Government is the core problem afflicting the property market: Terry Ryder

All the core problems afflicting the real estate industry can be encapsulated in one word: government. 

All three levels of government are key forces impacting property – and none of them are forces for good. State governments, which are responsible for real estate laws, have the greatest impact and do the greatest damage. 

The first of many problems is that the only interest politicians have in the real estate industry is its role as a cash cow. The concern of most politicians for property starts and ends there. 

Stamp duty, land tax, capital gains tax, rates, infrastructure charges and the GST – property is a core source of funding for all levels of government. 

These taxes hurt property consumers because they add layers of costs. They are a massive burden impinging on the critical matter of affordability. Many politicians say they care about housing affordability, but the lack of action suggests otherwise. 

Grants to first-home buyers have never been an effective remedy. They create short-term distortions in the market and do little to address the core issues. 

We have the bizarre anomaly where a state government will provide a grant to a buyer of a first home and then charge her more in stamp duty when she buys that first home. Only a bureaucratic mind could make sense of that. 

Beyond short-term tinkering with grants, the response by federal and state governments to the issue of affordability has been deafening silence. 

State governments also harm real estate through the lack of a timely and effective response to problems that arise, particularly those that relate to consumer protection. 

Most state and territory governments have changed real estate laws during the past decade or so. These laws have seldom been effective in protecting buyers and sellers, for two reasons. 

Reason one: before legislating the politicians have consulted “the real estate industry” for advice on what to do. This is a farcical approach because the real estate industry – primarily developers and real estate agents – is the problem. It’s like consulting the mafia for advice on how the stop the drug trade. 

Reason two: having enacted laws to deal with matters such as under-quoting in ads, dummy bidding at auction and sundry other rorts, politicians render them irrelevant by failing to enforce them. Each jurisdiction has an office of fair trading or consumer affairs department, and their track record in enforcing consumer protection laws is pitiful. 

The biggest rip-off in real estate is the growing practice whereby developers offer kickbacks to professionals who bring them buyers for off-the-plan apartments. Accountants, financial planners, real estate agents, marketers masquerading as buyers agents and other “advisers” can earn up to $35,000 for each buyer they recommend. 

When we asked Queensland’s Fair Trading Minister, a fresh-faced kid named Jarrod Bleijie, what he was doing about it, his response was: “This is not an issue that has been raised with us by the real estate industry.” 

Translation: he knows nothing about it and doesn’t intend to find out. 

And of course the industry hasn’t raised this issue with the minister. Key elements of the industry are benefiting from this rip-off. 

The other way state governments are harming real estate is with their economic policies. State and territory governments seem to believe we’re in a recession and that austerity is the answer, with public service numbers cut, programs slashed and jobs-creating projects scrapped. 

Victoria, NSW and Queensland have recently elected Liberal-National governments. Each new regime seems to believe it has a solemn duty to tear down everything started by their predecessors – and to hell with the consequences. 

Residents of regional areas of Victoria, who probably expect a few favours from a conservative government, must be wondering what hit them. Government offices are being closed, which is costing local jobs. Programs and project funding has been slashed or refused, with particular impact on universities and TAFE campuses, again costing jobs. 

Tasmania, which is the nation’s struggle state, desperately needs strong leadership and economic stimulus from its government. Instead it’s getting austerity. New infrastructure spending is almost non-existent and there is no growth anywhere. 

I make my living identifying the future hotspots around Australia. I can’t identify a single location in Tasmania worthy of recommendation – and the state government is a major part of the problem. 

I’m beginning to think we’d all be better off if we scrapped this layer of government. New Zealand doesn’t have stamp duty or land tax because it doesn’t have this middle tier of government. Do we really need it?

Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.