Clik here to view.
Michael Roddan
Property investors are retreating from the housing market due to “uncertainty about future negative gearing and capital gains tax policy”
Documents released by Treasury under Freedom of Information laws reveal chief financial officers and managing directors of some of the nation’s biggest companies relayed their concerns about the “softening in demand” in the property sector. The confidential briefings show business leaders are concerned about the downturn, which has also hit owner-occupiers wanting to sell their homes.
Treasury’s Business Liaison Program, which surveys large and small companies from major industries to inform the forecasts of the government’s key economic department, said property sector chiefs believed the main trigger was tightened lending standards from the banking sector following a crackdown by financial regulators and after the banking royal commission.
“Owner-occupiers have retreated from selling because the value of their own home has fallen and the prospect of a sale is deteriorating,” said Angelia Grant, the head of Treasury’s macroeconomic conditions division.
Business leaders told Treasury that domestic property buyers — “particularly investors” — have also been abandoning the market as “investors are uncertain about finance at settlement/completion”.
There was also the perception that Kenneth Hayne’s royal commission may result in stricter rules for lending to property investors.
“Another contact reported that they were seeing many local buyers who purchased off-the-plan 9-18 months ago who cannot get finance to settle today,” Ms Grant’s submission to the Treasurer noted. “As a result, there is now a surplus of sites with 25 to 30 per cent price declines.”
The surveys, which were conducted between August and October, fed into the government’s Mid-Year Economic and Fiscal Outlook, which slightly shaved back official growth prospects for the Australian economy following unexpectedly soft conditions in the second half of 2018. In MYEFO, Treasury warned the escalating housing downturn could threaten the health of the economy. National house prices are down more than 6 per cent from their 2017 peak, with steeper falls in the Sydney and Melbourne markets. Analysts are expecting house prices to record further double-digit falls.
“In New South Wales and Victoria prices have eased, settlements have declined, there is lower pre-sales activity and homes are taking longer to sell,” according to the Business Liason document.
While the property sector was downbeat, Treasury noted there were signs of a strengthening labour market, with businesses reporting some of the highest rates of employee churn they have seen, where workers feel confident enough to change jobs. Temporary and permanent positions were being filled “at rates not seen since the GFC”.
However, bosses were still reluctant to offer wage rises to retain employees. “One contact reported that they are increasingly using non-monetary incentives to retain staff, including wellbeing programs, flexibility, fruit bowls and work drinks,” Treasury said.
