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ACT property sector gloomy but improving

By johnboy - 18 April 2013 13

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The Property Council are sharing the results of their latest survey on sentiment amongst the property owners of Canberra:

Uncertainty in the Federal political environment and ongoing concern about domestic economic conditions continues to harm ACT property sector confidence, with new research showing an ongoing negative outlook for the industry.

The latest Property Council of Australia-ANZ Property Industry Confidence Survey shows a shift in sentiment from 90 on the index for the March 2013 quarter to 96 for the June 2013 quarter. A score of 100 on the index is considered neutral.

The quarterly survey polled more than 3100 property industry professionals across all Australian states and territories on their forward-looking views regarding the business and political environment, the economy, employment intentions and other factors.

Property Council ACT Executive Director, Catherine Carter, says the latest Survey shows ACT continues to have the lowest sentiment of any mainland state or territory, though this had improved marginally from the March 2013 quarter.

What’s Your opinion?


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13 Responses to
ACT property sector gloomy but improving
arescarti42 9:57 pm 16 Jun 13

countach said :

arescarti42 said :

thebrownstreak69 said :

arescarti42 said :

I don’t think it has twigged to most. Negatively geared investors need high capital growth to come out ahead on their investment. The fact that they aren’t all selling out makes me think they’re either all innumerate, or they expect a return to strong capital growth in the future.

It’s more likely that they aren’t negative geared.

Statistically speaking it’s not. According to the ATO 63% of property investors are negatively geared. That’s about 1.1 million landlords betting that prices are going to start rising fast enough to make up for all the money they’ve been pissing away in the mean time.

There’s a difference between being negatively geared on a cash basis and being negatively geared from the ATO’s point of view. For example, you could have positive cash flow, but a loss due to capital works deduction and depreciation. You’re not going to sell if you’ve got positive cash flow.

Fair point, however that’s likely to be an extremely small minority of negatively geared investors.

My understanding is that those with positive cash flow are typically those with high incomes on the highest tax bracket, and thus have the greatest potential for tax savings.

The majority of negatively geared investors (72%) have a taxable income of less than $80k pa. Less than 5% are in the top tax bracket.

countach 7:54 pm 16 Jun 13

arescarti42 said :

thebrownstreak69 said :

arescarti42 said :

I don’t think it has twigged to most. Negatively geared investors need high capital growth to come out ahead on their investment. The fact that they aren’t all selling out makes me think they’re either all innumerate, or they expect a return to strong capital growth in the future.

It’s more likely that they aren’t negative geared.

Statistically speaking it’s not. According to the ATO 63% of property investors are negatively geared. That’s about 1.1 million landlords betting that prices are going to start rising fast enough to make up for all the money they’ve been pissing away in the mean time.

There’s a difference between being negatively geared on a cash basis and being negatively geared from the ATO’s point of view. For example, you could have positive cash flow, but a loss due to capital works deduction and depreciation. You’re not going to sell if you’ve got positive cash flow.

dungfungus 12:23 pm 18 Apr 13

HiddenDragon said :

Just saw this – head for the hills!

http://www.abc.net.au/news/2013-04-18/auditor-warns-china-debt-crisis-could-dwarf-gfc/4636648

It’s a worry, no doubt.

HiddenDragon 11:43 am 18 Apr 13
arescarti42 11:33 am 18 Apr 13

thebrownstreak69 said :

arescarti42 said :

I don’t think it has twigged to most. Negatively geared investors need high capital growth to come out ahead on their investment. The fact that they aren’t all selling out makes me think they’re either all innumerate, or they expect a return to strong capital growth in the future.

It’s more likely that they aren’t negative geared.

Statistically speaking it’s not. According to the ATO 63% of property investors are negatively geared. That’s about 1.1 million landlords betting that prices are going to start rising fast enough to make up for all the money they’ve been pissing away in the mean time.

HiddenDragon 11:27 am 18 Apr 13

Unless Australia is hit by the perfect economic storm, I doubt whether there’ll be a true collapse – deepsouf’s comments are pithily relevant to the chances of that – but it’s hard to see Canberra escaping an easing/decline/slump (choose your favourite euphemism/cliche) given the Budget pressures facing the Commonwealth and Territory Governments.

Steve Keen recently suggested that cashed-up exiles from the awful air pollution in Chinese cities might help to keep up prices in the more salubrious parts of Sydney etc., but I can’t see too many of those folk heading for the ACT.

thebrownstreak69 11:17 am 18 Apr 13

arescarti42 said :

I don’t think it has twigged to most. Negatively geared investors need high capital growth to come out ahead on their investment. The fact that they aren’t all selling out makes me think they’re either all innumerate, or they expect a return to strong capital growth in the future.

It’s more likely that they aren’t negative geared.

OpenYourMind 10:51 am 18 Apr 13

I think one thing that may push real estate investment down in Canberra is the enormous bundled costs for rates and land tax (for rental properties).
Just picking a random house: (http://www.allhomes.com.au/ah/act/sale-residential/3-shout-place-pearce-canberra/1316845844511), the land tax if rented out is $6138 + Rates $2233. So that’s $160 a week the investor needs to fork out before paying back loan costs, insurance, management fees, repairs etc. Yes, it’s all tax deductible, but it’s still one hell of a lot of money outlaid.
A relative of mine was considering investing in Canberra but upon seeing the land tax and doing the sums it was a poor proposition.

arescarti42 8:51 am 18 Apr 13

deepsouf said :

The age of 10-20% yearly growth (i.e. the late 90s and early 00s) is over. People will take time to get used to that, hence the slightly gloomy sentiment.

I don’t think it has twigged to most. Negatively geared investors need high capital growth to come out ahead on their investment. The fact that they aren’t all selling out makes me think they’re either all innumerate, or they expect a return to strong capital growth in the future.

deepsouf said :

So addicted is the establishment to housing that prices will never be permitted to plunge.

That was the thinking in Ireland, the US, and most of Europe as well. The US Government chucked well over half a trillion dollars and all sorts of crazy schemes to try and save their housing market, but it still sank like a lead balloon. I’m not suggesting that the same will happen to Australia, but the system is way too big and distorted for the government to convincingly control.

deepsouf said :

The result is tightly restricted land releases by state governments, banks who lend to almost anybody because their wholesale funding is guaranteed by the Commonwealth, and laws designed to artificially boost the market (e.g. negative gearing, FHOB, record low interest rates, etc). Add to that high immigration rates and the fact our mortgages are recourse debts (unlike the US), and yes, in my view property prices will always go up over the medium to long term. Unless the very nature of the system changes

It’s worth noting that restricted land supply, full recourse loans, lax lending and high immigration were all characteristics of many US states that went completely belly up.

urchin 8:47 am 18 Apr 13

How does that work? Have they inventd a time machine and are using it solely for the purposes of determining property market sentiment when they could have gone back in time and killed hitler?

Or does the june quarter end in mid april? Maybe its a southern hemisphere thing… Up is down, day is night. Madness, i say, it’s all madness.

Deref 8:08 am 18 Apr 13

“Improving” should mean that property prices are plummeting. Somehow I don’t think that’s what they mean though.

thebrownstreak69 8:07 am 18 Apr 13

Property did nothing for a few years and got cheap, then went crazy for a few years and got expensive, now it will do nothing for a few years again.

Pretty standard market cycle I’d say.

deepsouf 1:51 am 18 Apr 13

The age of 10-20% yearly growth (i.e. the late 90s and early 00s) is over. People will take time to get used to that, hence the slightly gloomy sentiment.

But the prognosticators of a coming crash (or steady stagnation) do not convince me. No doubt real estate is very overvalued. Yet so addicted is the establishment to housing that prices will never be permitted to plunge. Federal pollies need the votes of over-45s (almost all of whom own property) but can ignore under-35s (few of whom do) because the latter bloc substantially outnumbers the former, to say nothing of the huge proportion of teenagers who fail to enrol to vote. State governments are totally dependent on revenue from land rates and stamp duty. And most people have basically all of their net worth tied up in their home (plus several investment properties for many) or in super which is heavily invested in property or companies who profit from it.

The result is tightly restricted land releases by state governments, banks who lend to almost anybody because their wholesale funding is guaranteed by the Commonwealth, and laws designed to artificially boost the market (e.g. negative gearing, FHOB, record low interest rates, etc). Add to that high immigration rates and the fact our mortgages are recourse debts (unlike the US), and yes, in my view property prices will always go up over the medium to long term. Unless the very nature of the system changes – which I doubt would flow from some APS redundancies after the election.

I feel sorry for my grandkids.

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