There is no affordability crisis and here is the proof – Simon Pressley

There is no affordability crisis and here is the proof – Simon Pressley

There is no housing affordability crisis in Australia because the majority of locations remain affordable to property buyers. That’s according to new research from Propertyology.   Simon Pressley gives us the lowdown.

Transcript:

Kevin:  We hear a lot about housing affordability and a housing crisis. There is no housing affordability crisis in Australia because the majority of locations remain affordable to property buyers. That’s according to new research from Propertyology.

The research found that 56% of local government areas in Australia had median house prices of $400,000 or below and nearly 70% had medians of $600,000 or less. Whether or not you think that’s affordable, I don’t know. But we’re going to get the facts now because the author of that report, the man from Propertyology, joins me, Simon Pressley.

You gave a presentation that I attended during the week, Simon. You went through the areas. Let’s just pick through this, if we may. 56% of local government areas in Australia had a median house price of $400,000 or below. Surely, that would indicate that we don’t have an affordability crisis.

Simon:  That’s right. More than half for a grand sum of $400,000, and that’s a detached house. Obviously, apartments increase these options even further.

Kevin:  That was going to be my question. Is this total properties? Is this houses and apartments?

Simon:  The 56% figure is the number of local government authorities – of which there are 550 in Australia – where the median house price is $400,000 or less. So, in more than half of Australia, you can buy the detached house… If we include apartments, yes, that comes to 69%, so almost three-quarters of the country.

Kevin:  How does it compare to, say, a couple of years ago – I don’t know whether you’re able to give me that comparison – in terms of some of the regional areas that took a bit of a nosedive? Because I imagine we are talking primarily about regional areas now.

Simon:  Definitely, that would cover most regional cities in Australia. There are a couple of regions that are quite expensive. Wollongong and Newcastle, for example, are actually more expensive than a few capital cities.

But for the $400,000, you can buy a detached house in Brisbane for that, in Adelaide for that, in Hobart for that. There is certainly nothing wrong with the quality of infrastructure and employment opportunities in those cities.

Kevin:  I guess a lot of the housing affordability crisis centers around the fact that the majority of people prefer to live or choose to live – or have to live, I guess – in Brisbane, Sydney, and Melbourne, the main areas. And all of this affordability discussion is largely centered around Sydney, I would have thought.

Simon:  Wholly and solely centered around Sydney, in our view. Even Melbourne, which is officially Australia’s second most expensive city, for $600,000, which most household incomes can afford a property for $600,000, a detached house in Melbourne – and there are 31 LGAs that make up greater Melbourne – in nine of those, you can buy a detached house for $600,000 or less, and 26 out of 31 LGAs in Melbourne, you can buy an apartment. Almost all of Melbourne, you can get a property for $600,000 or less. It really is a Sydney-centric debate.

Kevin:  What about Brisbane? We’ve heard a lot about how affordable property is in Brisbane. What did you find out there?

Simon:  Brisbane’s median house price, greater Brisbane is $515,000. I’d suggest that that’s still very affordable. But I guess the further you get out from the CBD, for a detached house, the more affordable that gets.

At the low point, you could buy a house in greater Brisbane – the outer suburbs, as I say – as low as $350,000. And for apartment living, you could be right in the city for $500,000 or $550,000 or, say, five kilometers out from the city, two or three train stops, for around $400,000 to $450,000. Brisbane is Australia’s third biggest city, so you can own a property for somewhere around $450,000.

Kevin:  We have the double whammy here, too. You have very affordable prices in some of these areas that you’re talking about here as well as the lowest interest rates we’ve seen, certainly, as long as I can remember anyway.

Simon:  Yes, I don’t think there’s anyone alive in this country who has experienced interest rates lower than what we are, which again, contradicts what has become a national debate that we have a housing affordability crisis.

I guess it’s extended to more than a debate. We’ve actually had policies adjusted, whether it was credit policies enforced by APRA or changes in the federal Budget that are targeted largely to investors, all over an alleged crisis Australia-wide. It’s horrible, according to these so-called experts. All the evidence contradicts that.

Kevin:  One of the things that was discussed quite broadly, too – probably not enough, in my view – at your luncheon, Simon, was the demonization of property investors, and how they’ve painted almost as being greedy landlords. You actually had someone on stage who admitted that she didn’t even want to tell her friends and relations that she was investing in property for that reason, for that stigma.

Simon:  It’s sad, isn’t it? We’re talking about a 25-year-old young lady, motivated, driven, owns two investment properties, middle-income earner, and she was afraid to tell her family and friends that she was responsible and hard-working and did good things with her money because she was worried about what the backlash would be.

It’s sad when we’re worried about that sort of thing, when all we’re doing is being good with our money and trying to be proactive so that years down the track, we’re going to afford to retire on our own terms rather than being reliant on taxpayer pensions.

Kevin:  She was asked why she felt that way or did she even try to explain her situation. She said that she and her partner were just over it. They were sick and tired of trying to explain it, so it was only a matter of time that people started then to say to them “What are you doing, again?” It is a stigma.

Simon:  It is. It’s sad. It shouldn’t exist. As we spoke about the other day at the luncheon, Kevin, I think leadership for anything starts at the top, so we need to stop talking negatively about investing. It’s a positive thing. It’s something we should be encouraging. We should be teaching our children to be responsible with their money and save their pennies so that when they enter the workforce, they’re similarly living within their means and planning for their future.

We should be talking positively and encouraging investment and not looking to bash them with a stick and blaming them for something. It’s sad to think that society in general has become one where we look to blame. Then we figure out who we want to blame and how we’re going to penalize.

That has certainly happened with property investors, whether it’s paying more interest on a loan than an owner-occupier, or being harder to get a loan because of tighter credit policies, or further diluting negative gearing benefits, or just accusing investors of depriving generations of home ownership. It’s wrong.

Kevin:  There was a slide you used at the luncheon that was a real eye-opener to me – I’ve never seen it used before – and that was just how much of a contribution investors make to the overall economy.

We talked there about leadership, and where is that leadership going to come from? It has to come from politicians. It has to come from the government, who need to be promoting the benefits that investors bring into the community.

Could you spend a moment and talk about that?

Simon:  I’d love to. Imagine Australia, because we talked property investors, if they just didn’t exist, there would be three million fewer dwellings for those who don’t own their own home. Not everyone aspires to home ownership or just aren’t motivated enough.

Australia has 9.7 million properties. Two-thirds of those are occupied by the owner, with or without a mortgage, and three million of those are occupied by a tenant and are owned by mom and dad investors, not rich lawyers and surgeons or anything like that. Certainly, very few properties are owned by governments. Three million properties are owned by mom and dad investors.

So, imagine Australia without that. The homeless situation would be disgusting. Think of all of the jobs, directly or indirectly, that are related to maintaining a rental pool: the property managers, conveyancers, trades people, building inspectors, accountants doing our tax returns – tens of thousands of jobs that are directly and indirectly related to property investors.

And taxes, directly to property investors… these numbers were released only a couple of weeks ago by the AGO. Stamp duty, last financial year, property investors alone contributed $8 billion to the Australian economy. For $8 billion, we could fund two Brisbane Cross River Rail projects, or we could build four new state-quality hospitals for $8 billion. That’s just in one financial year from stamp duty revenue.

Council rates: $130 million is paid by property investors, which goes towards footpaths, potholes, and rubbish collection services. Land tax is not payable on the family home; only investors pay land tax. That was $7 billion last financial year.

Not every property is negatively geared. Generally speaking, the longer we own it, eventually it becomes positively geared and then the property investor pays more tax. There was $7.5 billion paid from rental gains last financial year, and God knows what capital gains tax revenue is collected each year. We estimate that $20 billion is paid to the Australian economy from property investors in a financial year.

Kevin:  It’s very frustrating that these are the figures that aren’t used and it’s that emotional… It’s almost the low-hanging fruit. “Let’s blame investors, if there is a crisis, for this crisis, this affordability.”

You actually have come up with a number of solutions that we’d like to put forward and just spend a minute or two on what you think can be done to encourage people. What is the solution to this, do you think, Simon?

Simon:  I think that the easiest and most cost-effective solution doesn’t actually require any policies; it’s just attitude, it’s education, and it needs to start with prime ministers and treasurers and premiers and industry leaders.

Make all of Australia aware of the wonderful lifestyles, the affordable housing, and employment opportunities throughout all of regional Australia. That doesn’t require a policy, a tax; that’s just a discussion and maybe a clever advertising and marketing campaign.

Try to change the image that a lot of capital city folk have when they hear the word “region.” We have a lot of clients who, for example, have spent their whole life living in Sydney or living in Brisbane and when we raise the prospect of investing in a regional location, for example, they immediately say “Oh, not a mining town.”

There are mining towns that represent regional Australia, but there are also plenty of beachside locations, like Gold Coast, Sunshine Coast, Cairns, inland Australia, some beautiful places like Orange and Bendigo.

There are capital cities that don’t get much mention, like Hobart. For anyone who has been to a holiday in Tasmania, they go “What a beautiful place.” Its economy is the best improved economy in all of Australia over the last couple of years, and housing is more affordable in Hobart than in any capital city in Australia.

It costs nothing to just have these discussions and change the perception that other parts of Australia don’t have as big of a [12:17 inaudible]. There are parts of regional Australia where the unemployment rate is below the national average, below several capital cities. But most people wouldn’t be aware of that because they have a different perception in their mind.

In terms of policies, I’m a big believer of Barnaby Joyce’s suggestion with decentralization. What is to say that every government department has to be located in a capital city? It’s more affordable to build that office in a regional location where the land is cheaper and you create employment opportunities with it.

Big businesses could consider this as well. Why does the head office have to be in Brisbane or Sydney? It’s probably more affordable to be in a regional location for some businesses from a stamp duty point of view.

I don’t think they’re ever going to get rid of stamp duty, but certainly, they could at least consider some instances where they waive it to encourage mobility, whether that’s the baby boomer generation, for example, who are retiring and are prepared to move from an expensive Sydney/Melbourne to a more affordable regional city. Take away the barrier, take away the stamp duty cost for someone in that situation.

Or someone who is prepared to move for employment opportunities, who isn’t in a retirement stage in their life but is prepared to move to a more affordable location. Again, take away that barrier known as stamp duty.

People need to think outside the square a bit. The issue is nowhere near as big as what is being reported. I just think Australia’s population is unaware of all of the options and the solutions.

Kevin:  Very well said, indeed. Simon, thank you so much for your time and your insight, and for providing this report and putting the lunch on. I think it was a real eye-opener for the vast number of people who were there. Thank you. I appreciated it, and I appreciate you spending some time with us today on the show too.

My guest has been Simon Pressley from Propertyology. The website is Propertyology.com.au.

Simon, thank you for your time.

Simon:  Thank you, Kevin, and thank you for your wonderful leadership in helping us share this story for others to digest. You’re doing a great job.

Kevin:  My pleasure. Thanks, mate.

Tags:
Kevin Turner
kevin@realestatetalk.com.au
No Comments

Post A Comment

*

Subscribe to Australia’s most listened to podcast now!

Free to join and learn, just subscribe now!

Daily Audio Shows, Video Tips, Commentary and Blogs.