Issue 07 | Thursday 7 April 2022 | How Government Policies will Impact Real Estate
Hi Andrew Bell with you, and would you believe we have just flown through the first quarter of this year with so much happening and landing us into the second quarter, also with a very full schedule starting with Easter and then rolling into the Federal Election. You really get the sense that this year is going to fly like no other.
Here we are today at 44 Horizon Avenue in Ashmore and oh my gosh this is a home to dream for, check it out here. We will touch more on this spectacular home in just a moment.
Meanwhile, I have had a lot of questions about the impact of the budget on the Real Estate market. I am always wanting to provide you with the most relevant information about the status of the real estate market, I took the opportunity of being at Parliament House in Canberra for the launch of the government’s 2022 Budget. Of course, two days later was the opposition’s budget announcements. But the key information was the current status of our economy and to hear from key ministers in key portfolios to get the latest update on each of those portfolios.
You’ll remember that at the last federal election we went to the election with two policies that were going to severely affect real estate and that was the elimination of negative gearing and an increase in the capital gains tax. Well, it’s safe to say that both sides of government in terms of policy announcements have nothing particularly controversial in relation to real estate. The current government had some announcements regarding additional help for first home buyers and disadvantaged people to provide the opportunity to take up almost nil deposits to buy homes. Helpful, but to a very limited group of people. Apart from that, neither side had any particular policies that impact substantially on the real estate market.
So, that leaves the big question of whether there’s any impact from the budgets on real estate and the answer is most definitely yes. In the absence of specific policies, directly aimed at the real estate market, then the big impact the budgets will have been on the health of the economy going forward and as a result, consumer confidence.
Let’s be upfront and honest here, the real estate didn’t need any significant support. It’s been breathtaking over the last 2 years. What is needed is some addressing of the supply and demand issues in real estate and particularly in the rental market. There is simply not a sufficient supply of properties to meet the demand, and as result property prices and rental prices have had a sudden surge that has added substantially to this current discussion about the rapid rise in the cost of living.
So, the issue of addressing the cost of living did need some immediate and direct attention in a number of the one-off issues that have impacted heavily recently. Petrol prices are at the core of this. The Ukrainian war came completely out of leftfield, creating a shortage in energy and petrol supplies that would see petrol prices at the bowser sky rocket, and that’s fed through to every single one of us and in particular to the supply chains and to the producers of all the goods that we purchase. Up have gone prices. So some support from government levels is much appreciated but is not the solution long term.
Given that housing cost is for most people, the singular biggest cost of living, there were no real measures by either party to address this particular issue. For both properties to purchase to live in or rental properties to live in, supply is our major issue, affordable real estate in particular. This is going to need the cooperation of both local and state governments. The opening up of new greenfield areas, some rezoning of other areas and of course the speed up of the providing of the infrastructure that will be needed to support those new areas in the way of schools, medical and so on.
Right now, we’ve cottoned onto American, and now a UK trend of built rent. To encourage investors so not to encourage build to rent. But to get investors to be prepared to put up the capital they are going to need some special taxation treatment and state governments are going to have to watch how they treat the tenancy laws within these buildings or areas to encourage large investors into this new sector. But if they did, we could have buildings under construction very shortly and relief to the rental housing market in 18-24 months.
Of course, a critical factor to housing affordability going forward is to ensure interest rates don’t rise too high. That will come down to how responsible whatever government in power are. The need to start seeing some debt reduction is essential.
I could go on with so much more information here but at this stage, there was a lot more detail in the current governments budget that you could summarise in terms of real estate as there were no direct policies in the announcements that has a positive or negative effect directly on the real estate market. In terms of the economy, it was a pro-growth budget addressing some shrinkage in the deficit and some immediate relief to the cost-of-living pressures with a reduction in petrol cost, and some cash in the pocket. But most definitely nothing on either side of politics to address the core issue of housing supply.
So, for the moment it’s steady as you go in the real estate market, no question there is softening in prices in many parts of the country now as the issue of housing affordability is hitting household budgets. There have already been rises in fixed-rate interest rates so the direction of real estate pricing going forward will vary from region to region depending on their particular supply and most definitely demand factors.
I hope you have enjoyed looking at 44 Horizon Avenue, Ashmore. As you would have seen looking through the video, this Hamptons inspired home is truly unique to the market. The amount of work and attention to detail is simply stunning. I also love that at the rear of the home there are some 50 acres of parkland, offering peace and tranquillity in a very central and highly sought after pocket in Ashmore. This home is the perfect family entertainer’s home with plenty of bedrooms and open living and outdoor spaces. I can only imagine this one will be snapped up very quickly, so don’t delay in attending this Saturday’s open home. For more information contact Nick Baxter who has the privilege of marketing this home on behalf of the owners.
I hope to see many of you at our big fundraiser tomorrow for the Surfers Paradise Surf Club, we’re holding our twentieth odd Business Meets Sports Luncheon at Star Casino. Always a fun day with some of the leading elite sportsmen and elite business people in separate Q&A sessions that should be fascinating and plenty of other entertainment, which is why it’s regarded as the leading and most enduring business networking lunch here on the Gold Coast. We’ll make sure it delivers plenty of dollars into new rescue equipment on our beachfront to keep our beaches safe for all our locals and tourists.
Also, have available an interview I did with Australia’s leading Economist in property Nerida Conisbee. If you would some insight into her forecast moving forward just reach out either by return email or via the details on screen now and we will send a link for you to view.
That’s it for this market update, I wish you a wonderful Easter with your family and friends. Let’s try and switch off from politics and all the other dramas of the world at present and enjoy the most important people in our lives. See you in a fortnight.
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group