Housing Shortage is Inflationery!

Governments deliberate influence on Property Prices will be highly inflationary

Population Growth

Recent Census of 2016 provided a big surprise that Australia is growing faster than we estimated and planned for with a growth of 1.553% last year alone to over 24 million people. Victoria had strongest growth of 2.4% followed by ACT 1.71%, NSW 1.52%, QLD 1.46% etc. A total of 209,000 people migrated into Australia last year, all requiring a roof over their heads

Migration now counts for around 55% of our population growth with a huge surge in the demographic of 25 – 32 year old’s who have uprooted their lives and arriving with a burning desire to own property and build a successful life in Australia. Many measure their success by where they live and the properties they own

The Census also demonstrated that the majority of us live in our capital cities equating to over 2/3rd’s with 80% of these people living on the east coast. This population growth is underpinning property along the east coast driving up demand whilst placing pressure on supply for dwellings to own or rent

 

Housing Shortage of dwellings to Own or Rent

By now you will be aware that there is already a housing shortage across most capital city post codes on the back of current massive population growth

You probably are also aware that by design the Government of Australia is deliberately and significantly encouraging population growth where the likes of Melbourne alone will grow from around 4.5million towards 10million residents!  That is massive and has a tremendous impact on Housing, Infrastructure, Roads, Hospitals, Schools … and the list goes on

Right now today there is a looming housing shortage, there is also an affordability issue forcing Australian residents to either become tenants or move to postal codes in which they can afford to buy

As most job nodes are centrally located in capital city CBD’s most of the Australian Population (70-80%)  want to Live, work and play close to where they live. This massive demand on supply of dwellings has played its part in a dramatic influence on the rise and rise of property prices. Clear for all to see if you are prepared to review the facts and ignore ignorant media bias

 


Recent research by Ernst & Young at the behest of the Urban Institute of Australia backs up our analysis of the Victorian and Melbourne markets read more here confirming the time to Invest or buy to live is now!


Rental Supply and Affordability Issue

What is not evident is that not only is there a housing affordability issue there is also a looming and growing Rental Affordability issue and Government are not in any shape or form addressing this issue read more here. Did you know that Australian Super Funds find it more profitable to invest in USA rental property schemes than in Australian Property because there are no Government Incentives in place to remove punitive taxes placed on investors

Another looming issue is the amount of ‘short term’ rental properties coming out of the long term rental pool and going into avenues such as AirbNb or furnished accommodation for short term stay. Further lowering supply in a growing market

Genuinely alarming, and from an economical stand point will become a massive cost to the next generation. Current housing shortage will compound on the back of a designed population growth!

 Government Interference in Residential Property is Inflationary

What puzzles me to no end is that the (Australian Government to a lesser extent) but primarily the Opposition Labour government talk of removing negative gearing to garner votes using ‘tall poppy syndrome’ trying to blame the rich for the woes of the poor. Removal of negative gearing is highly inflationary; Rents will rise on the back on owners escalating Rental Income to cover the costs of any shortfall due to the removal of negative gearing. Less investors will be inclined to put another Rental Property into the much needed rental pool if negative gearing is removed!

Less investors equates to higher competition for Rental Dwellings according to recent Censis more Australians are renting than previously = increased Rents (demand and supply). The very voters the Labour Party want to attract will be left poorer if the ‘rich are financially punished’ … how come they don’t see this?

Secondly by ‘manipulating’ APPRA to try slow down property growth in Sydney and Melbourne by forcing the banks into reevaluating how they lend, who they lend to and what amounts they value a property at in terms of how much they will lend – is not only fiddling with natural growth of an economy (massive population growth by design on the back of a housing shortage stimulating a building boom) will place upward pressure on supply of dwellings and thus prices of dwellings. Evident in current spate of growth in most capital cities

Instead of focusing attention of how a government can improve housing affordability on the back of a massive population growth they tend to look for short term ‘fixes’ which have medium to long term disastrous effects on everyone

How can you ‘financially punish’ an investor who is prepared to take on some risk by providing another rental property into a much needed market place when you as a government are not providing this much needed housing?

 Banks not readily lending to Developers is also inflationary

You may have read that developers are finding it increasingly difficult to get finance to Build even with sufficient presales on their books

If an economy such as our Australian Economy is being underpinned by the construction and building industry why continue to make it so difficult for Developers to get finance? If a developer cannot develop a property (needs presales, but banks making it more difficult for borrowers and also more difficult for developers to get finance in order to construct) … they will simply either not build or delay the construction to a time in the near future when the banks might Lend more freely again. By delaying, a developers holding costs are going up as are build costs across Australia. These ‘costs’ will be passed on to buyers when the development is relaunched at a time in the future!  This too is inflationary and has the opposite effect of trying to stem price growth in residential property

Either stop population growth or allow an economy to run it’s natural course and encourage investors or openly admit you have and will fail!

Your Opportunity to Invest remains Now

Having said the above, if you have equity in your current property and can get a loan …. leverage and get into the market today because supply of dwellings in capital cities is low, vacancy rates are very low and rental yields are pretty healthy. As the rental pool dries up, as fewer developments come to market demand will continue to accelerate. If you take action you will be well placed. Undertake your due diligence, ask what and where so that you may come to your own informed decision and Commit to yourself!

 

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