Property Headlines: Should we worry about the biggest deficit since WW2, proposed Stamp Duty changes and property market update

2020 will be remembered for a myriad of challenges.

We are at a precarious stage of this pandemic. Corona Virus

Victoria’s daily new infection numbers are regularly in triple digits and there are increasing reports of outbreaks in New South Wales.

But amongst all these concerns there is also good news.

For example. the concerted and extraordinary international effort devoted towards a vaccine or other solution is heartening.

And in Australia, there is also good news if you look for it.

And that’s what I’d like to discuss in this week’s Property Insiders video with Australia’s leading housing economist Dr. Andrew Wilson, chief economist of My Housing Market, we’ll get an update of what’s happening in our property markets and we’ll also have a talk about:

  • The proposed stamp duty changes in NSW
  • What we can read into last week’s economic statement from Treasurer Josh Frydenberg
  • The biggest budget deficit since World War 2
  • The latest employment data

Proposed Stamp Duty Changes in NSW

The NSW government will temporarily axe stamp duty on new homes for first home buyers in a bid to boost construction and create jobs amid the COVID-19 crisis.

Premier Gladys Berejiklian said the government expected more than 6000 first home buyers would benefit from the changes, saving eligible first home buyers thousands of dollars.

Under the changes, the threshold for stamp duty being charged on new homes for first home buyers will increase from the current $650,000 to $800,000, with the concession reducing on higher values before phasing out at $1 million.

The change to the thresholds will only apply to newly-built homes and vacant land, not to existing homes, and will last for a 12-month period, commencing on 1 August 2020.

The stamp duty threshold on vacant land will also rise from $350,000 to $400,000 and will phase out at $500,000.

Premier Gladys Berejiklian said the change to stamp duty thresholds would also support new home construction and create jobs as part of the Government’s COVID19 Recovery Plan.

“Thousands of people will see their bank balances benefit from this change – it will help get more keys into more front doors of more new homes,” Ms Berejiklian said.

“It will also boost housing construction across NSW and support jobs in the building industry at a time when we need them more than ever before.”

Under the changes the stamp duty threshold on vacant land will rise from $350,000 to $400,000 and will phase out at $500,000.

The NSW Government will also continue to offer a $10,000 First Home Owner Grant, which is available to people buying a new first home worth no more than $600,000, or buying land and building a new first home worth no more than $750,000 in total.

This means the maximum amount of benefit a home owner could be entitled to is $32,335 if purchasing a new home and accessing the grant.

Last week’s economic statement

The treasurer’s economic update didn’t really deliver much news – so we’ll have to wait for the October budget.

The big headline was the biggest budget deficit since World War 2 – okay but as Dr Andrew Wilson explains in this week’s property inside this video this is definitely manageable in today’s low interest rate environment, especially considering we entered this downturn in good economic shape.

Of course the media focussed on the negatives, but there was some good news….

  • various sectors of the economy are gradually moving forwardAustralia Economy Concept
  • The treasurer said our economy will contract by 3.75% in this calendar year. In March / April there were many “experts” predicting our economy would plummet by 10%. Even treasury thought GDP could drop by 7-8% . This has now been revised down to 3.75%
  • Last year Australians spend $65Billion on overseas vacations – This year without overseas travel much of this money will be available to spend locally and boost our local economy – tourism, recreation, experiences.
  • During the worst recession we lived through (the 1990-91 recession) when unemployment rose to 11% – the Central banks and the governments did not give the support that has currently been made available.

Credit card spending surges despite lockdown

Credit and debit card spending has defied the COVID-19 lockdowns, rising 10 per cent across the country in the week to July 24 compared to the same week last year.

Commonwealth Bank data shows the huge government stimulus in the form of $750 payments and the JobKeeper subsidy, and the impact of tax cuts flowing through after the end of the financial year have helped spending stay steady. Multiple Credit Cards

But the bank cautioned a structural shift from cash to cards is flattering the annual card spending growth numbers.

CBA estimates card spending is worth around 6 per cent of the total.

Credit card spending is holding up during the pandemic.

Victoria’s spending is the lowest among the states but is up 5 per cent on the same week last year.

“Overall household income growth remains strong supported by all the benefit payments and we think this has supported consumer spending which is back up above pre-COVID levels,” CBA economist Belinda Allen said.

Update of Employment

The latest ABS data shows that total payroll jobs decreased by 1.1 per cent in Australia between mid-June and mid-July.

Nationally, payroll jobs are 5.6 per cent below mid-March, when Australia recorded its 100th confirmed COVID-19 case. Jobs

However the good news is that the latest data shows that around 35 per cent of lost payroll jobs had been regained by mid-July.

In Victoria, payroll jobs decreased by 2.2 per cent between mid-June and mid-July as additional COVID-19 restrictions were progressively introduced, with jobs 7.3 per cent below mid-March in this state.

Payroll job losses in other states and territories since mid-March ranged from a 6.8 per cent decrease in Tasmania to a 3.1 per cent decrease in Western Australia.

Arts and recreation services showed more recovery than any other industry from mid-June to mid-July (7.5 per cent), however it continues to be one of the most impacted industries during the COVID-19 period (16.3 per cent decrease since mid-March.)

Loss Of Payroll Jobs

Consumer confidence slips again this week – lowest level for 3 months

ANZ-Roy Morgan Consumer Confidence dropped 1.7pts to 89.0 this week – and is now at its lowest for three months since April 25/26, 2020 (85.0). Downturn

Driving the fall this week were falls in both Melbourne, down 1.7pts to 83.1, and Sydney, down 4.7pts to 86.3 – with both now well below the national average.

In contrast Consumer Confidence continued to ride high in Perth at 103.2 and was above average in Brisbane (95.4) and Adelaide (91.0).

Consumer Confidence is now 29.5pts lower than a year ago on the comparable weekend of July 27/28, 2019 (118.5) and 5.6pts below the 2020 weekly average of 94.6.

Across the index the largest fall was the decreasing number of Australians, 31% (down 4ppts), who say now is a ‘good time to buy’ major household items, while 39% (up 1ppt), say now is a ‘bad time to buy’.

In addition, now 25% (up 2ppts) of Australians say their families are ‘better off’ financially than this time last year and 36% (up 2ppts) say their families are ‘worse off’ financially.

Consumer confidence 27th July

 

This week’s property data provided by Dr. Andrew Wilson of My Housing Market

Andrew Wilson

Auction clearance rates

Auction clearance rates remain firm in Sydney last weekend.

However with Melbourne in lockdown and auctions now being held on line, many properties originally scheduled for auction have been withdrawn and these are classed as non-sales creating a much lower clearance rate than normal.

 

Andrew wilson auctions

Sydney Regions

 

Melbourne Regional Auction Results

 

 

 

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

Metropole Team

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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'Property Headlines: Should we worry about the biggest deficit since WW2, proposed Stamp Duty changes and property market update' have 4 comments

    Avatar

    July 24, 2020 Martin

    The RBA will print money. And has printed plenty of it already to fight covid-19. It just doesn’t give the money directly to the government. It prints new money and uses it to buy government bonds on the secondary market so that institutions can take a cut as they buy the newly issued bonds from the government So that the government can pay for jobkeeper and Then these institutions onsell them to the RBA for a markup.

    Reply

      Michael Yardney

      July 25, 2020 Michael Yardney

      There has been a lot of discussion recently about Modern Monetary Theory, which suggests central banks should print more money and then give (lend) it to the government, to help pay for it debts.
      This week RBA governor Philip Lowe said that he won’t do that (print extra money) instead the banks should borrow on the open market at the prevailing low interest rates because they can afford it.
      Rather than print more money he gave the Morrison government the green light to increase debt levels and lock in a larger budget deficit to support the economy during its recovery from the virus crisis

      Reply

    Avatar

    June 26, 2020 Alex P.

    While Dr Wilson may say that more sellers entering the market is an expression of confidence, the flip side is that it may be the smart money taking the opportunity to exit while prices are still holding up. If you drill down in the data is there a way to differentiate whether these are investment properties or owner occupied properties being sold and how does that relate to historical data. Second point is that government intervention has done a good job of addressing short term liquidity over the crisis but there have been no measures on a similar scale to address solvency, and solvency is what really matters after the liquidity tap has been turned off.

    Reply

      Michael Yardney

      June 26, 2020 Michael Yardney

      Alex, you are right on both counts.

      Our experience on the ground speaking to buyers, sellers and estate agents, is that there are very few distressed properties coming on the market at present.

      Similarly we do not believe the government is going to pull the rug out from under us in September after he’s gone to such an effort to support the economy and our markets

      Reply


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