Australia Housing A to Z

Research evidence excerpt

Australia Housing A to Z

we are (inflation-adjustedUnder new regimecost

on the cusp of another significant fall. Since the early 1980s, prices have 5 nobasenegativeindexation,gearing)

fallen between 5% and 7½% (peak-to-trough) on 5 occasions.

2005 2008 2011 2014 2017 2020 2023 2026• There is considerable uncertainty regarding the impact of the tax 0 Financial year of sale

changes on prices. Depending on conditions (e.g., interest rates, rental

yields and 'real' capital gains), we estimate the historical impact on prices % AdditionalReturnPrice underGain RequiredOld Tax Regime*to Achieve Same

could have been as large as -8%. 9 Established dwelling purchases over 10 year period

* Assumes highest marginal tax rate is 45%, same

yields under each scenario; estimates do not• However, other factors may also impact prices and future returns for 87 purchasing price, interest rates & gross rental factor in selling expenses and land taxes

investors.

Þ The removal of negative gearing has significantly reduced a 65

prospective investor's borrowing capacity, with some estimates as 4

high as -20%. 3

Þ The ability to raise rents may be constrained due to tax benefits for 2

existing properties being grandfathered and dwelling supply likely to 1

increase as the existing pipeline is worked through. 0

2005 2008 2011 2014 2017 2020 2023 2026

• Low housing affordability (exacerbated by recent interest rate hikes) may Financial year of sale

limit the extent to which lower investor demand is offset by stronger Source: ABS, Cotality, RBA, Macrobond, Macquarie Macro

owner-occupier demand. Even lower-priced homes (those below the Strategy

Government's Home Guarantee Scheme cap) have begun to fall.

As for dwelling construction, activity this year will be supported by the large

pipeline of work.