27 Nov REIA not happy with Labor policy – Malcolm Gunning
The President of the Real Estate Institute of Australia, Malcolm Gunning, tells us what is happening in residential and commercial property in the nation at present and he doesn’t miss the opportunity to tell us his feelings about any fiddling with negative gearing.
Kevin: And joining me now is my next guest, the president of the Real Estate Institute of Australia, Malcolm Gunning. Malcolm, thank you very much for your time.
Malcolm: It’s a pleasure, Kevin, good to speak to you.
Kevin: I want to talk about the landscape generally around Australia. Also, we’ll take a little bit of a focus too at commercial real estate a little bit later in the interview. Let’s first talk about the residential market. You get an overview of right around Australia. What are you seeing, is the market very patchy at present, Malcolm?
Malcolm: It really is. It’s like a checkerboard of strength and weakness, okay. The East Coast is where the credit squeeze, and I’ll call it that. That’s exactly what it is, I think. Most people say a quarter is a credit crunch, is mostly affecting Brisbane, Sydney, Melbourne. But again, within those areas, it’s patches. Really that middle market is the one that’s being affected where really, the upsizers and the downsizers is the market which is being affected most at this stage.
Malcolm: But places such as Adelaide, Perth, Hobart, they’re really sailing through pretty well because they’re coming off a less volatile base. It’s much more affordable.
Kevin: We’re hearing some good stories out of western Australia, particularly with Perth. I was talking to an agent just yesterday afternoon, who was telling me that there are some green shoots in the Perth market, which is really good news, actually.
Malcolm: Oh, jeez, they need it, Kevin.
Kevin: They do, and Darwin’s suffering a lot too, right now, I think, too, Malcolm, isn’t it?
Malcolm: It is. That’s all about jobs. Think of that big gas installation which is coming to a close. I was up there recently talking to Quintin Calleen at CEO and he said two years ago there was about 50,000 jobs being stimulated from that massive gasworks, where they’re going to export a lot of their gas out of Australia. Now they’re down to 5,000. And shortly, they’ll be down to really, just the operation, which is about a thousand.
Malcolm: So you can imagine the knock on effect, as far as the economy is concerned. So you’ve got falling house prices up there and vacancy in residential property. And there’s lobbying government, saying, listen, we need … and their tourism’s not strong. Because it’s been under promoted and the state government hasn’t invested in that area. So unfortunately, poor old Darwin, Darwin’s having it’s backside kicked.
Kevin: Yeah, but a lot of nervousness at present in the market as well, Malcolm, with the prospect of maybe a labor government winning, not so much, that’s not the problem, but the problem is what they might do when they get there with negative gearing.
Malcolm: Well, we’re right up to our eyes in that at the moment. We’ll see if Australia, we’ve got research that says that, you know, it’ll have a detrimental affect. What will happen, at this stage, we’ve got vacancy, in Sydney particularly, which is good for the renters. But that’s because a lot of that investment property’s settling.
Malcolm: Then in the other states, the vacancy’s tightening up. All the reasons that the Labor government going to bring in the property taxes, that was to free up property and really quieten the market down. It’s all now not relevant.
Kevin: It’s happening anyway.
Malcolm: It is and so we’re calling it just really as a grab for tax. Both Mr Bowen and Shorten have said they’re taking that policy to the next election. They think it’s something that they need to be able to bring in to really flatten out the market in the longer term. We’re of the opinion they’d be brave to bring that in. If they’re elected next year to bring that in in their first term.
Kevin: The last time Labour played with negative gearing it only took them about six months, I think. Six to 12 months to realise that they’re on the wrong track.
Malcolm: That’s a few years ago-
Malcolm: We said to Mr. Bowen, why don’t you go and have a chat to Paul Keating. He was the one who bought in a change the taxes and he reversed it within 12 months because the market, the rental market tightened up. And you’ve never heard a lobby group shout louder than the tenant lobby group.
Malcolm: And again, your next thing you’re gonna be talking about is some sort of rent control or some sort of rent constraints. If all that market starts to spiral out control.
Kevin: Just quickly before I let you go, the commercial market, two different markets, I guess. Residential, commercial, industrial, that’s your specialist area, what are you seeing there, Malcolm?
Malcolm: It’s still pretty strong. But taxes, again, are playing into that market because you’ve had good capital growth with commercial, industrial, not so much retail, retail’s a basket case. In those other areas when the investor looks to sell, he goes and talks to their accountant. The accountant says well, you’re up for a healthy chunk of tax, due to capital gains tax regulation, and they say well, what can I buy? We’re not going to sell now. And we say well, line up. The investment market is still relatively healthy. Yields did contract, rents in Sydney and Melbourne are quite high. Still and all, while the economy’s strong, we’re going to see the commercial and industrial market continue on.
Kevin: Malcolm Gunning, President of the Real Estate Agent Institute of Australia, also principal of Gunning Real Estate in Surrey Hills. Thank you so much for your time, Malcolm. Always great talking to you.
Malcolm: Thank you, Kevin.