The Census produces some interesting lessons for real estate

July, 2017 by

The results of the latest national Census last month revealed that Australia’s population has grown by almost 9% since 2011.

The 2016 Census counted 23,717,421 people in Australia on 9 August 2016, the night of Census. It’s now over 24.5 million.

The Census found that New South Wales remains our most populous state, with 7,480,228 people counted, ahead of Victoria in second (5,926,624 people) and Queensland in third (4,703,193 people). Yet it’s the nation’s capital – the Australian Capital Territory (ACT), which experienced the largest population growth of any state or territory since 2011, adding more than 40,000 new residents – an increase of 11%.

ACT is a population growth leader

Located approximately 45 kilometres from the Perth CBD in the woody hills of the Darling Scarp, Serpentine – Jarrahdale showed the fastest regional growth in the country, with a population increase of 51% to 27,000 people – up from 18,000 people in 2011. Gungahlin, a thriving northern area in the ACT, continues to flourish and is now home to 71,000 people, up from 47,000 in 2011 – an increase of 50%.

Greater Sydney continues as Australia’s largest population centre, with 4,823,991 people, with around 1,656 new people calling the Harbour City home every week since 2011. However, the population of Greater Melbourne is accelerating with 4,485,211 people, increasing by around 1,859 people every week since the last Census.

Immigration is contributing to population growth with 1.3 million new migrants arriving in Australia since 2011, with China (191,000) and India (163,000) being the most common countries of birth of our new arrivals.

Older population underpins need for stamp duty tax breaks

Our population is also getting older, which underpins yet again the need to create stamp duty breaks for empty nesters. The 2016 Census found that there are 664,473 additional people aged 65 and over since 2011. Tasmania is our most experienced state, with nearly one in five people aged 65 and over. The Apple Isle also recorded Australia’s highest median age (42 years), ahead of South Australia (40 years).

I was also heartened to see that despite many experts telling us that real estate is increasingly less affordable, monthly median household mortgage repayments have fallen since the 2011 Census. Six years ago, we were paying $1,800 a week, yet in August 2016, it was $1,755 – and don’t forget this statistic was collected just before the Reserve Bank cut interest rates in September.

Table 1: Dwelling statistics Census 2016

2016 2011
Occupied private dwellings 8,286,073 7,760,314
Median household rent (weekly) $335 $285
Median household mortgage repayments (monthly) $1,755 $1,800
Median bedrooms per household 3.1 3.1
Average number of people per household 2.6 2.6

Source: Australian Bureau of Statistics

Slight adjustments to your goals can work

July, 2017 by

To be fair, the affordability issue centres largely on Sydney and Melbourne. If your objective is to buy a first home in our southern capital cities, it might be a case of adjusting your search radar. For example, if you venture 12 kilometres from the Sydney CBD to Dulwich Hill or Summer Hill in the inner west, you’ll find 2-bedroom apartments from $650,000.

I’m also a big advocate for looking at some of our boom growth centres such as Bathurst and Wagga in New South Wales, Geelong in Victoria, Queensland’s Toowoomba and Mandurah in Western Australia. In regional NSW, for example, in towns that are just 2-3 hours from Sydney you can buy a house for $300,000. Moreover, these towns have affordable real estate, are achieving decent population growth and have diverse economies, which can underpin real estate capital growth long-term.

More government subsidies

July, 2017 by

At the same time, I was pleased to see that New South Wales Government has finally recognised a need to assist first home buyers. In June, it abolished stamp duty on new and existing homes up to $650,000 purchased by first homebuyers, while there is stamp duty relief for homes up to $800,000. It will abolish insurance duty on Lender’s Mortgage Insurance (LMI) and has restored a $10,000 grant for first-timers building a new home valued up to $750,000 or purchasing a new home valued up to $600,000.

I’m confident other state and territory governments around Australia will start to follow New South Wales’s lead.  That said, the Northern Territory’s experience illustrates the desired effect that generous first home buyer subsidies can have on first time buyers. According to Raine & Horne Darwin, around 25% of the sales of established properties in Darwin involve first home buyers, while almost 90% of land sales in some developments are to first-timers. A first home buyer who is building or buying a new home in the Northern Territory is eligible for a $26,000 first home owner’s grant. In addition, first-timers receive $2,000 to buy household goods. Up to $23,000 in stamp duty relief is available for first home buyers purchasing an established home valued up to $650,000.

Ignore the noise, first home buyers can still afford a home

July, 2017 by

The challenge of real estate affordability is mostly a Sydney and Melbourne issue. But through a combination of government subsidies and realistic goal setting, it’s possible for first timers to secure a home in these capital cities and elsewhere, writes Angus Raine, Executive Chairman, Raine & Horne.

Is it little wonder that first home buyers are confused. This month, it was widely reported in the media that Swiss investment bank UBS reckons that it would take first timers 40 years to save for a home in Sydney.

The research was based on saving to buy a home worth more than $1.2 million. Yet the latest Bankwest First Time Buyers Deposit Report revealed it will take Australian couples buying a home for the first time an average of 4.4 years to save the $103,600 needed for a 20% deposit on a median-priced home. In Sydney, the Australian bank reckons it will take closer to 8 years to save for a deposit. That is a long way short of the Swiss bank’s estimates. Also, don’t forget that wages paid to Sydney and Melbourne workers are considerably higher than in other states – so we can’t have our cake and eat it too.

The Federal Budget delivers a few changes for investors to consider

May, 2017 by

The federal government’s determination to commit to negative gearing and capital gains tax discounts in last week’s budget is welcome relief for real estate investors. However, there are a few measures that seemed to have appeared from out of the blue, which will require further detail, writes Angus Raine, Executive Chairman, Raine & Horne.

Negative gearing going nowhere

Pleasingly, the Government reiterated in the budget that it has no intention of removing or limiting negative gearing or changing the capital gains tax discount. To do so, would add to the tax burden on Australians trying to provide a future for their families. This practical decision maintains the supply of housing for our growing population, keeps rents affordable and eases the burden on social housing. It will also give many Australians the confidence to keep investing in bricks and mortar to build long-term wealth.

Depreciation deductions limited for residential rental properties

While the government left negative gearing intact, the decision to tighten some deductions will create confusion among property investors. For instance, plant and equipment depreciation deductions will be limited to equipment purchased by investors in residential real estate properties from 1 July 2017. I’m not an accountant, so I looked to the National Tax and Accountants’ Association (NTAA) for some clarification. The NTTA says plant and equipment items are usually mechanical fixtures or those which can be easily removed from a property such as dishwashers and ceiling fans. According to the NTAA this is an integrity measure to address concerns that some plant and equipment items are being depreciated by successive investors more than their actual value. I have no idea if this double-dipping is happening, however, we need to see more detail from the government about this measure.

Change to travel expenses

Travel expenses related to residential rental properties will also be disallowed. Deductions for travel expenses related to inspecting, maintaining or collecting rent for a residential rental property will be disallowed from 1 July 2017. This measure will not prevent investors from engaging third parties such as real estate property managers such as Raine & Horne – property management services will remain tax deductible.

To find out more about what the taxation measures announced in the Federal Budget mean for your investment property, please contact to your accountant.


Australia’s real estate affordability

April, 2017 by

Tax breaks for retirees and a return to old-school values are the answer to Australia’s real estate affordability issues, writes Angus Raine, Executive Chairman, Raine & Horne.

As real estate values keep charging ahead in most parts of Australia, the housing affordability debate continues to rage.

Half of the country’s leading economists believe that Millennials face a bleak economic future compared to their parents’ generation, according to a recent survey by  These economists cite housing affordability as the primary concern, followed by slow wages growth, fewer career opportunities, and the trend from full-time toward part-time work.

However, the survey also showed that 35% of economists and investment experts disagree with that grim assessment. They argue that housing affordability and wages growth can change over time with social shifts and policy changes.

I’m with the 35%. I believe that with some social shifts and policy changes, we can tip housing affordability back in favour of first-home buyers.

Ease the stamp duty burden

April, 2017 by

Let’s start with stamp duty breaks for empty-nesters aged over 70. Currently stamp duty costs are stopping many empty-nesters in Australia’s capital cities from downsizing to a smaller home or moving out of the city. The result is a low supply of houses in the second-home-buyer market, which, in turn, is causing affordability issues for first-home buyers.

I read with interest a report from consulting firm SGS Economics and Planning, which noted that it’s becoming increasingly difficult for young first-time buyers to enter the market in Sydney because retirees are choosing to stay put in desirable suburbs. It seems to me that many of these retirees would prefer not to take a hit from stamp duty, even if it means they have to forego the dream of heading to a retirement home on the coast.

Stamp duty erodes retirement savings, so it’s little wonder empty-nesters might be hesitant to move on from their family home. It is a serious consideration retirees need to weigh, especially those who retired before the advent of compulsory superannuation in the early 1990s and therefore have limited savings.

Giving older Australians a break on stamp duty would be a win-win: retirees could downsize and move to the places where they want to retire, meanwhile freeing up housing stock in our capital cities.

Remember the property ladder

April, 2017 by

In the past, Australians were happy to take measured steps up the property ladder towards their dream home. Some were even prepared to take many decades working their way up through a succession of apartments, terraces and bungalows until they had the financial wherewithal to acquire a dream family home.

For me, the key to climbing the property ladder is location: if you graduate to a more desirable suburb with your next home purchase, and do the same thing the next time you sell, you will build value faster than if you stay in the same suburb and keep buying grander homes. It might be a case of trading off an extra bedroom to live in a great location.

But over the last few decades, there’s been a cultural shift. People don’t talk about the property ladder any more. Buyers have come to expect that they should get their ideal family home right now, rather than arriving there through a gradual journey.

I’m calling for another cultural shift – back to the notion that a family’s first property is only the initial step on the property ladder. A change in perception of what a first home means, a new attitude toward growing value gradually as you climb the property ladder, and stamp duty changes freeing up the supply of homes are what we need to prove the economic naysayers wrong.

Will changes to negative gearing hurt the rental market?

March, 2017 by

The answer quite simply is yes. A proposal pushed by the Federal Opposition prior to the last election to restrict negative gearing to new properties was universally howled down by almost all sectors of the property market with experts saying it will lead to higher rents and drive house prices up even further.

Labor’s proposal to limit negative gearing to new housing from July this year and reduce the capital gains tax discount to 25% was slammed by the experts who say the move would hurt renters the most and do nothing to help housing affordability.

Renters in major metropolitan cities like Sydney are already paying up to $2,000 a week due to low stock and low vacancy rates and property experts say any change to negative gearing policy would drive up rents further and affect the “most vulnerable people in the community”.

REIA president Malcolm Gunning said the major beneficiary of negative gearing are renters because it has proven to increase supply. “The rate of increase in rents has plummeted since investment in housing started to pick up at the end of 2011,” said Malcolm. “For Australia, rents increased by 0.7% for the year ending September 2016 which is the lowest annual increase since March 1995.”

Changes to negative gearing would have an enormous impact on an already tight rental market and see less rental properties causing rents to rise even more. A report by property analyst SQM Research showed Labor’s proposed negative gearing changes could see rents rise by as much as 6% and property prices fall by 15%.

Raine and Horne Executive Chairman Angus Raine, said any change to negative gearing was “personal”.

“I represent the fourth generation of my family to lead Raine & Horne and I’m taking the ALP’s proposals personally because we’ve been helping Australians build wealth for four generations and 134 years,” said Angus. “The end of negative gearing will mean investors can no longer write off rental losses against other income, deterring people from investing in property at all.”

Recent reports showed the Government was now providing less than 12% of rental properties compared with 25% prior to the introduction of negative gearing in the late 1980s.

The report argued that most first-world countries provide some kind of tax relief or subsidy to ensure the supply of rental housing and if negative gearing was removed or changed in a way that leads to investors leaving the market, it would create other problems. It’s a sentiment Angus agreed with. “If landlords lose the ability to write off losses on investment properties, and current rents don’t cover the mortgages and other costs they incur, they must increase rents until they do,” he said.



The Great Australian Dream is still achievable

February, 2017 by

The Great Australian Dream is still possible, writes Angus Raine, Executive Chairman, Raine & Horne.

I recently read a media release issued by a mortgage broker breathlessly claiming the Great Australian Dream was essentially on life support.

For starters, I’ve heard this declaration, or similar, countless time over the past 30 years, yet owning a house still seems achievable for many Australians. Also once you dig below the sensational headline, claiming that 90% of the survey respondents believed owning a free-standing home was impossible, the mortgage broker, who makes money from the sale of property, said it appears the traditional dream is evolving. The media release elaborated: “Australians no longer consider owning a free-standing home as the ‘Great Australian Dream’. Instead, they believe the ‘dream’ has evolved to include any style or type of property.”

Charles Darwin will be spinning in his grave. Of course the way we choose to live continues to evolve. One man’s cave is another man’s New York loft apartment. The facts are there remain unresolved housing affordability issues in some of our biggest cities. But it’s never been a cinch to buy a house. I remember interest rates of 16 and 17% in the late 1980s. Likewise, we didn’t have the massive banking competition in those days that we have today. More competition gives us the chance to borrow money, and at affordable rates, which are currently at historic low levels.

Go west (north or south) young man

To my way of thinking, with some compromises about where you’d like to live and where you can afford to buy, it is still possible to buy a free-standing house. For example, I really urge people to consider the affordable housing offered by some of Australia’s favourite regional towns. The trick is to buy into a regional town that has a diversified economy and plenty of job opportunities to sustain long-term real estate growth. In the northern NSW town of Coffs Harbour, for example, there are more than 79,000 jobs across 19 sectors. According to a federal government website, in addition to jobs in local agriculture, the Coffs region employs around 79,000 workers, with about 17% working in the local healthcare sector, 14.5% in retail, 10% in accommodation and education and about 5% in manufacturing and construction. What is more, in Coffs Harbour, it’s possible to buy a house for $415,000, according to Raine & Horne. Likewise, in the state’s south, a house in the bustling town of Goulburn will set you back a very affordable $339,000 and just $320,000 in Nowra, which is located on the state’s south coast.

It’s also worth keeping in mind that a well-selected free-standing house, for which you paid a fair market price, should continue to rise in value over the long term, and the time will come when you own your property mortgage-free.