Property doom and gloom misses the bigger housing problem
With falling prices, weaker confidence and another new rental policy adding to the uncertainty, the focus should be on Australia’s fundamental housing shortage rather than short-term fixes and political tinkering.
The property price doom and gloom headlines have gone to the next level.
Now its ANZ saying prices could drop by as much as 15 per cent over this year and next, taking into account the impacts of interest rate rises, affordability constraints and property tax changes.
For her part, in keeping rates on hold this month, the Reserve Bank Governor, Michele Bullock, said, “If property prices fell by 20 per cent, still only about 5 per cent of households would be in negative equity”, arguing this wouldn’t pose a risk to our financial institutions.
Shame about all those people who could be forced to sell their homes.
Something has gone wrong if the Australian Government’s attempts to undermine the value of peoples’ most valuable asset still doesn’t make it easier for others to buy a home.
Perhaps the mistake has been to tinker with the free market in the first place, and not meaningfully address the root cause of unaffordability, which is the supply-demand imbalance.
Instead, we have a market in which vendors have lost confidence. Auction volumes are down and clearance rates are too. It’s more than merely a winter downturn; it’s the result of a series of policy moves that have dramatically affected sentiment.
The real estate industry suffers but so do all the flow-on industries. It’s a huge part of our economy.
At times like these, it’s important to maintain perspective and remember the big picture. Historically, there has been steady and significant property price growth over many years and through many cycles. Property has never been a short-term investment.
Like other cycles, price growth will resume after the current downturn. And spring may just be the catalyst for an increase in transaction activity.
Portable rental bonds scheme: another smokescreen
The landscape for landlords in New South Wales seems to be forever changing.
Most recently, it’s the NSW Government’s new portable bonds scheme. Basically, for a fee, tenants can transfer the bond for their existing home to a new rental home they plan to move into.
If a landlord makes a claim on the bond that is upheld, the state government pays the landlord and the tenant becomes liable to repay Revenue NSW.
For government to insert itself in the middle could be met with scepticism from an efficiency perspective.
Unsurprisingly, the scheme raises many questions that don’t have answers.
Firstly, why is it limited to three local government areas to begin with? Why are communities in Parramatta, Central Coast and Penrith being forced to undertake the scheme’s beta testing?
Then there is the drain on the NSW Civil and Administrative Tribunal (NCAT). This is a body already under pressure, yet it seems inevitable that an increase in disputes is coming.
Landlords should not be left to fund legitimate repair costs or rental arrears while matters await resolution. Remember, they are now forced to accept pets in their properties. So how will NCAT cope with an increase in disputes?
For landlords, the scheme makes property manager selection even more crucial. Property managers will be burdened with further administration, so working with experienced and capable people will make an important difference.
One final question that Government can’t answer. At a cost of $25 each time a tenant uses the scheme, and with 330,000 tenants in the state moving each year, Government will pocket up to $8.25 million annually directly from tenants. How is this helping those tenants, exactly?
Regrettably, the scheme is another example of a policy band-aid targeted at a symptom while ignoring the problem: the lack of homes for people to rent.
