Quote Of The Week
“Density in the right areas can be the most sustainable form of growth”.
Brisbane Lord Mayor Adrian Schrinner
Consumer Confidence Improves
Consumer confidence remains stable with new figures showing a slight improvement in the long-term view of the economy.
The latest ANZ-Roy Morgan Consumer Confidence ratings remain unchanged for the second week in a row, although it is still about 20 points below what it was at the same time last year.
Confidence is up in Queensland and South Australia, it is unchanged in Victoria and is down in New South Wales and Western Australia.
About a fifth of respondents believe their families are better off financially than this time last year while confidence in the economy remains weak with only about 12% believing it will perform well in the next five years.
There has been a slight deterioration in whether consumers think now is a good time to buy a major household item with only 19% believing it is a good time.
ANZ Senior Economist, Adelaide Timbrell, says confidence among those who own their home outright and those renting declined slightly.
Clearance Rates Hover Around 70%
Clearance rates and auction numbers are down slightly on the previous week, according to the latest analysis of the Australian auction market.
Nationally the clearance rate last week was 69.1% compared with 72.4% the previous week.
Adelaide remains one of the strongest performing auction markets with almost three quarters, 74.8%, of properties selling under the hammer.
Brisbane had a clearance rate of 70.9%, followed by Sydney, 70.8%, Melbourne 70.7% and Canberra 58.2%.
The number of properties offered for auction last weekend, 1682, was significantly less than the 2377 properties taken to auction at the same time last year.
The top performing region in Australia was Sydney’s City and Inner South with a clearance rate of 83.3%, while Melbourne’s outer east has a clearance rate of 79.6%.
Of the larger regional markets, Newcastle and Lake Macquarie had the highest clearance rate last week of 65.4%.
According to CoreLogic figures auction clearance rates for 2023 have been substantially higher than late last year.
Building Slump Further Pressures Rents
Building approvals have slumped to their lowest levels in more than a decade. The reduction in supply puts further upward pressure on residential rents.
Australian Bureau of Statistics figures show total new approvals were down almost 28% in January with 12,065 approvals the lowest figures since July 2012.
Standalone home approvals dropped 13.5% in January, while apartments, townhouse and semidetached homes approvals dropped by 44%.
BIS Oxford Economics senior economist Maree Kilroy says increasing interest rates are stopping people from committing to new housing.
She says further rate rises will impact on the demand for new homes.
“Inquiries for greenfield land and off-the-plan apartments are down sharply on a year ago and are set to remain weak over the year ahead,” she says.
“For households that put down deposits on land lots over 2021 and 2022, finance at settlement has become challenging.
“Financing the build stage has similarly become tougher, where higher borrowing costs and a near-30% run-up in construction costs are both impacting.”
Experts Move On Super Changes
Experts are already devising methods for investors who have Superannuation balances above $3 million to avoid being hit with higher taxes.
From 2025 the superannuation fund concessional tax rate will increase from 15% to 30% for taxpayers with balances above $3 million.
Cameron Harrison, Partner, Anne-Marie Tassoni, says most affected people will simply restructure their finances and invest anything above $3million elsewhere.
She says some might consider drawing down on their superannuation above $3 million and contribute to the superannuation accounts of their children.
Tassoni says this will help prevent “frivolous consumption” by the children, who will have to wait many years to access the money.
Other analysts suggest tax-efficient investment bonds, or discretionary and testamentary trusts.
Anna Hacker, of Pitcher Partners Advisory, says investors might need to be a bit more creative, while Australian Unity head of strategy Greg Bird, warns the changes will affect a wider group than just people with a super balance of $3 million.
PM Rules Out Negative Gearing Change
Australian Prime Minister Anthony Albanese has stepped in to ward off speculation that the tax-exempt status of the family home could be abolished.
Albanese has emphatically said it will not happen, “because it is a bad idea”.
The issue arose as media began speculating on what tax cuts Treasurer Jim Chalmers may make this year.
Some suggest Negative Gearing could soon be in the Government’s sights but Albanese says that they have announced everything they are doing and that didn’t include changes to Negative Gearing.
Former Labor leader, Bill Shorten, took a policy to limit negative gearing to new properties to the electorate when he ran as leader in 2019.
Labor scrapped its policy on changing negative gearing after it lost that election.
Many investors left the market during the Covid induced property boom, taking advantage of growing prices. Analysts say touching negative gearing would make the rental crisis even worse, as more investors would sell up.