might find them lazing in an organic teahouse, bashing out their memoirs on a 60-year-old typewriter they found in an op shop. Or they might be attending some uber cool but very off-the-grid art or music festival in a disused warehouse in the middle of the day. Failing that, they’ll be riding around on a repurposed pushbike with a basket but no gears.

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For the past few years, property investors have been obsessed with mining towns. It’s understandable – the dizzying profits and yields on offer in resource-rich regional backwaters were pretty incredible. The accelerated development of major projects and ballooning workforces meant the going was pretty good.

BY SHANNON MOLLOY

Sure, fortunes have shifted in some industry-driven parts since those post-GFC glory days – Moranbah in the Bowen Basin region in central Queensland is a good example. However, for a long time it was those mining towns that presented one of the few success stories in properties.

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