Bill Shorten to address housing affordability at ALP national conference

I don’t think this is aimed at those on benefits.

 

That was going to be my next comment. Sounds like it is a realisation that benefits are too low and essential workers salaries have been capped at 2-2.5% increases pa so they need to get creative with how to give away more of the cake while looking like they're doing it for the developers.

 

Yes and we would be helping those who really need it.....

 

Trying to understand labor party logic here. Remove one broad and efficient tax incentive to residential property investment (NG) and replace it with another far more narrow, prescriptive and beaurocratic version.

This is my fundamental problem with the Labor party, their belief that they can 'fix' otherwise effecient markets through government intervention.

 

Rent assistance exists. All they would need to do to make this way work is selectively open up rent assistance applications to the desired worker groups in designated income bands (even though they aren't currently receiving Centrelink many are already in the system and get some FTB etc) and bump up the rent assistance $ a bit.

 

Too few details yet to make a definitive judgement but the Labor scheme looks very much like the old NRAS except for 2 main points:

• incentive of $8,500 pa over 15 years compared with (using current rate) $11,192 pa over 10 years for NRAS
• 250,000 properties built over 10 years compared with 37,000 over 4 years for NRAS.

As an NRAS investor from the earliest days I think this scheme looks subpar:

• The proposed annual incentive is too low to make it worthwhile considering that what you receive will be much less due to fees and various admin. The 5 extra years wouldn’t help much if your return over the first 10 isn’t good enough.
• The very large number of new properties means they’ll be predominantly far away from established areas and of low investment grade. NRAS investors already had to be very selective in their choice of property so I expect this problem to be further exacerbated. The majority of investors on this scheme are likely to be disappointed.
• If this goes ahead at the same time as the NG changes (where only new builds are allowed to NG) the risk is huge that developers will increase their price premiums so much that only the most naive of investors will be sucked in.

Happy to change my views if more positive details emerge.

 

I like your thinking. BUT what developers will be building brand new properties in the outback and selling them for $150k each? Both NRAS and this scheme is for new housing only.

Are there still empty new houses in places like Middlemount, Moranbah and 50 klms from Gladstone that might fit this criteria?

 

It's $26,400 per house allocation.

Add FHOG / SD concessions and you're looking at a home that is new, incl land, for about $250-275k.

Show me where you can do that and have a job to support such a mortgage and I'll show you watermelons.

 

I think the biggest change is that it won't be available to individual private investors, so many here wouldn't be in a position to utilise it even if they wanted to.

 

This is going to be a game-changer based on those numbers @truong

25000 new properties/yr for 10 years (or 2,000/month)

The ABS graph below, indicates that there's about 17,000 dwellings/month being approved. If this was to swell by another 2,000 odd (more than 10% increase), then there'd be a major shortage of trades to do the work, prices would increase rapidly, the savings would vanish as $8.5k incentive would be more than swallowed up by the 15-25% increase in the cost to build.

 

The first NRAS was also for institutional investors. Approved participants provided an avenue for individual investors to participate via head lease , NEJV or Managed Investment Scheme ( Questus)

While we dont know any details yet- its unlikely they will get enough volume from limiting this to institutionals .

Let's wait and see the details...

 

if the previous NRAS rounds were any indication, I would expect the incentives would be applied to some of the 17,000 dwellings already planned for construction. I wouldnt expect there would suddenly be an additional 250,000 dwellings being built over 10 years that otherwise wouldnt be built, so its unlikely this would create an increase in construction costs in any way.

The last NRAS provided @37,000 dwellings that are rented at 20% below market, but it didnt result in 37,000 new dwellings that wouldnt otherwise have been built.

It's the National Rental Affordability Scheme, not the National Construction Scheme

But again.....let's wait to see the details.

 

Hit the nail on the head here.

 

That’s entirely possible but I’m more concerned about price gouging by developers and marketeers intent on playing the NG and incentive cards to the max. On the previous NRAS I saw plenty of cases where valuations came back short by tens of thousand $. The deals that I rejected due to overpricing were more prevalent than the ones I eventually bought. This time around with new builds being the only NG-enabled class of properties, I expect this situation to get worse.

There’s already not much margin to play with as the incentive is cut by 25%, but if you’re uninspired enough to buy an overpriced property you could virtually wipe it out.

My back-of-the-envelope calculation:
Incentive $8500
Minus rent discount (say rent 400/wk) 20% x 400 x 52 = $4160
Minus admin fees (at a guess) 15% x 8500 = $1275
Minus extra loan repayments due to say 40K overcharge: 40000 x 5% = $2000

Residual benefit: $1065

 

are you planning to increase your rent soon ?

 

Steady the ship Eric. I'll wait till the tenants are on their January vacation lol.

 

W

What is cheap about Mt Druitt. I checked it out the other week. 1,000 SQM blocks listed for about $800k. Was also surpirsed when I popped into the local Westfield, there was a security guard on the door.

 

Was he scared by a mouse?

 

Did he ride a Segway?

 

Plenty of houses in the "satellite suburbs" of Mt Druitt going for 450K.

Mt Druitt Proper has always been more expensive.

Now that security guard you mention does a wonderful job. He can spot a shop lifter from a crowd of shoppers who all look like shop lifters lol.