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Are we headed for a housing crash — or not?

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YOU can’t blame people for being confused.

One minute we are told there is an apartment glut and house prices could crash any minute. The next, our leaders are calling for negative gearing changes that will push prices down even further. So are we headed for housing armageddon or not?

PRICES ARE TOO HIGH …

Housing prices have been rising for over a decade and warnings about a property bubble have been brewing for years.

One of the latest warnings came last month from property analyst Louis Christopher, of SQM Research, who said the national property market was overvalued by 22 per cent.

This is being driven by prices in Melbourne, which hit its highest overvaluation level of 40 per cent and Sydney, which was at its second highest level of overvaluation at 40 per cent.

Mr Christopher warned that if changes weren’t made, such as lifting interest rates or tougher restrictions on home lending, prices in Sydney and Melbourne would continue to rise by up to 16 per cent in 2017.

“However it is likely 2017 will be the last year of price falls generated by the mining downturn for these cities,’’ he said.

Mr Christopher said if interest rates were cut again, prices would rise even further, paving the way for a possible correction in 2018.

BUT THERE’S AN APARTMENT GLUT COMING …

At the opposite end of the spectrum, there are fears that construction of new apartments will lead to an oversupply in the next few years.

The construction boom already seems to be impacting Melbourne apartment prices, where there’s been record levels of building in the last two years.

On Thursday, Corelogic’s November Hedonic Home Value Index showed Melbourne dwelling prices had fallen by 1.5 per cent.

Head of research Tim Lawless attributed this to new units coming on to the market. Prices for units fell by 3.2 per cent last month.

Overall, prices for Melbourne units have only grown by 3.9 per cent this year, compared to 12.2 per cent for houses.

But this is where things get really interesting for Sydney.

While Sydney unit prices are not increasing as fast as those for houses, they are still rising.

In November, unit prices increased by 0.9 per cent, which was actually slightly higher than 0.8 increase achieved by houses.

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Across the year, unit prices grew by 10.6 per cent compared to 15.3 per cent for houses.

Earlier this year BIS Shrapnel released a report that predicted Melbourne would have an oversupply of more than 20,000 homes by 2017, but managing director Robert Mellor said Sydney was still suffering from an undersupply of housing.

“It’s so severe we won’t see an oversupply in Sydney in the next four years,” Mr Mellor said at the time.

“A downturn in Sydney between 2004 and 2012 was so severe, basically only in the last 12 months we’ve started to see construction move above the level of demand.”

SYDNEY IS DIFFERENT

Prices in Sydney have outstripped those in other areas and it remains Australia’s most expensive city, with a median dwelling price of $845,000, according to the latest statistics released by Corelogic.

Since 2009 dwelling prices in Sydney have risen by a staggering 96 per cent, Corelogic head of research Tim Lawless told news.com.au.

Melbourne is not that far off, with growth of 78 per cent, but the next best performing market after that was Canberra, which has only seen growth of 33 per cent.

The difference was even more stark in Perth, which only grew by 6.5 per cent, and Hobart on 4.5 per cent.

Mr Lawless said Sydney’s astronomical growth had been achieved against the backdrop of record low wages growth of about 2 per cent.

“So the byproduct of strong capital gains (for housing) and relatively low income growth is that affordability is becoming stretched,” he said.

One way of measuring housing affordability is to look at the dwelling price to income ratio.

In Sydney this ratio is 8.4, which means it takes 8.4 times the typical household salary to buy the typical Sydney dwelling.

If you look at houses only, this ratio is closer to 10, while for apartments it is 7.1.

These figures are still higher than in other cities.

Melbourne has a ratio of 7.2 for dwellings, while Brisbane’s ratio is 5.7.

“It highlights that Sydney is becoming increasing unaffordable,” Mr Lawless said.

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However, Mr Lawless said there was some confusion in the market because the measure of “serviceability”, the proportion of household income that goes towards paying a mortgage, which has been really flat because of record low interest rates.

“This hides the fact that dwelling prices have risen at a substantially higher rate than incomes in Sydney and to a lesser extent, in Melbourne.”

A TARGET FOR INVESTORS

All the analysts seem to agree on one thing — the Sydney real estate market is different and property prices in other areas are not growing as strongly.

This may be why NSW Planning Minister Rob Stokes, called for reform of negative gearing this week.

His comments were later backed by NSW Premier Mike Baird, who said changes should be considered. But this is in direct conflict with Liberal Party policy.

During the election Prime Minister Malcolm Turnbull said the coalition would not change the measures, and warned Labor’s policy to reform negative gearing and the capital gains tax discount would lead to price falls. Estimates have ranged from between two per cent to as high as six per cent.

Mr Turnbull pointed to the need to increase housing supply to improve affordability.

But in his speech, Mr Stokes said supply alone wouldn’t solve Sydney’s housing affordability problem.

The state is currently building 185,000 homes over the next five years to try and address an undersupply of close to 100,000 homes in NSW.

But with interest rates at record lows and generous federal tax incentives, Mr Stokes said Sydney had become a prime target for investors.

Property investors can use negative gearing to reduce the tax they pay if they make a loss, for example if the rent they collect is less than their mortgage repayments.

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Once they sell the property, they only pay tax on half of the profit because of the capital gains tax discount.

Mr Lawless said statistics showed investors currently made up more than half the demand for mortgages in NSW.

States are now trying to wind back incentives for investors.

This year NSW introduced higher taxes on foreign investors buying residential property, following in the footsteps of Victoria and Queensland.

HOUSING MARKET IS STILL HOT

AMP chief economist Shane Oliver said NSW must think there’s still some extra capacity in the property market as the state planning minister probably wouldn’t be talking about negative gearing if the market was weaker.

“They are probably thinking there is still room in the market as it’s not altogether clear that the market has peaked,” he told news.com.au. “They are probably thinking there’s a long way to go.

“I would be more cautious, I think a supply glut could hit next year,” he said.

However, if prices did fall, Mr Oliver said the market could still be propped up by two types of buyers.

Firstly, first home buyers may re-enter the market, especially if prices fell by 20 per cent and interest rates remained low.

Ironically foreign investors could also be lured by lower prices and move to snap up a bargain. Prices in Sydney are still reasonable compared to those overseas, especially because the Australian dollar is quite low at the moment.

Population growth in Sydney also remains strong and this would also cushion the market against a big fall. Mr Oliver said he didn’t think any price falls would go beyond 15-20 per cent.

“You wouldn’t be looking at a fall like what happened in the US or eurozone.”

SO SHOULD THEY CHANGE NEGATIVE GEARING?

By restarting the debate on negative gearing, NSW is basically trying to push some of the responsibility for fixing housing affordability back on the Federal Government.

While Mr Oliver believes supply is more connected to affordability, this doesn’t mean some changes shouldn’t be looked at — especially the capital gains tax discount.

“This is a bit of a distortion and that’s what makes negative gearing so profitable,” Mr Oliver said.

But Treasurer Scott Morrison did not seem to be taking the bait, and said on Friday that abolishing negative gearing would hit mum-and-dad investors in rental properties, pushing rents up and putting immense pressure on the market.

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Another tricky thing about changing negative gearing and the capital gains tax discount, is that the measures would impact property markets around Australia, not just Sydney.

Meanwhile, Housing Industry Association chief executive Graham Wolfe pointed to the state taxes and levies charged on the sale of every new home.

“State-based stamp duty on the purchase of a typical new home alone adds a $91 per month burden on household mortgage repayments,” Mr Wolfe said.

Stamp duty is something the NSW Government could change to help first homebuyers but has left untouched.

In his speech, Mr Stokes said if states were to consider getting rid of inefficient state taxes, the Federal Government needed to outline how it would help states raise money for schools and hospitals to cater to a booming population.

Providing investors with generous tax breaks such as the capital gains tax discount, costs the Federal Government billions. In 2014/15, the CGT alone was estimated to have cost the federal Budget more than $6 billion.

And despite all the talk of housing bubbles, apartment gluts and falling rental prices, this hasn’t deterred investors.

ABS housing finance data has shown a consistent rise in finance commitments for investment purposes since May this year.

“Clearly investors are continuing to see housing as the preferred investment option, despite low yields and a mature growth cycle,” Mr Lawless said.

Mr Stokes believes it’s time for a real debate about policies and for the Federal Government to partner with states to address housing affordability.

“Why should you get a tax deduction on the ownership of a multi-million dollar holiday home that does nothing to improve supply where it’s needed?” he said.

“We should not be content to live in a society where it’s easy for one person to reduce their taxable contribution to schools, hospitals and other critical government services — through generous federal tax exemptions and the ownership of multiple properties — while a generation of working Australians find it increasingly difficult to buy one property to call home.”

 

Originally Published: http://www.goldcoastbulletin.com.au/

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Opinion

Brisbane suburbs to watch in 2019

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brisbane suburbs to watch in 2019

Brisbane suburbs to watch in 2019

These are the suburbs to watch in Brisbane in 2019, where a window of opportunity exists to get in ahead of demand driving prices up.

These are the suburbs to watch in Brisbane in 2019, where a window of opportunity exists to get in ahead of demand driving prices up.

The list, compiled via the Price Predictor Index by Hotspotting’s Terry Ryder, tracks increases in sales demand — which is generally considered to be a precursor to increased prices.

“This precedes the price reaction,” Mr Ryder said. “Where there are sales increasing, prices will follow eventually.”

For buyers, rising demand can be a handy early warning system, particularly if suburbs they are interested in are on the list of those seeing steady rises.

“It’s a chance to buy in areas that are rising before prices really take off,” he said.

The Moreton Bay region was still the top market in Greater Brisbane in terms of rising suburbs — with seven on the list including Kippa-Ring which also made the national top 50 list.

suburbs in brisbane to watch in 2019

Brisbane is becoming a haven for cyclists with more appearing across the suburbs as infrastructure improves. Picture: Bruce Long Source:News Corp Australia

The Brisbane-south region came in second with five rising suburbs, followed by Brisbane-north and Redland City, both with four growth suburbs, while there were just two rising suburbs in Logan City.

Graceville and Indooroopilly were named along with Kippa-Ring as the top three suburbs in Brisbane.

“The whole premise is there is a time lag from when sales activity rises and prices go up,” Mr Ryder said.

“If you are already in an area where sales activity is picking up strongly, well that’s good because you are ahead of the strong price rises.”

Mr Ryder expects improvements in the Queensland economy including rising infrastructure spending — much of which was focused on inner Brisbane — to have a strong positive effect on the housing market.

suburbs to watch in 2019

Opening of Howard Smith Wharves precinct parklands and Cliff-face lift in inner Brisbane. Picture: Liam Kidston. Source:News Corp Australia

“Brisbane has definitely lagged because it hasn’t had the same drivers that Sydney and Melbourne have had. I do expect Brisbane in the coming year to be stronger than it has been.”

“We’re seeing that big infrastructure spend, population growth data is favourable as well, with Queensland now the number one state for net gains for interstate migration — and 90 per cent of that goes to SEQ. Those are all things falling into line for a rise.”

29 suburbs to watch in Brisbane in 2019:

(Alphabetical order)

Suburb/Municipality/Dwelling Type/Current Median Price

Albany Creek Moreton Bay H 585,000

Alexandra Hills Redland H 470,000

Annerley Brisbane-south H 720,000

Bald Hills Brisbane-north H 440,000

Banksia Beach Moreton Bay H 560,000

Bethania Logan H 365,000

Burpengary Moreton Bay H 465,000

Camira Ipswich H 407,000

Cleveland Redland H 620,000

Clontarf Moreton Bay H 445,000

Corinda Brisbane-south H 745,000

Eatons Hill Moreton Bay H 600,000

Geebung Brisbane-north H 545,000

Gordon Park Brisbane-north H 845,000

Graceville Brisbane-west H 905,000

Indooroopilly Brisbane-west H 905,000

Indooroopilly Brisbane-west U 475,000

Kenmore Brisbane-west H 700,000

Kippa Ring Moreton Bay H 430,000

Logan Reserve Logan H 410,000

Mansfield Brisbane-south H 680,000

Mt Cotton Redland H 550,000

Ormiston Redland H 680,000

Redcliffe Moreton Bay H 440,000

Redcliffe Moreton Bay U 415,000

Stafford Heights Brisbane-north H 605,000

Sunnybank Hills Brisbane-south H 680,000

Tarragindi Brisbane-south H 775,000

Tingalpa Brisbane-east H 555,000

Wakerley Brisbane-east H 755,000

Wynnum West Brisbane-east H 540,000

(Source: The Price Predictor Index)

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Opinion

Tim Gurner overcomes 2017 controversy to take third place in Young Rich List

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sunshine coast

IN 2017, property mogul Tim Gurner became one of the most hated men in Australia. But today, he’s having the last laugh.

LAST May, millionaire property developer Tim Gurner outraged millennials the world over after blaming their housing woes on smashed avocado and coffee.

The Melbourne man made the sensational comments during a 60 Minutes segment about housing affordability, telling the Nine network: “When I was buying my first home, I wasn’t buying smashed avocado for 19 bucks and four coffees at $4 each.”

Mr Gurner’s 2017 quote went viral, sparking hysterical headlines around the world and instantly turning Mr Gurner into a villain among young people struggling to break into the housing market.

Related article: Mortgage holders rejoice: Most Qld homes rose in value over the past year

But the 36-year-old’s comments have clearly done little to hold him back.

Last week, he was officially named as the third richest young person in Australia in the 2018 Financial Review Young Rich List thanks to his impressive $631 million fortune.

He was beaten only by Atlassian co-founders and serial rich-listers Scott Farquhar and Mike Cannon-Brookes, who took out the top two spots on the list for a record-breaking seventh year with a combined net worth of $14.2 billion.

According to the list, Mr Gurner, the founder and CEO of property development group Gurner, owes his phenomenal success to a number of acquisitions which pushed his “combined project value to more than $5 billion, spanning almost 7000 apartments”.

Mr Gurner was beaten only by serial rich-listers and Atlassian co-founders Scott Farquhar and Mike Cannon-Brookes. Picture: SuppliedSource:Supplied

The AFR also explained Mr Gurner had made a stack of cash by “targeting high-end buyers wanting to downsize”.

He got his start in property after taking over a lease on a suburban gym aged just 19, using $34,000 given to him by his grandfather.

A year later he sold the business and went into property development, riding Melbourne and Brisbane’s real estate boom.

At the peak of the smashed avo outrage, many of Mr Gurner’s detractors claimed he had enjoyed an unfair advantage from his grandfather’s cash.

But while the backlash has not affected Mr Gurner’s fortunes, he has previously spoken about the personal toll the scandal took.

At the time, Mr Gurner was ridiculed across social media and inundated with interview requests from local and international reporters alike.

In May this year, around a year on from the original controversy, Mr Gurner told Executive Style it had seriously impacted his life, and that his comments were taken out of context.

sunshine coast

Mr Gurner insists he has no regrets despite the backlash. Picture: Stuart McEvoySource:News Corp Australia

“I said it was really hard for them (millennials), I said I feel for them because there were real challenges, but I added I thought there was an issue in society with the amount of conspicuous consumer spending with the millennial generation,” he told the publication.

“I said a large number of this generation needs to lease (the) latest BMW, take the European holiday, buy a 70-inch TV, the latest designer suit, the latest phone, eat smashed avocado and $4 coffees every weekend.

“They took out the last bit and it all went crazy.”

Mr Gurner also described falling ill three days after the story went global as a result of stress — but said he did not regret making the comments.

“It really got me personally. We can all have a tough media facade but I am a normal person inside and it really hurt. But I learned a lot,” he said.

“I learned the haters talk a lot louder than the likers. And I think it did, ultimately, create a really good conversation around affordability and what the next generation will do about it, because it is a legitimate problem.”

brisbane

Fitness queen Kayla Itsines was ranked fifth on the list. Picture: AFR MagazineSource:Supplied

Meanwhile, Ori Allon, who built his $539 million wealth in technology and property, scored fourth place in the Young Rich list, while equal fifth and sixth went to fitness entrepreneur Kayla Itsines and her fiance Tobi Pearce.

Seventh place went to Owen Kerr, with $460 million to his name thanks to his stake in foreign exchange Brokerage Company Pepperstone.

Husband-and-wife duo Collis and Cyan Ta’eed, who founded online graphic marketplace Envato, are jointly worth $428 million, earning them the eighth and ninth places, while farming and finance capital investor Peter Greensill sits in 10th place with $412 million in the bank.

The Young Rich List, now in its 15th year, tracks the wealth of the richest self-made Aussies aged under 40.

The 100 rich-listers featured this year have a staggering combined wealth of $23.5 billion — a huge increase on $13.2 billion last year.

Source: www.news.com.au

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Opinion

Brisbane house prices tipped to rise 11pc in three years: QBE

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Brisbane house prices

BRISBANE homeowners will be the envy of their southern counterparts over the next few years, with property price growth predicted to be the strongest in the country.

brisbane house prices

House prices are tipped to rise 11.3 per cent in Brisbane by June 2021. Image: AAP/Darren England.Source:AAP

BRISBANE homeowners will be the envy of their southern counterparts over the next few years, with property price growth predicted to be the strongest in the country after Adelaide.

House prices in the Queensland capital are forecast to rise by 11.3 per cent in the next three years, according to the latest BIS Economics Australian Housing Outlook commissioned by QBE Insurance.

Brisbane’s median house price is tipped to grow to $615,000 by June 2021.

Brisbane house prices

House prices are tipped to rise 11.3 per cent in Brisbane by June 2021. Image: AAP/Darren England.Source:AAP

The report found Brisbane’s affordability remains significantly more attractive than in Sydney, where house prices are forecast to fall 3.5 per cent in 2019 before bottoming in 2020, and in Melbourne, where they are set to drop another 4.2 per cent next year.

But the outlook is less rosy for Brisbane apartment owners, with unit prices set to fall by 5.1 per cent over the next three years as the oversupply of stock continues to be absorbed and demand from investors weakens.

The median price for an apartment in Brisbane is expected to fall to $405,000 — the greatest forecast decline out of all capital cities.

Brisbane houses

Apartment prices in Brisbane are forecast to fall 5.1 per cent in the next three years. Photo: Claudia Baxter.Source:News Corp Australia

Greater competition for inner-city apartments is tipped to cause investors to lower rents to try to draw tenants from more affordable city fringe locations.

Competitive unit rents and prices due to the oversupply may encourage some potential first home buyers to remain as renters, or alternatively preference an apartment purchase over a house.

QBE Lenders’ Mortgage Insurance chief executive Phil White said tighter lending restrictions had impacted property prices nationally.

 

Brisbane houses

Phil White, chief executive of QBE. Picture: Supplied.Source:Supplied

“We anticipate foreign investment will further dampen in coming years owing to a number of factors such as increased approval fees, stamp duty and land tax surcharges, as well as tighter capital controls from foreign governments, most notably China, which have impacted how much money they can take out of their country,” Mr White said.

But Queensland’s increasing population growth is expected to support buyer demand.

The report is the only one of its kind in Australia that looks at what house prices will do over the next three years.

Source: www.news.com.au

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