‘Hold­ing costs’ may be a threat

Port Douglas & Mossman Gazette - - REAL ESTATE -

AC­CORD­ING to ac­count­ing and wealth ad­vi­sory group Chan & Nay­lor, the re­cent 3 per cent in­crease in value of the Aus­tralian property mar­ket, which now stands at just over $5 tril­lion ac­cord­ing to some econ­o­mists, is in line with pre­vi­ous his­tor­i­cal cy­cles and is not a sign of a property mar­ket over­heat­ing.

The big­gest cause of con­cern for Aus­tralian hous­ing af­ford­abil­ity how­ever is the ‘cost to hold’ a property, which could be­come pre­car­i­ous for many people if near term in­ter­est rates rise above 6 per cent and na­tional pro­duc­tiv­ity im­prove­ments fails to gain mo­men­tum.

"A per­son’s abil­ity to pur­chase and re­tain a property is a func­tion of their abil­ity to make re­pay­ments.

‘‘And with near record cur­rent low in­ter­est rates fund­ing a mort­gage is more fea­si­ble than it was 10 years ago when in­ter­est rates were dou­ble,’’ said Ken Raiss, a di­rec­tor at Chan & Nay­lor.

‘‘How­ever with an in­evitable rise in in­ter­est rates as the econ­omy im­proves and con­tin­ued growth in property value, Aus­tralia’s pro­duc­tiv­ity must im­prove.

Fail­ure for it to do so will re­sult in less people be­ing able to pur­chase or re­tain property."

Mr Raiss be­lieves that the im­pact of property in­vestors on the Aus­tralian property mar­ket has been over­stated.

He also says that Aus­tralia is now at a cross­roads where on one hand in­ter­est rates must nec­es­sar­ily in­crease as the econ­omy im­proves and on the other the Govern­ment must aim to keep un­em­ploy­ment and in­fla­tion down by fo­cus­ing on in­creas­ing real liv­ing stan­dards through in­creased pro­duc­tiv­ity which will lead to im­proved busi­ness out­comes leading to in­creased real wages and sus­tain­able job op­por­tu­ni­ties.

‘‘The is­sue for value-ori­ented mum and dads is al­ways go­ing to be not what you get paid but what it gets you.

‘‘There­fore a near-fu­ture rate rise may seem anath­ema to many, but com­bined with a good dose of sen­si­ble eco­nomic re­form it epitomises the ’tough medicine’ re­quired to re­store the coun­try to pre-2007 fit­ness,’’ said Mr Raiss. ‘‘This is the for­mula that will negate property un­af­ford­abil­ity over next 10 to 20 years.’’

Mr Raiss be­lieves the govern­ment’s pol­icy spot­light must be on cre­at­ing an en­vi­ron­ment where in­ter­est and in­fla­tion are man­aged in con­cert at around 6 per cent and no more than 2.5 per cent re­spec­tively.

‘‘More col­lab­o­ra­tion be­tween govern­ment, who is re­spon­si­ble for putting in place eco­nomic in­fra­struc­ture, and busi­ness, who man­age labour and raw ma­te­ri­als, is re­quired to cre­ate an at­mos­phere of en­ter­prise,’’ said Mr Raiss.

‘‘In­creas­ing pro­duc­tiv­ity will en­able more Aus­tralians to share in the grow­ing property pie.’’

Mean­while, the peak body rep­re­sent­ing the ur­ban de­vel­op­ment in­dus­try has called on the govern­ment to use the 2014-15 Federal Budget to help boost in­vest­ment in new hous­ing and im­prove af­ford­abil­ity for new home buy­ers.

In its Pre-Budget sub­mis­sion, the Ur­ban De­vel­op­ment In­sti­tute of Aus­tralia (UDIA) has rec­om­mended re­mov­ing bar­ri­ers to new land sup­ply, in­creas­ing in­vest­ment in in­fra­struc­ture, re­duc­ing un­nec­es­sary red tape, and re­duc­ing ex­ces­sive taxes and charges on new hous­ing.

‘‘ De­spite record low in­ter­est rates, the dream of home­own­er­ship is still out of reach for far too many house­holds,’’ said UDIA na­tional pres­i­dent Cameron Shep­hard.

‘‘We’re call­ing on the federal govern­ment to work with state and ter­ri­tory gov­ern­ments to ad­dress the prob­lems hold­ing up in­vest­ment in new hous­ing, such as con­straints on land sup­ply, poor in­vest­ment in ur­ban in­fra­struc­ture, ex­ces­sive red tape, and hefty taxes and charges. In ad­di­tion to im­prov­ing hous­ing af­ford­abil­ity, in­creased in­vest­ment in hous­ing will cre­ate new jobs, im­prove busi­ness ac­tiv­ity, and add to govern­ment rev­enue.’’

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