Property Industry: The Beaming Light of Hope
The threat of an impending recession looms with the ABS reporting that Australia’s economy has shrank by 0.3% in March.
But dear readers, you can breathe a collective sigh of relief, because the property market is here to save the day.
While the property industry isn’t totally immune to COVID-19 with the building industry likely to take a hit, property buying shrinking and low levels of confidence for sellers, there are some key tactics that will allow the property industry to boost the national economy.
Development industry incentives
While the pipeline of development has been disrupted by the pandemic, there has been talk of Government grants going up to between $40,000 and $50,000 for new house and land to help speed up the pace of development. These grants aren’t just for new home-owners either – they’re for everyone, potentially even investors.
Currently though, the federal government is offering a home builder grand of $25,000 for Australian citizens (but not Permanent Residents yet) for building a new home or making a substantial renovation that’s over $150k and less than $750k. Not a bad deal.
While apartment purchases have gone cold with a huge reduction of local and offshore investors, currently first home buyers are actively looking for house and land. To lure local and offshore investors back to the property market, the Government could consider changes to taxation.
Stamp duty reforms
Stamp duty is the parking inspector of taxes. Unpopular. It stops people from buying and selling frequently, resulting in a reduced stock turnover. That means less work for agents and fewer listings. It also has a flow on effect to general spend as selling and buying property increases retail spending.
There is talk of moving away from this tax towards a more broad-based land tax system, but this could potentially take years. Many States and Territories provide stamp duty exemptions to first home buyers, but the possibility of these exemptions being extended market-wide would help stimulate the market.
Relaxed planning restrictions
Relax the restrictions, boost the economy. We’re already seeing planning approvals being fast-tracked to get new projects off the ground with 24 NSW projects ear-marked for fast tracking in April and the Victorian Government approving $2.5 Billion worth of projects in May.
Boost to social infrastructure
Some good can come of economic downturns. You see in the past, government spending seemed to be directed towards public housing – and that’s important, because there is a serious shortage in Australia. We’ve already heard several announcements of cash injections to support public housing builds, with the Victorian State Government announcing plans for 2000 new units and the New South Wales Government launching a $33 million pilot plan to get commercial builders to build 125,000 public homes.
Better access to cheaper loans
We’ve never seen interest rates this low. Banks have been fed $90 billion worth of stimulus from the RBA and they’re sharing the love – even though they’re slightly nervous about the risk they’re taking on with increased unemployment rates. And these already low rates could go even lower, with mortgage rates potentially being pushed to 0% or negative, like we’ve seen in Denmark.
Increase migration levels
Never have we ever seen our borders closed like this. Even our state borders! It’s all very strange. And it will likely have a huge impact on immigration with the Australian Treasury predicting it to drop by 85% over the next 12 months. Housing demand is fundamentally driven by population growth and we’re going to need more than the impending coronials to boost the economy. Changes to the migration levels is always a hotly debated subject, but it may be a necessity to increase these levels over the coming years.
The Government has a lot of levers to pull in the property industry that could stimulate growth for the nation. The builders, buyers and sellers are ready. What say you, Government?