Economic modelling undertaken by University of Melbourne economists, and presented to the Reserve Bank last month, shows that three-quarters of Australian Households would be better off if negative gearing is abolished.
The study was posted on the Reserve Bank website for public release on Friday.
The paper explores the implications of negative gearing – including a 30 per cent collapse in the supply of rental properties – and found that abolishing negative gearing would lead to an overall welfare gain of 1.5 per cent of GDP.
Negative gearing is a policy that largely benefits landlords, and for the 17 per cent of the Australia population that have property investments – out of which 70 per cent are negatively geared – would be worse off.
The study estimated that thirteen per cent of the population would be directly influenced by the removal of negative gearing, and likely to quit their holdings.
“The housing prices fall because removing negative gearing takes a significant amount of housing investment out of the property market,” the report said.
“Both the proportion of landlords and the amount of resources allocated to housing investment, given by the average expenditure, have fallen significantly after the policy reform.
Importantly, removing negative gearing increases the average homeownership rate of the economy from 66.7 per cent to 72.2 per cent.
The improvement in homeownership was observed most predominantly among poor households, where the fall in house price and the rise in rent reduce the price-to-rent ratio in the economy by 4.2 per cent.
“This has direct implications on housing affordability as the fall in house price lowers both the downpayment requirement for mortgages and the size of mortgages required to purchase a house, making it easier for households to own a home.”
If negative gearing was to be scrapped, the average mortgage size held by homeowners would likely decrease 21 per cent.
“Eliminating negative gearing takes young landlords who were rich enough to meet a downpayment requirement for investment properties away from the market.
“This reconciles a recent trend in the property market that there has been a rise in investment housing debt holdings by young and rich 35 households who would have benefitted the most from negative gearing concessions.
“The aggregate welfare for the economy improves upon the repeal of negative gearing … around 80 per cent of households are better off after the policy reform.”
Australia’s negative gearing regime stands alone against comparable OECD countries. Only New Zealand and Japan allow the unrestricted use of negative gearing losses to offset income from other sources.
The report’s authors, Yunho Cho, Shuyun May Li, and Lawrence Uren said that along with their findings on negative gearing it would also be worth considering some partial restrictions, such as allowing tax deductions for mortgage interest payments only.
Originally Published: www.theurbandeveloper.com
Gold Coast house values record the biggest growth in Queensland
The Gold Coast has recorded the strongest growth in house prices in Queensland over the past 12 months.
GOLD Coast house prices are leading the way in Queensland, up six per cent in the past 12 months to an average $620,000.
The latest figures by the Real Estate Institute of Queensland show homes on the Glitter Strip are $35,000 more on the same time last year.
Unit prices are up 1.9 per cent to $428,000.
REIQ data reveals houses on the Glitter Strip are worth $35,000 on the same time last year.
REIQ’s Queensland Market Monitor for March said the strong population growth came on the back of infrastructure projects such as the $550 million Gold Coast Health and Knowledge Precinct and M1 upgrades.
“The property market has been one of the big winners from the sporting event as the $1.5 billion infrastructure investment has boosted confidence and demand for housing in the region,” the report stated.
“We expect house prices will show an upward path in 2018. However, this growth will most likely be more moderate.”
A quiet real estate period leading up to, and during, the Commonwealth Games likely contributed to a slight drop (-0.3 per cent) in the March quarterly median sales price, the report reveals.
Andrew Henderson says a growing population and employment opportunities were contributing to a strong property market. Picture: Jerad Williams
REIQ Gold Coast zone chairman Andrew Henderson said he expected interstate migration to continue to benefit the city.
“I expect the market to remain strong,” he said.
“There is a heavy amount of interstate buyers moving here.
“I was at an auction recently where the winning bidder was from Sydney and the underbidder was from Melbourne.”
Mr Henderson said growing employment opportunities were also attracting homebuyers to the city.
The Gold Coast property market is expected to remain strong.
“We have some of the best health facilities in the country and our universities are world recognised.
“Those two things alone complement the tourism industry and the lifestyle aspects that the Coast offers.”
The report found the fastest-selling suburbs on the Coast included Worongary, Merrimac, Highland Park, Mudgeeraba and Carrara.
It also revealed the rental vacancy held tight throughout the first quarter of the year at 1.1 per cent.
Andrew Bell says the Coast had evolved from a tourist town into a vibrant city with an expanding economy. Picture Mike Batterham
Ray White Surfers Paradise Group CEO Andrew Bell said the Games heralded the next chapter for the Coast, as it evolved from a tourist town into a vibrant city with an expanding economy.
“The city’s property market is riding the irreversible momentum that has now come to the Gold Coast in terms of economic diversity and with more employment options we will need more housing options for people,” Mr Bell said.
“We are no longer going to be subject to tourism upsides and downsides as we were in the past because our economy has well and truly diversified beyond just tourism.”
Australia’s golden triangle of opportunity
It was great to be back on the Gold Coast for the 21st annual Australasian Real Estate Conference (AREC), attended by over 4,000 of Australia’s best industry professionals. While I was there I was once again reminded of how much potential the South-East Queensland property market is offering both sea changers and investors at this stage in its market cycle.
In my view, Brisbane is the best market in Australia currently for short to medium term price growth, with the value gap between it and the other big East Coast capitals as large as I’ve seen it in many years.
When you factor in the key drivers for future growth – liveability, affordability, scale and future economic prospects, they all suggest that Brisbane is a market to invest in. Check out the latest statistics from CoreLogic below.
Value gap – median house prices
Value gap – median apartment prices
I’ve been bullish on Brisbane for many years and in hindsight, I called its next growth phase a couple of years too early. It’s had some growth in recent years but there is a lot more to come over the next few years.
According to McGrath’s top prestige agent in Brisbane, Alex Jordan, one of the dominant trends today is downsizers buying up luxury apartments.
Alex says: “Despite the reported oversupply in Brisbane’s inner city apartment market, we are seeing great strength in the prestige apartment sector.
“The luxury apartment market ($1M+) is driven by owner occupiers, particularly baby boomers and empty nesters, who are attracted to less maintenance and better accessibility.
“Popular suburbs include New Farm, Newstead, Teneriffe, Kangaroo Point, South Brisbane, St Lucia, Paddington and the Brisbane CBD. These areas offer a desirable lifestyle with an abundance of shopping, dining and entertaining precincts at their doorstep.”
South East Queensland has so many options for asset-rich, cash-poor southerners. Many of our customers in Sydney and Melbourne are looking closely at South East Queensland both for investment and a potential sea change. I believe its affordability will continue to attract record levels of interstate migration.
If you live in Sydney or Melbourne and you’re struggling with the mortgage and cost of living, Brisbane is a fantastic alternative. It offers big city job opportunities, high quality education options and the chance to transform your financial future.
The boom delivered Sydney and Melbourne home owners a capital gain of up to 75% – that’s enormous new equity that could be cashed in to fund an amazing new lifestyle with far less mortgage stress up north. Plus, you’d be buying in just before Brisbane’s next wave of price growth. It’s the perfect scenario.
I believe the area from the Gold Coast to Toowoomba and up to the Sunshine Coast is Australia’s golden triangle right now.
Toowoomba, with its expanded airport facilities which have opened up easy access to the south, is the perfect and affordable treechange destination. Known as Queensland’s Garden City, about 2,300 people moved here from Brisbane last year for its cheaper house prices and enjoyable regional city lifestyle.
Both the Gold Coast and Sunshine Coast are also appealing sea change options benefitting from a raft of new infrastructure that will drive further population growth and generate more local jobs.
Brisbane is one of the world’s great cities but I don’t think this is fully realised as yet. If you haven’t been to Brisbane for a number of years, get on a plane. This is a thriving city that offers many of the lifestyle amenities you love about the southern capitals but at a much cheaper price.
I think Brisbane will also become very attractive to migration and investment from Asia in the years ahead.
South East Queensland is offering opportunity everywhere for both owner occupiers and investors alike. Now’s the time to consider what Australia’s premier lifestyle market can do for you!
REIQ CEO Antonia Mercorella on What’s Next for Brisbane’s Property Market
After five years of booming apartment construction, Real Estate Institute of Queensland chief executive Antonia Mercorella says Brisbane is now entering a new era of game-changing mixed-use development that has the potential to propel the city into a sophisticated lifestyle destination.
Brisbane’s real estate market is in the midst of a dramatic transformation, and combined with the Queensland government’s $45 billion infrastructure pledge, Mercorella says it’s exciting times ahead for the Sunshine state capital.
The Urban Developer spoke with Mercorella about what’s next for Brisbane’s transitioning property market.
TUD: Brisbane’s project pipeline: What’s new in Brisbane?
AM: The $3 billion Queen’s Wharf Project, Howard Smith Wharves, the new Brisbane Airport Redevelopment, the $5.4 billion Cross River Rail, the Brisbane Quarter and the new $350 million Herston Quarter are all developments changing Brisbane’s city skyline and creating dynamic economic and vibrant community hubs.
However, probably one of the most exciting projects to be unveiled is the Brisbane Live project which, if successful, will deliver an exciting Maddison Square Garden-type venue and precinct right in the heart of the city.
TUD: Brisbane’s growing city: How is it changing?
AM: Queensland is home to more than five million people – and this figure is expected to grow. We’re seeing more people moving here in ever increasing numbers.
Queensland has overtaken Victoria as the state receiving the highest number of interstate migrants. Overseas migration to Queensland is the highest it’s been in more than a decade and this is driving demand for accommodation.
In addition, the way we live is changing.
Queenslanders have embraced apartment living, choosing to live in smaller spaces closer to work and entertainment precincts. According to CoreLogic, more than 17 per cent of Queenslanders live in apartments, higher than Victorians at 15 per cent. Of course, New South Wales leads the pack, with 22 per cent.
TUD: Brisbane’s inner city apartment market – where to next?
AM: Much has been made of the soft inner city apartment market. But will that continue? Or will value rebound as migrants move in and scoop up the bargains to be found?
The inner city apartment market is patchy but if you do your research there are good opportunities to be found. Albion, Bowen Hills and Brisbane City unit markets have grown in median unit prices over the past 12 months while Fortitude Valley eased 1.2 per cent.
To find out more about Brisbane’s changing real estate market join the REIQ Property Insider lunch. Speakers include:
Brisbane Lord Mayor Graham Quirk
CoreLogic research analyst Cameron Kusher, and
Realestate.com.au EGM Residential Andrew Rechtman
Tickets are selling fast to this event. Don’t miss an opportunity to get valuable insights into Brisbane 2.0.
What: REIQ Property Insider lunch presented by Aon
When: Friday 1 June
Where: Moda, Portside Hamilton
Cost: $155 non-members $130 members
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