The National Housing Accord

According to the Real Estate Conversation, the National Housing Accord is a new agreement between governments, investors and the construction industry detailed in the recent budget. Its intention is to make inroads into the supply and demand issues the property marketing is currently experiencing.

Apart from the Accord, the article outlines some of the budget ramifications for the property market which, in a nutshell, with inflation forecast to hit 7.75% in the quarter to December, are that fiscal policies are apparently focussed around minimising pressures on inflation, and improving productivity. The word of the day appears to be ‘restraint’.

Despite this, the practical target of the Accord is a target for a million new homes by 2030, or to put it another way, over 500 homes per day, every day, for the 5 years from 2024, when the Accord is due to come into effect. Although this seems like a fantastic number on the face of it, Eliza Owen, Head of Australian Research at Core Logic, notes that 974,732 homes were completed in the 5 years to June 2022, and this is down on the million+ average of preceding 5 year periods.

There are other interesting points that Owen covers, including that the Accord is said to encourage superannuation company investment in social and affordable housing, meaning there will need to be a solid return on investment, and a raft of other plans to boost affordable housing and home ownership.

Renters and Investors

With renters more and more feeling the pinch, Domain writes that some rents in Sydney are increasing well into the double figures. The biggest increases have been in the blue ribbon eastern suburbs such as Rose bay (up 46.2%) and Double Bay (up 36.5%). According to the Real Estate Conversation, vacancy rates are at their lowest in nearly a decade.

With rents going up, The Real Estate Conversation writes that actual values of both units and houses are falling across 80% of the national market, according to Core Logic. This increases the number of areas with declining values by about double from last quarter. This may come as some relief to some renters, who may be struggling to find rental accommodation, but may be able to take the plunge and purchase instead. The ABC makes this point here, showing some renters finding it actually more economical week to week in some areas to buy their own home; although ‘economical’ is relative in this case. More accurate perhaps is to say ‘Levels of desperation are minutely lower when buying, in some areas’.

According to AHURI (Australian Housing and Urban Research Institute), as reported in The Real Estate Converation, at least part of the cause of this situation is the lack of social housing, with about 10% of the national requirement having been completed. Undoubtedly, more social housing will reduce pressure on the rental market.

Domain chief of research and economics Dr Nicola Powell notes that the current Canberra rental market may be indicative of a change coming to the broader national market with rental costs in a few regions beginning to soften by 3-5% over the recent quarter. Canberra is the most expensive city for rental prices – even more so than Sydney.

According to Blackshaw Weston Creek & Molonglo senior property manager Kylie Bickerton, the reason for this is that with house prices weakening, investors are no longer scrambling to maximise their profit by selling. With reduced investor activity, urgency for tenants to relocate has also reduced and there are likely a few more rental options available. How this fits in with the increased levels of migration however, is unclear.

In addition, The real estate conversation discusses a new taxation impediment for investors building an investment property on empty land. The article states that changes to tax were introduced in 2019 so that claiming ‘holding costs’ as a tax deduction is no longer possible. The assumption is that this only applies when building an investment property (not when building your new home to live in). The outcome presumably is that investors are discouraged from sitting on or developing rental properties when people are screaming out for homes to live in. So there is that, as well.