News and chat from the house and property market on the Northern Rivers region of NSW.
27/06/2008 - By Michael Murray
I am amused and amazed by the amount of speculation out there on what rates and property prices are going to do in the near future. I have read opinions that house prices (in Sydney at least) are going to come off by 20% more...
Property Punting
I am amused and amazed by the amount of speculation out there on what rates and property prices are going to do in the near future. I have read opinions that house prices (in Sydney at least) are going to come off by 20% while another survey predicts an 18% rise in the next 3 years. I think that is the issue - it is patchy and changeable all over. Brisbane, Melbourne, Adelaide are doing well. Byron seems to be holding on well - not a lot of turnover but prices are being met and biz as usual.
Only an idiot would predict what rates will do in the long term but it looks like steady for the next few months. Below I have added an attachment that has some of the various property reports for those who want more detail.
Byron Bay Holiday Rental
There are always hot issues in Byron - they seem to rotate and some keep coming back. The holiday rental issue for some reason has captured peoples attention and many believe stopping it is going to solve all of our community problems. I don’t buy that. I can understand how upsetting it would be to live next door to a house continually rented to drunken pommy backpackers. I am sure that it happens occasionally and that is a behaviour management issue. It is delusional to think that banning holiday letting is going to solve Byron’s affordability and housing shortage and turn it back into a nice gentle, relaxed seaside town. Byron Bay is an international tourist destination and sought after location. I would rather have them staying in suburban houses than blocks of modern flats. I am happy to maintain Lennox, Bangalow, Mullumbimby and Brunswick Heads as community villages and allow Byron to be the bustling holiday town that it is and the envy of so many others. Why some people who don't even live in Byron want to kill it off beats me.
Rental properties and the Tax man
Don't get me wrong I am a great believer in holiday rental properties. I don't want to put a dampener on them and will be happy to help someone get into one. But for warned is for armed. The tax office notes that more than 1.5 million people claimed more than $24 billion in rental deductions in their tax returns last year, with almost 170,000 people claiming for the first time. Rental properties are a long-time problem area for the tax office. Common errors are regularly being made, and Granger says the tax office will soon be writing to people who claimed rental deductions for the first time last year with information on the "do's and don'ts". The tax office will also be writing to people who have been selected because they have some of the following characteristics: Unusually high claims for rental deductions; low rental income in relation to rental deductions; high claims for interest expenses'; and high claims for borrowing expenses.
Housing Affordability
In Domain.com is an interesting report from the Senate Select Committee on Housing Affordability. It is hard to say what the Rudd Government is going to do about it but it may be possible that some of the tax incentives for property investment may be taken away at some time. Professor Julian Disney, director of the Social Justice Project at the University of NSW told the Senate Select Committee: “A major cause of our problems is that we have excessive exemptions for owner occupiers from capital gains tax, land tax and the pensions asset test. They are so generous they have driven up housing prices. They have ended up being not in favour of home ownership; they are in favour of current owners.”
He makes the argument that just to take the $8 billion that negative gearing on investment housing (not including the $60 billion of other tax incentives) would go a long way in solving some of the housing crisis if it is spent directly by the government. These incentives were set up to encourage the private sector to invest in rental accommodation to be more efficient than the government. Professor Disney now suggests it has gone to far and greed is the major driver of the market. The report also suggests that to open up more green field development on the outskirts of the cities is counter productive as there exists a natural resistance for most people not to commute for more than 30 minutes. Also with rising oil costs the expense of long distance commuting will become prohibitive.
You can read the full article on: http://www.domain.com.au/Public/Article.aspx?id=1213770892436&index=NationalIndex&headline=Greed%20is%20at%20the%20root%20of%20the%20housing%20crisis
Banks Vs Brokers
In the 90's the major banks went on a fire sale and sold off and shut down branches all over the country. Then early in this decade they were happy about financial deregulation and outsourced a lot of home loan lending to independent brokers and we had the growth of the non bank mortgage companies which provided a lot of healthy competition in the finance industry. Lately, it seams that the banks decided they aren't happy with their loss of market share and with the timely help of the sub prime crisis in the states are doing their best to kill off the independent broking industry. I am sure most people won't care where they get their money from but just thought I would provide a bit of background to the present situation. The banks are cutting the commissions paid to independent brokers and undercutting the non bank lenders on rates. There will be a lot of culling in the independent broker industry.
We are still Competitive!
- So in the interest of healthy competition, we are still able to beat the banks on many fronts (in particular one-to-one service!)
- The four major have raised 3 yr fixed rates to 9.2% - 9.5%. Depending on the circumstances we can do better than that.
- For variable loans we can get today 8.7%-9.0% per annum. This beats the banks in most cases.
- The banks have also been doing a PR mail out to clients suggesting some benefits. Read the fine print on that as it mainly benefits them - as usual. Call us if in doubt.
- Some good news on the home loan front - mortgage stamp duty has been eliminated from July 1 this year so that will save a little money in set up costs.
- Another beneficial change is the new ability to borrow from a self managed super fund for property (up to 70%). Again if you have a SMSF call me and I can make some suggestions on property and finance only.
Happy to speak to you at any time.
Take care - have a happy financial new year!
Michael
