Affordability has become the quintessential ‘issue of the day’ for Australia’s major urban property markets. Of course I refer namely to Melbourne and Sydney, with the latter being the prickliest thorn in the side of various government regulators right now.
Even as the Victorian state government announced its plan to help first homebuyers claw their way back to the threshold of the proverbial property door this weekend past, reports have emerged that make Sydney appear even further from the reach of those trying to enter the real estate market.
Daniel delivers
Victorian Premier Daniel Andrews, announced a cost-of-living package on the weekend to help those who “feel like they’ve been locked out of the housing market” in Melbourne.
Seemingly seeking tangible solutions to ongoing concerns around an entire generation that’s been forced onto the periphery of property circles as lifelong tenants, the Andrews government will make drastic amendments to the state’s stamp duty tax legislation in July this year.
First homebuyers will no longer incur any stamp duty liability on a property purchased for $600,000 or less. And substantial stamp duty concessions will apply to properties between $600,000 and $750,000, be it a new or established dwelling.
As usual, fear mongers were at the ready, suggesting the changes could see a further spike in housing markets already said to be ‘overheated’. But according to the government’s numbers analysis, the uptake as a result of this tax break won’t be so staggering as to create a ‘disturbance in the force’.
It’s expected around 25,000 people per year would benefit, with average savings for first time buyers in the vicinity of $8,000.
“This will help them get their foot in the door,” said Andrews. “It means they can put extra money towards what matters most – buying their first home.”
Indeed, some of the potential savings are not to be sneezed at. The biggest winners are those who outlay $650,000 on a home. They’d currently pay $34,000 in fees, but as at July that will be reduced to about $11,000.
The government’s generosity will cost the state budget $800 million over four years. But it doesn’t end there.
The first homebuyer’s grant, which is currently $10,000 for anyone buying a newly constructed property for under $600k in Melbourne, will be doubled for regional Victorians.
In other words, if you’re a first time buyer, looking to purchase a brand new home in the country for around $650,000, you could save close to $33,000!
Mind you, considering how much the state has raised in stamp duty revenue since the local market started on its boom phase some time ago, they can afford to exercise some good will.
In 2013-14 the state took $3.5 billion in stamp duty. Fast-forward to the present day, and the government currently rakes in a whopping $5.7 billion through the detested tax. So that $800 million blow to the budget? Yeah…chump change!
Treasurer Tim Pallas said the reforms were “important steps towards ensuring today’s families and future generations will be able to afford somewhere to live.”
In a direct dig at big brother in Canberra, and the seeming inertia coming out of the capital around the affordability issue, Pallas adds, “The federal government may know how to talk about housing affordability – but this is what real action looks like.”
So…what are you going to do about it?
A recently released, five year retrospective analysis of median dwelling values across Australian suburbs demonstrates the reality of our nation’s ongoing affordability crisis.
Even though numerous commentators and government regulators have attempted to lay blame for the problem on a whiny, over-indulged younger generation with ideals beyond what they can reasonably afford.
At the end of 2016, only 7.6% of suburbs across the nation had a median house value under $200,000 and 5.9% had a median unit value under $200,000.
Conversely, 11.4% of suburbs had a median house value of at least $1 million, while 3% had a median unit value of $1 million plus.
Highlighting the affordability decline further, in 2011, 53.5% of suburbs had a median house value of $400,000 or less and 69.8% had a median unit value of $400,000 or under. By the end of 2016, these proportions had fallen to 41% and 55.3% respectively.
Logically, if you want to talk about where reforms are required to make the affordability issue a little less of, well, an issue, for first time buyers, then we cannot neglect to mention Sydney.
In 2011, the proportion of Sydney suburbs with median house prices of $400,000 or less was 21.2%. Units painted a brighter picture at 38.8%.
Fast-forward five years later, and the figure for suburbs with a median house price of $400,000 or less now sits at 0.1%. Yes…you read that correctly! And for units? Well, only 6.5% of Sydney suburbs harboured options under $400,000 at the end of last year.
Alarmingly, the figures reveal that there are now more suburbs across the Harbour City with a median house value of $2 million than under $600,000.
In other words, if you happen to be a relatively low-income earner (the key term here being ‘relative’), such as you’d expect as a first homebuyer just starting out in life, it’s likely you’ll be competing with hundreds of others in a rapidly declining pool of affordable stock.
Perhaps its time for the power’s that be in NSW to take a leaf from their southern neighbour, with clear, concise action on Sydney’s affordability issue, before an entire swathe of the population is pushed out of the city and surrounds for good.
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).