Making big news last week was the RP Data announcement that after 17consecutive months of solid growth, dwelling values across Australia’s capital cities recorded their first monthly decline of 0.7 per cent (seasonally adjusted) in the month of June.
Over the June quarter, Aussie home values remained flat with effectively no growth (+0.1 per cent). Described as a ‘soft landing’ after the double-digit gains of 2009, few industry insiders would have been surprised by the announcement given the considerable media predictions of a slowing of prices growth throughout 2010.
The mining resources super profits tax appears set to make a return to the pre-election debate following Greens leader Bob Brown’s declaration that miners should pay even higher taxes. Shattering any semblance of consensus, his earlier advocacy of a 50 per cent tax, twice that of Labor’s proposal, and the expectation that the Greens would hold the post-election balance of power in the Senate, is cause for genuine concern to miners, the nation, and the real estate industry.
The European and US reaction to Labor’s original proposal was concern about increased sovereign risk,
due to budget projections relying on forecast mining profits that are unlikely to emerge. With increased
sovereign risk it is feared that available finance for mortgage lending could be significantly reduced. This, in turn, could lead to higher borrowing costs (interest rates), lower buyer demand and, consequently, falling property values! The coalition, in the mean time, is promising to dump the tax if elected. Evidence also emerged last week that first home buyer grants and taxes are making home ownership a more expensive proposition than ever before. Owning a property in Australia deems you rich enough in Government eyes to be saddled with a growing array of taxes, charges, fees and levies. Property taxes are skyrocketing and investors in rental property are the
main targets. Property owners pay stamp duty and charges on their purchase, their mortgage, land tax, tax on rental income, and, capital gains tax when they sell. Victoria pocketed a 25 per cent increase in stamp duty this
year while New South Wales will suck in $3.9 billion in 2010/11. That’s on top of new transaction charges
on properties for up to $500,000, a tax that will slug half of all Sydney’s buyers next year. On the one hand
we have Government providing stimulus one year, then farming for taxes the next. This fractured policy
approach is leading to rising household debt, falling home ownership and increasingly volatile house-price
movements. Nationally, real estate agents have been bracing for the introduction of the Government’s proposed energy star rating scheme for existing housing stock next year. Last week, Penny Wong’s Department of Climate
Change and Energy Efficiency was dealt a blow when industry heavyweights found that the mandatory star
ratings scheme is inaccurate and fundamentally flawed. After the shelving of the Government’s Emissions
Trading Scheme (ETS), the disintegration of the home insulation and green loans programmes, and
the subsequent findings that both were fatally flawed, the Housing Industry Association (HIA) and Master
Builders Australia called for urgent action by Penny Wong to prevent another bungled scheme, that this
time could devalue Australian homes. The existing star ratings scheme for new homes is to be extended to capture several million Australian homes built before the scheme’s introduction. From next year, Australians will need to have their home’s star rating assessed and disclose that to prospective buyers or tenants before the property can be sold or leased. As older homes are unlikely to achieve five or six stars, the potential for housing stock to be devalued is obvious. Only three software tools are permitted for the assessment of a home’s star rating by Penny Wong’s department. However, it has been discovered that there are vast differences in the star rating produced by the three different systems for the same property in the same location with the same orientation. The HIA reported a variation of 3.2 stars for a two storey home, a huge discrepancy that has undermined the credibility of the whole concept. At this stage, estate agents can only imagine the minefield such an inconsistent scheme could present homeowners when they attempt to compete for buyer attention and maximise their home’s value at sale time. Investors may also find themselves unable to address rental income shortfalls, caused as a result of energy star rating deficiencies affecting whole strata plans.
There are plans to bring a case before the Australian Competition and Consumer Commission given the concerns that the software tools are both mandatory and not fit for their intended purpose.
The University of Adelaide’s Williamson, an expert on energy efficiency in buildings, believes Australians
are funding another energy efficiency debacle, calling the Department of Climate Change and Energy
Efficiency’s ‘blind faith in the [software tools] simply incredible’.
Professor Nolan of the University of Tasmania’s School of Architecture and Design weighed in, saying
that thermal performance regulations ‘appear to be driven by… “environmental positivism”… we may be
paying to improve buildings in ways that don’t deliver improved outcomes at the times of day that really
contribute to household energy consumption, and ignoring economic improvements that do.’
A similar story is unfolding in the lighting industry, soon another batch of globes will be deemed banned from importation, the alternatives or replacements are nowhere near the banned products as to light output.
Another imposition to come will be the amount of watts that you can have in a defined area!
The faceless men and women in Canberra will be telling us how much light we need per square metre!!