WEALTH HUB JOURNAL

Australians Don’t Believe Negative Forecasts

Everywhere you turn, experts are predicting a freefall in property prices. But consumer sentiment seems to show Australians just aren’t buying these predictions of a 20 per cent drop.

Finder Consumer Sentiment Tracker asked consumers whether they expect house prices to rise or fall over the next year.

They found that even in cities where prices may already be falling, like Sydney and Melbourne, just one in five consumers believe the negative headlines.

In fact, half of people in Sydney expect prices to rise, and 28 per cent predict they will stay the same. Sentiment is similar in Melbourne, with 56 per cent expecting an increase and 25 per cent doubtful of any change.

In Adelaide, Brisbane, and Perth, consumers are even more optimistic.

In Brisbane, the tracker showed:

• 63 per cent of people predict a rise in prices.
• 23 per cent believe they will stay the same.
• 14 per cent expect a drop.

Perth shares a similar view:

• 58 per cent expect an increase.
• 29 per cent expect no change.
• 13 per cent predict prices will fall.

Sellers Overwhelmingly Still Make a Profit

While slightly fewer properties are selling for more than the owners paid for them over the last quarter, 93.7 per cent of sellers are still making a profit.

The latest Pain & Gain Report from CoreLogic showed a decline of 0.3 percent in the number of properties reselling at a profit in the March 2022 quarter. This was based on 106,000 dwelling resales.

However, on a national scale, gains increased in 66 per cent of market jurisdictions. And the report shows that in nearly 94 per cent of sales, the seller comes out on top.

Eliza Owen, head of research at CoreLogic, says the figures align with other indicators, including:

• Slowing the growth rate of values.
• Increasing the time it takes to sell a property.
• Fall in sales volumes as access to credit has become more difficult and interest rates are up.

Across Australia, median gains are $290,000. The gain is biggest in Sydney at $415,000 and lowest in Perth at $119,000.

Median losses on dwelling resales were -$33,000 through the quarter.

In general, properties with higher hold periods resulted in higher gains, with properties held for 30+ years seeing median gains of $781,750, according to the report.

Properties held for 24-26 years also saw some of the highest gains. Owen says this is due to relatively cheap property prices in the mid-90s.

However, the median hold period for Australian properties is nine years. As dwelling values have risen 70.3 per cent since the March quarter of 2013, this sets the median dwelling value at around $309,000 nationally.

Unemployment at Record Low

May saw 61,000 Australians find employment, keeping national unemployment rates at historic lows.

The national unemployment rate continues to sit at a record low of 3.9 per cent for the third month in a row.

While around 8,000 people were added to the unemployment roster in May, the participation rate (those either employed or looking for work) is at a record high of 66.7 per cent.

“For the first time ever, more than two out of three Australians aged 15 and over were participating in the labour force,” said Bjorn Jarvis, head of labour statistics at ABS.

And there’s more good news from the Australian Bureau of Statistics. Underemployment and underutilisation rates have dropped to their lowest levels since 2008.

Underemployment has dropped 0.2 percentage points to 6.1 per cent, and underutilisation has dropped 0.3 percentage points to 10 per cent.

“The increase in May 2022 was the seventh consecutive increase in employment, following the easing of lockdown restrictions in late 2021,” Jarvis said.

Jarvis said the average employment growth of 30,000 over the past three months remains stronger than the trend before the pandemic. The pre-pandemic trend saw about 20,000 Australians finding employment each month.

However, with the tightening of the labour market comes the second worst workforce shortage in the Organisation for Economic Co-operation and Development (OECD). This is according to Andrew McKellar from the Australian Chamber of Commerce and Industry.

Sean Langcake of BIS Oxford Economics echoes the concern, saying the unemployment rate will increase the pressure on wages.

13 Million Spare Bedrooms in Australia

While the rental crisis dominates the market, there are 13 million bedrooms sitting empty in Australia.

More than 77 per cent of households have at least one bedroom to spare. And two thirds of those bedrooms are homes occupied by a single resident or couple, according to the Survey of Income and Housing.

Australia is set to see this trend increase as the population keeps “empty nests” while they age at home, having little reason to move to smaller dwellings.

John Daley at the Grattan Institute suggests replacing stamp duties with property levies to incentivise older Australians to downsize.

“That way you would be charged more for living in a house and less for selling it,” he said.

This tax change would motivate Australians who are holding on to larger properties to seek more fitting accommodations.

“At the moment we’ve got the incentives in completely the wrong direction,” Daley said. “You’re paying the stamp duty when you sell the house, but you don’t pay much for living in it.”

With the incentives flipped, homeowners wouldn’t pay a penalty for moving, but they would pay a premium to live in a larger home. This could free up larger properties for families who need the space and make it easier for all Australians to be comfortably housed.

Stamp Duty Phasing Out in NSW

Those purchasing their first home in New South Wales for up to $1.5 million can decide to pay stamp duty up front or pay an annual land tax instead.

This comes as part of changes to the state property tax system for residential property sales.

People have been calling for the government to switch stamp duty for property levies for years.

First home buyers will pay $400 annually plus a 0.3 per cent tax on the value of their land. This will allow them to avoid paying high upfront stamp duty costs.

According to The Australian, a home with a $1 million land value would come with a $45,000 stamp duty in addition to the purchase price. This new option removes that obligation for first home buyers, allowing them instead to pay an annual $3,400 land tax.

While those who take this option will pay a yearly tax indefinitely rather than a lump sum today, this lowers the barrier for home ownership for many, particularly younger Australians.

Quote of the Week

“For the first time ever, more than two out of three Australians aged 15 and over were participating in the labour force.” — Bjorn Jarvis, head of labour statistics at ABS

If you’re in the market for an investment property, talk to Wealth Hub Australia today.

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