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Thursday, 24 November 2016
Listings crash to lowest level on record
Listings lowest on record says McGrath Huh, so much for the predicted 'disorderly rush for the exits'.
4.5 years of rising property prices later listing volumes and turnover rates have sunk to their lowest levels on record, as a percentage of total property stock.
Having executed its IPO, McGrath (ASX:MEA) provided the below chart as part of its Presentation to the 2016 Annual General Meeting.
Source: ASX: MEA
McGrath's diagnosis left little doubt as to the reason for this, being excessively high stamp duty costs.
It's a point I've visited here often before.
Stamp duty bands were designed with far, far lower dwelling prices in mind.
By consistently refusing to raise stamp duty and land transfer brackets authorities are effectively loading more and more up front tax on to property purchases (in addition to other taxes, such as rates and land taxes).
By effectively raising the stamp duty from a bit over 1 per cent of the purchase price three decades ago to around 4 per cent, the tax has gone from being a consequence or by-product of the transaction to an actual barrier.
Unfortunately, the high transactional cost of moving is predictably leading to 'asset lock in' and indirectly impacting labour force mobility.
Meanwhile investors remain wedded to their buy-and-hold strategies since if they choose to sell they get hit with capital gains tax (not that this stops unthinking 'think tanks' from campaigning for higher CGT).
As for non-residents, presumably some of them must sell but I've rarely come across it, probably because they purchase expensive new property and it can take years to break even on that type of stock with its inherent price premium (particularly now with the new levies on foreign buyers loaded on top of stamp duties, plus land taxes).
Asset lock in
Unsurprisingly capital city owners of houses now hold on to their houses for 10.7 years on average, way up from 6.7 years in 2005.
Owners of apartments now hold for 9 years, well up from 5.9 years in 2005.
The negative feedback look has become self-fulfilling, with so little stock available prospective capital city vendors are hesitant to list for fear of becoming locked out of rising markets.
Due to low listing volumes, McGrath implied that we can expect to see low transaction volumes in FY17.