House prices slid in many of Australian state capitals in the end of April.
According to property data agency CoreLogic, Melbourne had the steepest weekly decline with 0.2 per cent, followed by Sydney and Brisbane with 0.1 per cent. So far in 2018, the home prices in all five mainland state capital cities have fallen, ranging from Brisbane’s 0.1 per cent to Sydney’s 2.1 per cent.
Many factors could be attributed to these drops, including the higher-than-usual supply of properties. Currently there are 26,879 homes for sale Sydney and 31,195 in Melbourne, indicating a 28.2 per cent and a 11.4 per cent increase from this time last year respectively. Weak household income growth and a decline in the number of foreign buyers also contributed to this weakness.
Excluding richer property investors from negative gearing can help improve housing affordability, according to a report coming out today.
In a research released today, the Australian Housing & Urban Research Institute (AHURI) said negative gearing reforms that prioritise ordinary “mum and dad investors” could save the federal government $1.7 billion.
A proposed model suggests denying the top quarter of income earners any deductions from rental losses, while the bottom half could continue receiving 100 per cent deductions.
The researchers also propose a reduction of capital gains tax discount to limit negative gearing activities and reduce inequities between higher and lower income investors.
Another option the report models is capping negative gearing deductions to up to $40,000.
“Current negative gearing policies are heavily skewed towards high-income earners, raising concerns about the extent to which these policies exacerbate income and wealth inequality in Australia,” said Alan Duncan, Curtin University economics professor and co-writer of the report.
The negative gearing tax breaks policy has been blamed for the surge in housing prices in Sydney, Melbourne and Brisbane. The Labor party has advocated for limitation of negative gearing to only new properties and reduction of CGT discount to 25 per cent, but the Turnbull government said the opposition’s proposals would jeopardise the property market.
The report follows Grattan Institute’s review released on Sunday, which found that housing affordability can be improved by cutting CGT discount, getting rid of negative gearing, and building extra 50,000 homes per year.
Auction market opens the spring season with significant clearance rate in Sydney, Melbourne, Brisbane, Canberra and Adelaide.
Sydney market remains strong with its fourth consecutive weekend of a clearance rate above 80 per cent, well above the rate recorded at the same weekend last year of 75.1 per cent.
Melbourne market is also at its strongest since last winter, achieving 77.5 per cent clearance rate on Saturday and making it the sixth consecutive weekends of clearance rates above 75 per cent.
Domain senior economist, Andrew Wilson told AFR Weekend that other cities are experiencing similar trend. “Brisbane saw a clearance rate of 54 per cent when it is usually travelling in the 40s, Canberra hit 82 per cent and Adelaide 74 per cent,” said Wilson.
Observers believe that this market boom is motivated by lower number of listings and cuts in interest rates by the Reserve Bank of Australia last month. Wilson reports that this weekend, Sydney only saw 537 auctions compared to 815 auctions at the same weekend last year while Melbourne had 718 auctions compared to 880 last year.