Blog Posts

Melbourne Property Report Aug 2017

Melbourne Property ReportMelbourne population growth is the fastest in Australia. Recent growth figures show a rate of 2.4% per anum. This is one the of fastest growth rates in the western world. Public transport is already overcrowded and at peak times the system is struggling to cope with the usage.

View the Report Below.

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Negative Gearing: A tax perk or good policy?

Negative gearing has been in the spot light as part of the Government’s “Australia’s Future Tax System” review.  This controversial discussion rears its head every few years when the two sides clash: one claiming it disadvantages first home buyers, the other saying it provides vital rental housing.

What is negative gearing and what benefits does it provide to tenants, investors and the Government?

Negative gearing is the situation where a rental property costs more to own than it generates in rental income.  Being able to claim a deduction on the expenses for investing is a well-established principle for business both in Australia and internationally.

However, some investors target their borrowing to maximise these taxation benefits so they can offset the losses incurred in the investment against their personal effort income taxation. This is particularly true for those with a deposit created by an equity release that effectively creates 100% borrowed funds for the purchase.

It can also occur in a rental market where interest rates are higher than gross rental yields.  These conditions currently exist in much of Melbourne, Sydney and many other capital cities.

What are the benefits for renters?

About 35% of Australians live in rental accommodation.  Most of these people rely on being able to find affordable accommodation near to their place of employment.  When employment centres shift, such as we have just seen with the end of the mining boom, employees need to be able to respond and move to new employment centres.

Those arguing that first home buyers are disadvantaged are forgetting that decreasing the number of rental properties through the removal of negative gearing benefits would drive rents up and those on the lowest incomes would be most disadvantaged.  They would potentially be driven out of the larger cities.

Many of these people provide vital services as minimum wage employees in sectors such as retail, food and hospitality, clerical and home services.

Imagine the impact on Australia’s GDP and productivity if there were jobs in areas with no affordable accommodation?  Imagine the impact on us if our service sector suddenly had to pay higher wages for employees?

What are the benefits for investors?

Most multiple property investors have stated they are seeking to create wealth to support their retirement living.  Buying a portfolio of property, selling half to pay back the debt and living on the income is a sound strategy.

The Government has a huge looming issue to fund future retirees via the pension.  It was reported recently that we should expect the pension to become means tested, and for it to shrink in spending power over time.  Additionally once the baby boomer generation retires the number of workers per retiree also drops dramatically increasing the taxation burden on future generations.  Self funded retirees are not relying on the Government handouts.

What are the benefits to the Government?

The Government has a responsibility to provide affordable housing in Australia and have done so in the past through owning large social housing projects.  More recently through the NRAS scheme; the scheme that gave an incentive for investors to provide the capital for this housing and offered a additional taxation benefit in return.

This project has since been retired, and so the question will be ‘How will the Government support low income earners with affordable rental accommodation?’ Clearly investment housing is an important part of this equation and the trend for Self Manage Super Funds to invest in residential housing provides a solution to accommodation and wealth creation. Superannuation is one sector that is now valued at about A$1.8Tr and is seeking good returns in low risk investments.

The benefits to tenants and investors are significant however it is the benefits to the Government that are greatest.  Being able to attract and retain international investment and businesses, and grow Australia’s GDP are key responsibilities. Having a flexible work force that can move about the country, as employment requires is vital, and reducing the demands on the public purse through more self funded retirees takes away a very significant unfunded cost.  Being free to engage in public, private partnerships to deliver new housing solutions gives the Government more flexibility on how it spends its income.

It is wise choices here that will dictate the future wealth of Australians.

 

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The Human Habitat III Conference.

“Implementing the New Urban Agenda” – Sydney to Newcastle High Speed Rail: A Value Capture Model.

By 2050 more than 70% of the people on the planet are forecast to live in cities, compared to about 50% currently. This creates a significant need to appreciate the qualities and characteristics of successful communities to enable planners to create new cities that support their human inhabitants thriving.

On October 2016, in Quito, Ecuador, the 3rd United Nations Conference on housing and sustainable urban development known as Habitat III, was held.

The Nation states present, in consultation with local authorities, grass roots and indigenous organisations, women’s and youth groups, the private sector and charitable sector created ‘The New Urban Agenda’ (NUA) identifying a recommended global strategy on sustainable urban development. Ref: About the New Urban Agenda

Of interest to us was the enshrining of the “Right to City” calling on Governments to make cities for people rather than profit. This needs to ensure inclusion for all including: gender and age sensitive approach to city planning, as well as continuing efforts to reduce urban poverty.

On 4th and 5th May 2017 the next chapter of The New Urban Agenda is taking place in Melbourne , at the Implementing The New Urban Agenda Conference.

I quote section 31 of the NUA which is a passionate plea to support social equality in the plan.

“We commit ourselves to promoting national, subnational and local housing policies that support the progressive realisation of the right to adequate housing for all as a component of the right to an adequate standard of living; that address all forms of discrimination and violence and prevent arbitrary forced evictions; and that focus on the needs of the homeless, persons in vulnerable situations, low-income groups and persons with disabilities, while enabling the participation and engagement of communities and relevant stakeholders in the planning and implementation of these policies, including supporting the social production of habitat, according to national legislation and standards. “

Through my network, I have been invited to present at “Implementing the New Urban Agenda” conference in Melbourne on the 4th and 5th May 2017: Title: “The Sydney to Newcastle High Speed Rail Link: A Value Capture Model”.

This project seeks to address a number of these considerations and there are some examples below.

Affordability:
Linking Smart Cities via HSR to allow access to affordable dwellings;
• Offer $600,000 prices for two bedroom apartments that are 15min to 35min travel from Central Station in Sydney.
• Support First Home Buyers and Owner Occupiers with a discounted HSR fare of $60 per week. The same as the current fares for regular rail travel.
• Provide a fractional ownership structure for purchase in conjunction with Domacom’s fractional ownership platform.

Social Housing:
• Provide up to 100,000 new social dwellings, on Government provided land, for the low income and disadvantaged members of the community. The number is dependent on the taxation treatment of gifting these properties to social housing groups.

Environmental Sustainability:
Using city waste as a biofuel to generate power for HSR and the Smart Cities.
Using safe and strong recycled materials, as appropriate, in the 140Km tunnel and smart city construction.

Cultural and Educational Integration
• Establish community centres celebrating and integrating ethnicity.
• Establish educational centres from primary school through to university as part of technology incubators. The purpose of this is to prepare students for work and to foster innovation.

Encourage investment
• Providing innovative property investment products that create a separate market for property investors, so they are not competing with home owners. Disabled housing facilities, and multiple occupancy dwelling.

The funding model is ‘value capture’ where profits from the development of Smart Cities are used to create the HSR infrastructure, environmental initiatives, social housing and green living.

Connect with me on LinkedIn and join the High-Speed Rail and Smart City LinkedIn Group to contribute your professional comments to this important project.

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The New Urban Agenda: New Highways Promote Traffic Congestion!

The forecast is that 70% of the people on the planet will be living in urban cities by 2050.  This is not about the historic shift in the industrial revolution where masses of people moved to the new cities to earn a living.  Most of these people have no jobs.  They are fleeing repeated natural disasters on their farming lands.

Some countries where the planning authorities and national finances are unable to keep up with demand for new dwellings and infrastructure, this spontaneous urbanisation is creating slums.  In other countries, the issues are about the equality of access to the city’s amenities, employment, and housing.

In Australia, we already have 80% of our population based in cities with over 40% of our population in Sydney and Melbourne.  Our issues include affordable housing, green energy, sufficient infrastructure and traffic congestion.

Let’s look at congestion as a cost and the plans for its resolution through good urban planning.  The Australian Government Department of Infrastructure and Regional Development reported that congestion cost $16.5B in 2015.  Congestion is forecast to cost between $27.7B and 37.3B by 2030, depending on the assumptions made.

Our Governments at Federal, State and Local are tasked with addressing this lost productivity.  What is the framework behind their thinking?

The United Nations (UN) has created a blueprint for sustainable human habitat (The New Urban Agenda or Habitat III) that brings the best elements of new cities and re-planning or older cities together.  Australia is a signatory to its implementation.  The global need for this framework for planning is underscored by the thirty-six thousand people who attended the first implementation conference in Quito, Ecuador.  Another much more modest event was held in Melbourne last week.

How can we address congestion?

New cities built within existing cities, such an example is the redevelopment of the formerly industrial suburb of Fisherman’s Bend in Melbourne.   It is planned to be a ’20 minute city’ where all residents can access employment, health care, schooling, shopping, parks and entertainment through 20-minute trips.  It is also planned that 80% of these trips will be made by walking or public transport.

Imagine if your commute were to change and you could live in a ‘20 minute city’.  No more slogging to work on the motorways, or through the back streets.  The public transport options may mean you could leave the car at home.  Instantly you might have more per day, for some, it could be as high as one and a half hours a day, or 7.5 hours per week.  This is the same as having another day in the week!

Where there is no brownfield land we could develop new ‘20 or 30 minute cities’ through new technologies such as high-speed rail (HSR) linking smart cities to employment centers in the CBD.  These cities can be built from scratch and embrace the best technologies, the best integration, and the best habitat creation from around the world.  Habitat III is best world practice to support sustainability, connections to the key services and the amenities we need to live well.  Songdo in Korea has upheld a key reference smart city though with so many new cities required in so many countries it may become a statesman example shortly.

In existing cities, wise spending on connections between where we live and where we work will reduce the cost of congestion. The associated stress it causes and creates happier lives.  The Governments in Victoria, NSW and Queensland are creating METRO train services to increase the quality and scope of services.  There are also HSR proposals on the table to connect affordable housing with CBD employment centers.

Sydney has the lowest rate of volunteering time per person in the country.  This indicator reflects the cost of congestion as we struggle to travel between our affordable homes and distant employment centers.  Investment in decreased congestion is key to more liveable cities.

Join the HSR and Smart Cities Forum: Here

Connect with me LinkedIn: John Moore

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Report Sheds Light On Digital Technology’s Influence On Property Sector

A new report by engineering and design consultancy Arup revealed how digital technology is reshaping the property sector by changing the way buildings are designed, built and used. The report said companies that fully embrace a digital strategy will do disproportionately well and have a big impact on our […]

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