24 October 2022

Home Truths: Realities of the housing market in a public service town

| Chris Johnson
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aerial view of Canberra homes

The comings and goings of the APS have an impact on Canberra housing. Photo: File.

Australian Public Service employees have always had an impact on the Canberra housing market – both sales and rentals – because so many of them live and work in the capital.

Depending on individual contracts and employment status, durations in the ACT vary from fleeting short-stays to lengthy permanency.

And then there are the hordes of people working for industries that service the sector. They need homes too.

But while the impact is always there and always significant, it is not as profound as it has been in times past.

READ MORE Home Truths: a Region campaign on Canberra’s housing crisis

When John Howard slashed public service numbers after being elected in 1996, housing prices plummeted as bureaucrats left the ACT in droves.

There hasn’t been a repeat of that magnitude since, although the Coalition’s public service decentralisation push just five years ago held a threat of a potential similar outcome.

It didn’t turn out that way, of course, but the public service is often used as election campaign fodder, which inevitably has ramifications for Canberra’s housing market.

The Coalition invariably threatens cuts to the public service when seeking election or reelection.

These tactics are unsettling for homeowners and influential on the overall housing market.

At this year’s federal election, Labor promised to employ more public servants while reducing external consultants’ spending.

READ MORE Where house prices have fallen the most over the last three months

Now in office, Labor is continuing with its plan, which certainly has implications for housing in and around Canberra.

As of December last year, 59,724 Commonwealth public servants were located in the ACT. That is 38.3 per cent of the overall APS workforce.

NSW is home to 17.1 per cent of the APS workforce, with 40 per cent of those employees in regional NSW, which includes Queanbeyan.

APS numbers grew during the pandemic. There was a 4.8 per cent increase between December 2020 and December 2021.

All of these factors affect housing affordability and accessibility in and around Canberra.

And it’s not just housing sales; the rental market has become increasingly competitive and difficult.

READ ALSO Feds dash Territory’s hopes of $100 million housing debt waiver … for now

Independent Property Group’s director of project marketing Wayne Harriden explained recently how investment property owners had taken advantage of house prices over the past two years.

“We’re seeing a lot of first-time investors entering the market to take advantage of the high demand for rental properties in Canberra,” he told Region.

“A wave of investors from 30 years ago has exited the market, providing new opportunities for the next generation of landlords.”

The following are a few case studies of recent housing experiences involving public servants. They are all actual examples, but names have been changed.

Case Study 1

Brenda, a middle-aged executive-level public servant working in one of the ‘big’ departments, needed a new home two years ago following a marital breakup and financial settlement with her former partner.

“Easier said than done,” she told Region.

“I lived with friends and family for more than a year until I could find a place that was suitable for me and that I could afford. It was a tough search.”

She seized an opportunity when another public servant could no longer manage the repayments on their mortgage.

Brenda bought a small apartment in Kingston but had to convince the bank she could meet mortgage repayments.

The only way she could do that was to take on a tenant.

Case Study 2

Susan runs her own business. Her clients are primarily Canberra’s public servants.

She sold her apartment at the height of the COVID pandemic almost two years ago, believing the bubble was about to burst and that then was the optimum time to sell if she wanted a good return.

She took the first offer of $550,000. It was a quick and easy sale.

But she made no real profit, only recovering what she had invested in renovations.

Her expectation that prices would fall proved to be wrong. The apartment is now valued at $650,000-plus.

Susan, a single mum with a young family and a good income, rents a small house in the northern suburbs because she can’t buy back into the market.

Case Study 3

Bob and Carol are both recently retired senior public servants. While some similar couples might retire to the coast, they had plans to sell their family home in one of Canberra’s leafy southern suburbs and move to Melbourne.

They were ‘gobsmacked’ at how high their home was valued.

Realising that rising prices will keep so many young people out of the market, Bob and Carol have decided to rent their home to their own public servant children and help them buy it – part inheritance to make it affordable for the kids.

Bob and Carol have bought a flat in inner Melbourne and are keeping the family home in Canberra – for now.

Case Study 4

Adam, a young public servant on an upward trajectory, recently bought a fairly new apartment in Woden because it looked trendy and was close to his office.

Rising interest rates are making it a struggle.

But he also has the added issue of being offered a promotion – out of state.

“I love my flat and don’t want to leave it,” he said.

“But I also want to progress my career. This is a good opportunity.

“The extra money will help me to pay it off and I know plenty of young public servants like me who would rent it from me because they can’t find anything anywhere else. Or do I sell and buy a place where I’d be working?”

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Incidental Tourist10:40 pm 24 Oct 22

Case Study 2 – business woman sold “believing the bubble was about to burst”. Sounds like this “get rich quick business plan” did not work out. Study 1 – EL1/EL2 middle aged single following “financial settlement” can’t afford tiny apartment on 115-160K wage? No, not now! A couple of years ago when “business woman” from case study 2 was selling cheap. So this EL failed demonstrating “Strategic Focus” competency level in managing their own finances. Folks in case study 3 did not go through divorce in middle ages. They stick to each other, which required tolerance and work. No marriage is perfect. They worked hard and saved raising kids. Their wealth is the result of their life long effort. Case study 4 is a young person who focuses strategically and is not afraid to take calculated risk. This is why he is in a better position than Exec Level in middle ages in case study 1.

Lets be honest – the issues in housing comes down to federal taxation policy with the negative gearing incentives that benefit those with high incomes and assets to get even more assets under their belt. It is literally a policy which allows the rich to get richer – on the pretence it stimulates the rental market. There are little controls by state and territory governments to stop house owners to ‘bank’ properties and leave them vacant.
No federal government has the intestinal fortitude to phase out negative gearing incentives in taxation legislation – despite all their bleating about making it easier for young homeowners.

devils_advocate2:49 pm 25 Oct 22

There was a window of opportunity to get rid of negative gearing when interest rates were at historical lows and a vanishingly small number of rental properties were running at a loss. Doing it now would be political suicide.

“There was a window of opportunity to get rid of negative gearing ….
Doing it now would be political suicide.”

So you agree with the over-all economic benefit of removing recognisable and inefficient tax advantage (see also CGT discount) but now object on purely political grounds.

Given that, I take it you also have no disagreement with taxing imputed rents on land, additionally where it is used for private investment though short of taxes on full commercial enterprises.

Finagen_Freeman5:36 pm 28 Oct 22

Bang on.
It is not addressed because it affects those who make policy.

Pretty sure the average retail worker would vote to stop giving away taxes which go back to those with an investment property.

If ‘investors’ were reduced in number then house prices would not rise and markets would be more equitable.

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