Housing report

Draft Housing Report

– Productivity Commission The Productivity Commission has released it’s draft report on housing affordability and has called for a number of changes to policies and regulations throughout Australia.

– These include grants to first home buyers to be targeted at those in need by means-testing the first home-buyers grant scrapping state stamp duty on conveyancing and replace it with a comprehensive land tax, which would include the family home. rejecting industry claims that reform of taxes and charges on new housing could yield big savings for first home buyers.

– Calling for a review by the Federal Government on the tax treatment of investments generally, including negative gearing and tax breaks on capital gains, without limiting it to real estate investments. But, despite finding that negative gearing and capital gains tax rules have played a key role in making housing less affordable, it does not recommend immediate changes.

– The commission also found that housing prices appear to have overshot sustainable levels. “Indicators point to significant potential for a downward adjustment in Australian house prices,” it says.

– Rental yields are now well below their long-term average and barely half the levels in comparable countries.

– The median house now costs nine years’ income, up from six years in 1996, and share prices are rising while some housing prices are falling.

– The report concludes that the surge in housing prices since 1996 stems from a combination of lower interest rates, rising incomes, easier borrowing conditions, the stock market slump and a “supportive” tax and regulatory environment for housing investors.

– But with investors taking 40 per cent of housing finance, it said the price surge in the past two years can only be based on expectations of capital gains. The full report is available at http://www.pc.gov.au/inquiry/housing/draftreport/housing.pdf

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