As I write this it occurs to me that we are already 1/6th of the way through the year. Where did those few weeks go?
The start of the real estate year has been unusually (but, perhaps, not unexpectedly) slow. We have noticed an increase in properties being offered for sale but a developing reluctance of buyers to “stretch” themselves financially.
Anecdotally, talking to colleagues in the property world, it seems that many properties have come down in value by as much as 10%. I will keenly read industry reports, as they are published in the next few weeks, to confirm this observation.
I suspect that this trend will become embedded for quite a few years to come.
I have taken the time to contemplate some mega-trends which may impact us all in future years.
One such trend I have written about many times is the obscene amount of stamp duty which our state government is extracting from normal working families just needing or wanting to move to a new house. In some of the areas in which we operate it is not uncommon for this impost to be well in excess of $100,000.
Anyone living in an area where such properties are not high enough to attract such amounts of stamp duty may not be too concerned at this time. Just wait a few years. The property prices will get there soon enough.
The only saving grace for the state government is that they at least seem to be pumping the money into much needed infrastructure.
I often wonder how the government has been able to get away with this disproportionate extraction of money for so long – with hardly a whimper from its citizens.
I suspect it may be that the really big amounts are being paid by those upgrading from another property. The actual “pain” of finding such a large amount is “anaesthetised” by the capital gain of the property being sold and buried in the overall changeover costs.
All very well, if property prices keep increasing at the rate that they have in recent years.
What happens when these increases decrease? It will be real money that buyers then must find (either their own money or a larger loan) – and this is perhaps when a resistance will start to impact on people’s decisions about whether to move – or not.
A taxpayer would need to earn over $145,000 in a year (without taking into account living expenses) just to pay stamp duty of $100,000.00. It seems a massive amount to just forfeit to the government!
Another sector of the property market which, I suspect, will increasingly resist the stamp duty extortion are those older property owners moving from their family home to some form of a retirement complex where they will most likely spend their final years. Perhaps a new concept will emerge for these people where they can become long term tenants – rather than owners (thus avoiding the payment of stamp duty).
This, no doubt, will be a huge change from what is currently available for this demographic. A key consideration will be security of tenure. As people grow old the last thing they want to worry about is having to move out at the whim of a Landlord.
There is plenty of room for governments and the property industry to work together on and contemplate such a scenario.
Clearly, the government is now hooked on its easy revenue stream – which just keeps on giving. Perhaps it is time for consideration to be given to other, more equitable, sources of revenue.
Occasionally, there is a suggestion that the State government transition from its reliance upon stamp duty to a more broadly based annual Property Tax. All very well if the government can be trusted to make such a transition revenue neutral.
Such a scheme was introduced in ACT 5 years ago. A report just released shows that stamp duty receipts have actually increased by 36% in that time. General Revenue in ACT has increased by 52% in the same time period! Hardly “revenue neutral”!
Memories of Paul Keating’s famous line – “never get between a state government and a bucket of money” – come flooding back!
Maybe it is a case of “the devil we know ..…” – rather than let a state government get its hands on a new revenue stream – under false pretences.
Given the debacle of when the NSW government last year tried to introduce an Emergency Services Levy in place of a fire levy on insurance policies – I certainly have my doubts about whether it can be so trusted! When this levy was presented to the property owners of NSW last year it was on the basis that those currently paying a Fire Levy through their insurance could expect to pay a lower Emergency Services Levy. Yippee – those who did not take out property insurance would end up paying a small Emergency Services Levy in any case and the funding of those services would then be apportioned more fairly.
Only problem! Those property owners who had been paying for property insurance saw that the Emergency Services Levy they would then be paying would be significantly higher than the Fire Levy already being paid through the insurance. The credibility of the government’s claims fell apart. The scheme was hurriedly scrapped.
I have no doubt that, if any business tried to “sell” a product with such misleading representations, the government would have no hesitation in bringing in Office of Fair Trading, ASIC, ACCC and whatever other bloated government agency it could find to punish such unconscionable business practices.
It will be interesting to reflect on all of this in another 12 months or so....