A climactic finish to 2016: Robert Simeon
Much like the final episode for a soap opera where the viewers are left waiting in the balance to know the outcome for the December quarter GDP.
Nobody saw this coming although for some strange reason I welcomed the result simply because it sent a firm message to Canberra to start doing something. Over the past six years all the federal government has done in terms of property prices is to pour more accelerants on the investment and established housing markets.
Despite tighter lending requirements being introduced in late 2014, Sydney real estate has continued to run amok climbing another 13.1 percent in the year to November. When you analyse the data over the last four years prices are up 60 percent and still increasing. What we do know with the current market is that prices are being driven by record low stock levels (see graphs below) marinated with record low interest rates.
As a result, we now see new data where the percentage of first home buyers in the owner – occupier market has plummeted to the lowest levels in twenty – five years. The banks internal data obviously has them concerned where over the past week they have raised the rates for interest only loans so they are now obviously starting to give the tree an almighty shake. It must also be noted that recently the banks stopped lending to Asian buyers in the off – the – plan markets although not much was said when these announcements were made.
Australian Treasury have just released a Working Paper – Foreign Investment and Residential Property Price Growth where they found there is absolutely no link to foreign buyers and high residential price growth. I wonder what market they are looking at when we see that Sydney house prices are up 60 per cent over the last four years. Maybe Treasury should ask the banks the reasons why they stopped lending?
Of course, they did not mention those Significant Investor Visas (SIV) which came into force on 24 November 2012 – aimed at attracting China’s super wealthy – China accounts for 89.9 per cent of SIVs issued. Since the introduction approximately 1600 SIVs have been issued for foreign applicants prepared to spend $5.000 million on complying investments. After a period of four years the applicants are eligible for permanent residency. The federal government is aware of recent reports that outlined that around 60,000 Chinese millionaires want to invest in Sydney and Melbourne.
The question I then put to the Prime Minister: Sydney and Melbourne are the two hottest property markets in Australia – why does he feel the need to further drive these markets by allowing 100 per cent of off – the – plan properties to be marketed offshore and why, do we need SIVs in the first place? If he were to cut off – the – plan from 100 per cent to 50 per cent and then shut – down the SIVs then we would start to see the property markets easing. Real estate agents will hate me for suggesting such a recommendation but I can live with that.
Whilst we are making much needed changes to the Australian property landscape it’s also high time investors had a cap on the number of properties they can own. With the Prime Minister’s popularity in the polls plummeting why not, introduce a Land Bank Tax and then get those 100,000 empty apartments in Sydney leased out to the market as they should be.
Now should you require further convincing please take a moment to analyse the following data that was extrapolated from pricefinder and compiled by our own RWM Research as at 1 December 2016. It certainly paints a very ugly picture that requires immediate action.
Mosman houses first then apartments below – 1998 to 1 December 2016.
Source: RWM Research and pricefinder
Cremorne houses first then apartments below – 1998 to 1 December 2016.
Source: RWM Research and pricefinder
Neutral Bay houses first then apartments below – 1998 to December 1 2016.
Source: RWM Research and pricefinder
Now if you take a moment these same results would be mirrored across other Sydney suburbs so it should be clear by now the Sydney real estate market no longer requires your government’s stimulation. Who knows that by taking immediate action your embarrassing polling might even bounce? What the Sydney property markets actually need now is organic growth not artificial.
Whilst you are on the job please call your mate Mike Baird and tell him to take an axe to his insidiously high stamp duty which is why we have record low stock levels. You might even like to explain to him that from an economic stand – point less can mean more.
We will be back in 2017 where we will take – up where we left off and no, Australia will not be in recession when we return.
Have a Merry Christmas, a safe and wonderful New Year.
ROBERT SIMEON is a director of Richardson Wrench Mosman and Neutral Bay and has been selling residential real estate in Sydney since 1985.
He has also been writing real estate blog Virtual Realty News since 2000.