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<\/p>\nThe owner of Australia\u2019s largest private held residential land developer, Nigel Satterley, warns rents could rise 15 to 20 per cent over the next two years and first homebuyer inquiries have dropped 50 per cent, as Anthony Albanese and Jim Chalmers play down growing consequences of their May budget tax reform package. <\/p>\n
After federal government debt ticked over $1 trillion for the first time on Thursday, economists\u2019 calculations indicate the cost to the economy of Labor\u2019s tax changes will create an \u201cexcess burden\u201d of up to $500,000 per new home that it expects such tax changes will deliver. <\/p>\n
Former Commonwealth Bank chief executive David Murray said the tax changes were piecemeal and, combined with falling house prices, would hurt wealth and slow the economy without serious productivity reform and changes to corporate and personal tax rates. <\/p>\n
On Friday the government\u2019s National Housing Supply and Affordability Council revealed the federal government would miss its national target of 1.2 million new homes by 18 months.<\/p>\n
Urban Taskforce Australia chief executive Tom Forrest said nobody should be surprised that the National Housing Accord targets were slipping out of reach.<\/p>\n
\u201cEven the most optimistic of paid government cheer squad \u00ad\u2018advisers\u2019 \u2013 the National Housing Supply and Affordability Council \u2013 was reportedly forecasting that the National Housing Accord target will now no longer be reached until the end of 2030,\u201d Mr Forrest said. \u201cThe reality is it will be a fair bit later than that.\u201d<\/p>\n
Following the big four banks all reporting drops in home loan applications of up to 28 per cent for investors since the budget, Labor declared this week it had \u201cbrought to an end\u201d a system that enabled investors to compete at auctions, and curtail \u201ctaxpayer-funded landlord welfare.\u201d<\/p>\n
But Mr Satterley \u2013 who sells about 3500 properties a year, and receives insights from investors who buy land, build homes, and rent them out \u2013 said it was not just three interest rates hikes this year that were slowing property purchases, but the impact of tax changes on behaviour. <\/p>\n
Declaring he was not like a publicly listed company that \u201cwindow dressed\u201d, Mr Satterley said he was now forecasting a 36\u00a0per cent decline in combined residential land sales from \u00addevelopers across country this coming year.<\/p>\n
Following modelling by NAB and Ray White this week that showed rent hikes of 30 per cent could be passed on by some investors wanting compensation after the removal of tax concessions, Mr Satterley said he also saw higher rents on the horizon. <\/p>\n
\u201cI think the rental increases will be about 15 to 20 per cent over the next two years or about 7.5 per cent per annum,\u201d Mr Satterley said. \u201cInvestors know there\u2019s a shortage, and what they\u2019re saying to us now at the cold face is, \u2018We\u2019re going to build a new rental home and we won\u2019t be selling it because of the new rules\u2019, because if they sell it, the percentage of tax has increased. They say to us, we\u2019re going to rent this forever. We won\u2019t be \u00adselling it because of the new tax implications.\u201d <\/p>\n
The developer briefed his five bankers this week and said the press had a responsibility to say what was going on that a significant drop in sales was on the way. <\/p>\n
\u201cWhen the market is normal the demand for lots is 50,000 per annum and our forecast for this year will be about 32,000,\u201d he\u00a0said.<\/p>\n
Asked to what that was attributed, Mr Satterley said: \u201cThe new budget and the changes to the rules. It\u2019s made the buyers very cautious because the investors can\u2019t buy established houses and get a tax deduction. Since the federal budget and the tax change announcement that have come out, the first homebuyer inquiry has dropped by 50 per cent and first home buyers have become very cautious.\u201d <\/p>\n
Official lending figures released last week showed both first homebuyer borrowing categories \u2013 those whose first property purchase they will live in and those who will rent it out \u2013 showed \u00addeclines in home loan commitments of 3 per cent and 14 per cent respectively.<\/p>\n
This week Stockland, Australia\u2019s biggest listed residential developer, said inquiry volumes were down in the fourth quarter following cumulative interest rate increases and tax changes, while Mirvac, another listed developer noted \u201cmoderation of sales activity and inquiry\u201d in this period.<\/p>\n
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The government has repeatedly said it wants to get more renters into the first homeowner market. \u201cThe best way to put downward pressure on rents over time is to build more homes, and also to help more renters become first-home buyers, which is, you know, really one of the fundamental objectives of our ambitious tax reform package \u2013 to make it easier for people to buy their first home,\u201d Dr Chalmers said this week.<\/p>\n
But the cost of the tax changes on the economy, known as \u201cexcess burden\u201d, were calculated this week by quantitative economics consulting firm Qaive\u2019s Bob Scealy and Tulipwood Economics director Joe Branigan to be $500,000 per new home to be built and to bring each extra first-home buyer into the market.<\/p>\n
\u201cThe government\u2019s housing package raises $43bn in extra tax and claims at most 30,000 net additional homes,\u201d Mr Branigan said. \u201cOnce the additional federal infrastructure expenditure and plausible state delivery costs are included, even a conservative marginal excess burden of 30c in the dollar implies about $15bn of deadweight loss \u2013 roughly half a million dollars for every net additional home.\u201d<\/p>\n
Mr Murray said the tax changes would hurt the economy. \u201cWhen I was CEO I may have said house prices were going too high, but trying to edge them down with policy changes is not effective,\u201d the former CBA chief said. \u201cIt will lead to a downturn in housing and that has a wealth \u00adeffect and that will slow the \u00adeconomy.\u201d<\/p>\n
While Mr Satterley said the tax changes would be part of driving rents higher, he said immigration was part of the strength too. \u201cThe rental market is very, very strong because today, there\u2019s about 460,000 shortfall of dwellings,\u201d he said. \u201cWe\u2019ll never catch up, and that\u2019s why there\u2019s so much pressure on rents. The immigration should be at least 240,100. The rents are going to continue to rise, and I would use the word quickly, well above inflation rate because of the shortage.\u201d <\/p>\n
Economist Chris Richardson said rents would not rise 30 per cent over two years and would not rise because of the budget tax changes. \u201cNo, housing rents in Australia aren\u2019t about to rise 30\u00a0per cent as a result of the tax policy changes in the budget.\u201d he\u00a0said. \u201cYes, the budget changes will raise rents \u2013 and more than the $2 that Treasury has said. But,\u00a0no, there\u2019s no 30 per cent \u00adincrease in rents due to the budget in the offing.\u201d<\/p>\n
He said renters were \u201calways going to be in the firing line\u201d right now, regardless of what the budget did or didn\u2019t do.<\/p>\n
\u201cWhat the budget did do is help wannabe first home buyers, yet that help comes at a cost to renters,\u201d he said. <\/p>\n
Additional reporting: Ben Wilmot <\/p>\n