Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Sunday, 2 October 2016

Vancouver tax, & the week ahead

Week ahead

First up, well played Doggies, and henceforth we will not be mentioning AFL until next year!

An array of jolly interesting other news due out this week, including the ABS Building Approvals figures for August.

For the month of July the volatile building approvals series defied predictions in leaping by +11.3 per cent a rip-snorting 20,987 - the second strongest total result ever - suggesting that there may be enough juice in the pipeline to keep residential construction operating at close to its capacity for a couple more years. 

In particular approvals in the high-rise sector were burning up the charts.

Away from the high-rise sector, where developers may in any case increasingly be grappling with financing challenges, the trend in building approvals is down. 

Market forecasters have unilaterally agreed on there being a weaker result reported for August. 

On Tuesday the Reserve Bank of Australia (RBA) will leave the cash rate on hold at 1.50 per cent, having already chopped rates twice in May and August respectively. 

Core inflation forecasts remain doggedly low, suggesting that interest rates could now be flat for a looong time, possibly until 2018.

Retail trade was very disappointing in July, but recall that there were some peculiar sectoral readings last month, so it'll be well worth noting what occurs for August. 

The August international trade balance will also report yet another trade deficit in the $2 to $3 billion range, with gold exports unable to match last month's spike, but a leg-up from coal as stronger coking coal prices gradually filter through to the coffers of Aussie exporters.

Finally, CoreLogic will tomorrow report that dwelling prices increased by +1 per cent in September and a thumping +2.9 per cent over the third quarter of the calendar year. 

There's been plenty of debate about the accuracy or otherwise of CoreLogic's numbers. 

I've now seen enough actual sales data to know that following further monetary easing markets have quite quickly been repriced ~10 per cent higher in Sydney's eastern suburbs, and on the lower north shore - possibly even in some parts of the 'inner inner-west' (i.e. CBD fringe).

However, I haven't really been following what happens in other Sydney markets closely enough to have any opinion at all on them, so will have to wait for the data providers to confirm.

Tax on non-residents

I was quoted quite extensively in this piece in The Guardian in the UK yesterday, which discussed changes in taxes on non-resident buyers of real estate in Canada and globally.

I'd possibly make a couple of subtle tweaks - there are more than 150,000 attached dwellings (including townhouses, and low-rise units) under construction in Australia - and the market will probably deliver around a similar number of high-rise dwellings over the next few years - but the gist is accurate enough.

The new land tax surcharge for foreign persons buying in New South Wales will kick in for the 2017 land tax year, but there remains hot demand from domestic investors in Sydney and Melbourne to contend with.

Although there's no doubt in my mind that extending the land value tax to capture all home owners would drive demand away from housing, I don't believe such a seismic shift will happen any time soon for quite a number of reasons (not least that certain state governments are utterly addicted to their monumental stamp duty windfalls). 

A higher annual tax on home ownership would probably be politically unpalatable, with home owners controlling too large a share of the vote - at least for now.

Home ownership rates have definitively fallen in the 25 to 34 year old bracket, but my experience in the market is that many of those 25 to 34 year olds no longer buying homes have instead entered the market as investors.

Fortunately for you, lucky readers, there's no need to rely on my half-baked opinions - on Tuesday the ABS will release a long-awaited paper on its revised findings relating to first homebuyer statistics. 

It's been clear for a long period of time that first-time investor buyers have not been captured by the data, so it will be most interesting to see what conclusions are drawn.