Trinity Grammar Alumni Networking Event

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Trinity GrammarAlumni Networking Event

• Rowen Kelly
• President
• Real Estate Institute of NSW

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About REINSW

• REINSW founded in 1910
• Largest association for members of the property
  industry
• Voice of the industry
• Promote, advocate and represent interests of
  members
• Lobby for economic and regulatory policy for
  positive property market

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Housing in NSW - Overview

• High levels of home ownership in NSW
• - in 2001 64 of homes owned outright or being
  purchased
• Rate of first home ownership in decline for last
  two years
• - affordability key concern for first home
  owners
• Increase in investors over last two years
• - safe investment - strong capital growth
  attraction
• End of strongest/longest housing cycle in
  Australia
• Australian Bureau of Statistics 2001 Census

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House Prices

• Sydney median house price 506,000
• tenth consecutive quarterly increase
• increased
• 1.2 over quarter
• 12.4 over the year
• 10.3 over last 10 years (on average per annum)
• NSW (overall) median house price 390,000
• increased
• 2.0 over quarter
• 21.9 over the year
• 9.7 over last 10 years (on average per annum)
• March quarter fIgures

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Volume House Sales

• Sydney volume of sales 6,201
• Lowest volume since March 1993
• decreased
• 34.6 over quarter
• 38.3 over the year
• NSW (overall) volume of sales 11,310
• decreased
• 30.7 over quarter
• 41.6 over the year

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Unit Prices

• Sydney median unit price 370,000
• increased
• 2.8 over quarter (decrease of 1.3 in previous
  quarter)
• 8.8 over the year
• 9.5 over last 10 years (on average per annum)
• NSW (overall) median unit price 350,000
• increased
• 4.5 over quarter
• 11.1 over the year
• 9.8 over last 10 years (on average per annum)

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Volume Unit Sales

• Sydney volume of sales 4,818
• decreased
• 38.4 over quarter
• 41.4 over the year
• NSW (overall) volume of sales 6,321
• decreased
• 34.4 over quarter
• 39.9 over the year

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Reasons for Volume Downturn

• Natural cycle downturn
• Decreased interest from speculative investors
• Unrealistic expectations of sellers (price)
• Price increases reached unstainable levels
• Flow-on effect on interest rate rises
• RBA and Federal Treasurers warnings about market
• Media speculation about bubble bursting

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Investment Outlook

• Property is an attractive investment
• - Solid capital growth continues despite market
  perception
• Current conditions better for home buyers and
  genuine investors
• - Steady price growth and on-going demand
• Property is long-term investment
• - 10 years for best return
• Unit market offer good opportunities

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Units

• Increase popularity in recent years in units/
  apartment
• - one-third of Sydneysiders lives in high or
  medium -density dwellings
• - Sept 2002 and Dec 2002 units outsold houses

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Units

• Lifestyle opportunities attracting variety of
  people
• Young families and singles
• - generally lower maintenance
• - allows people to in desirable areas close the
  city.
• - facilities at front door
• Empty nesters
• - over 50s, whose children have left home,
• - more free-time and more money
• - enjoying the enhanced lifestyle

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Units

• Weekly rents higher for units than houses

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Units - Outlook

• Sydneys population growing by 50,000 each year
• Over next 15 years Department of Urban Affairs
  estimates 274,000 new households
• - 64 percent of the new residences built will
  be multi-unit dwellings
• Spread over all areas not just inner city
• - over the next 5 years unit make up 70 of
  home construction throughout metropolitan area

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Units Hot Spots

• Estimated Price Growth
• over next 12 months
• City and East Kensington 8-12
• Inner West Concord 8-12
• West Parramatta 6-10
• Canterbury Bankstown Picnic Point 6-10
• South Brighton Le Sands 7-11
• Upper North Rydalmere 8-12
• Northern Beaches Narabeen 6-10
• Central Coast Wyong 8-12

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Political EnvironmentApril Mini-Budget

• Some good news
• g Increased incentives to first home buyers
• g removal the Premium Property Tax
• Some bad news
• g removal of land tax threshold
• g Increase in stamp duty for properties
  purchased for over 3mill. 7
• Some devastating news
• g NSW was to become the only developed region
  in the world to introduce a property sellers tax
  

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REI Reaction

• The real estate market in NSW did not need the
  heat taken out

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REI Reaction

• Will have a harmful impact on market
• Many people impacted
• g first home buyers
• g mum and dad investors
• g renters
• g owners of 2nd properties who dont earn income
• g owners who loose money due to definition of
  profit
• g NSW economy
• REI questions reasons for introducing tax

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Property Taxation In NSW

• Largest source of State Government revenue
• 2004-2005 financial
• g 36.7 or 5,700 million of total State
  Government revenue from Property Taxesg Stamp
  Duty 3,190 m
• g Vendor Transfer Duty 690 m
• g Mortgage Duty 372 m
• g Land Tax 1,448 m
• In comparison
• g Payroll Taxation 30.2 of total taxation
  revenue or 4,696million
• NSW residents pay more property taxes than
  residents in any other State

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Property Taxation In NSW

• NSW is the only place in the developed world
  where property is subject to
• g entrance taxes (Stamp Duty),
• g holding taxes (Land Tax) and
• g exit taxes (Vendor Transfer Duty)
• No other investment subject to similar taxes
• Since 1996 State Government had earned more than
  4.35 billion in property taxation ABOVE budgeted
  revenue
• Downturn in NSW property market would threaten
  ability to balance budget

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Recall the taxes Campaign

• April 8 REI launched Recall the Taxes campaign
• g Talks with Government and Opposition , Minor
  Parties and Independents
• g Part of allied industry lobby group
• g High media presence
• g Advertise in widespread media
• g Enlist members and public support in public
  action to protest tax changes

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Recall the taxes Campaign result

• No back down from government
• Commitment from Opposition, if elected in March
  2007
• g abolish VTD
• g indexed land tax threshold restored

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Immediate Effect

• NSW first home buyers an average loan 251,300

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Long Term Effect

• Opposition leader John Brogden has promised to
  withdraw VTD and reinstate land tax threshold if
  elected (March 2007)
• Investors will delay selling in lead up to
  election
• g decrease in supply of property lead to
  increased prices
• If opposition wins and tax withdrawn, increase in
  properties for sale
• g somewhat reduce pressure on prices
• g increase demand from other investors
• g create artificial market conditions

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Looking Ahead

• No evidence that prices have come down for first
  home buyers
• On-going sustainability of a budget dependent on
  property taxation still a concern
• thin edge of the wedge? future increases in
  tax rate?
• REI will continue campaign until next State
  election (March 2007)

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Conclusion

• NSW property cycle both residential and
  commercial has continued to slow returning to a
  traditional steady market
• Outlook - increasing interest from buyers with
  over riding economic conditions supporting strong
  market activity
• Historically low interest rates, strong levels of
  overseas and interstate migration, high
  employment rates and solid economic growth
• Total lending to home buyers in April was 20.4
  per cent higher than during the same period last
  year
• Property continues to be a good long-term
  investment

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Trinity GrammarAlumni Networking Event

• Thank you

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