The much dreaded Federal Budget has been presented and from a housing market perspective it is of little consequence. There was nothing that directly, or for that matter indirectly, impacted on property prices. However, the reduction in the corporate tax rate to 28.5 per cent from July 2015 adds a pressure to consider investing under a corporate structure where an investment property is not negatively geared. This is particularly so where the investment is going to be held for a considerable period. The difference between the discounted (50 per cent) capital gains tax (CGT) personal marginal rate and the corporate tax rate is now minimal and over time the benefit of the lower corporate tax rate on income could relatively quickly absorb the positive CGT discount benefit.
Tis the season to be jolly’ with this year’s Christmas bringing good news to our property market!
Rents are down and there is capital growth in most capital cities. All players in the market will be, or should be happier and feeling more comfortable about their financial positions. This situation bodes well for a happier Christmas with things looking as though they will be better than they have been for a number of years.
All is going well for Australia relative to most developed countries of the world. The Reserve Bank and the government should be comfortable with the transition process taking place as the country moves away from the mining boom to a more normal economy.
It was only about 18 months ago that the housing market was full of gloomy news. Many of the worst performing areas in Australia were on the Gold Coast where there was a significant oversupply of stock and values had fallen by amounts not seen since the Great Depression.
Markets are rebounding on the back of lower interest rates and a lack of available stock for those competing to purchase. In the last quarter, house and land values have increased by 0.59% on an Australian wide basis while units have presented an increase of 1.89%. Graph 1 displays the trend in the data, which is clearly presenting growth.
Rate reduction to help home owners and increase affordability
It has been a very busy month with several events and important announcements made.
For me, the budget is what I expected with the important issues and commitments being delayed until the future. In the near term, it could be argued that the budget is negative towards growth. In the medium term it moves to repair some of the structural problems caused by the so-called spreading of the mining boom benefits among the population. It does so through the removal of the baby bonus and the increase in the Medicare levy to help fund the national disability reform. Perhaps this correction will impact on housing markets but I doubt it as no change is significant enough at an individual level to negatively impact on the capacity of a family to buy a home.
Australian property market statistics reveal better affordability in April
Residex figures for the month of April are being finalised and the property market update is due to be released next week. The latest research and analysis is showing that the house and land market in Sydney, Melbourne and Canberra experienced negative growth of -1.42%, -1.14% and -1.12% respectively in the month of April. All other capital city markets achieved positive growth for the month.
Further research has revealed that the affordability position has improved and the May interest rate reduction will help home owners. The official cash rate now sits at 2.75 per cent. House and land markets in Sydney and Melbourne, which are the most expensive markets in Australia, have moved to their most affordable level since August 2009 when the official cash rate was at 3 per cent.
Stay tuned for the complete market update next week.
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