Saul Eslake, chief economist from Bank of America Merrill Lynch, believes negative gearing contributes more to a potential housing bubble than Chinese property investment. Eslake called on the Abbott government to end negative gearing for new investors, a week after the Reserve Bank said macroprudential policies such as raising the capital requirements on mortgage banks may be necessary to prevent the housing market from overheating. Negative gearing allows investors to reduce their tax liabilities by deducting losses from rental properties on their other income. Data has been notoriously unreliable on the amount of foreign investment in Australia's housing market, but The Grattan Institute pegs the cost in lost tax revenue to the federal government at $2.4 billion a year. Read the full story here.
The most expensive land in Australia is in the middle of Perth
The median price for a plot of buildable land in Perth is $277,780, up about $40,000 year over year. By the square metre, Perth has the most expensive land in the country, with Sydney second. Capital city land prices have increased by 6 per cent over the year, but Perth's land prices have grown fastest. While the overall boom in real estate has contributed to the exploding prices, Perth also has significant land constraints. The rise in land prices comes at the same time home sales have been falling, which means this may be the top of the market for developable land. Read the full story here.
Macroprudential measures to address the housing market? Sure… in China
The bubble has popped in China, and the Chinese government has started managing the fall. China's central bank began pumping money into cash-strapped developers, cut mortgage rates and lowered some minimum downpayment levels for home buyers Tuesday. Home prices in China have been in freefall since May, leaving developers stuck with unsellable properties and the banks backing them in danger of collapse. Banks have subsequently started slowing down the mortgage approvals for borrowers. The meltdown has taken China's construction market with it, leaving Australia's steel industry reeling. Read the full story here.
Investors crowding out owner-occupiers in the mortgage market
The Reserve Bank released figures Tuesday that show housing investors continue to increase their share of borrowing relative to home owners. The amount of debt owed by investors increased 0.8 per cent in August and 9.2 per cent year over year, about double the rate of owner-occupiers. The RBA has been floating trial balloons to test reaction to constraints on lending. These figures buttress the argument that banks may be overexposed to property speculators. Read the full story here.
News Corp buys Move
Rupert Murdoch's News Corp, owner of realestate.com.au, will also own realtor.com in the United States after a $950 million deal announced to buy Move Inc. REA Group Ltd, owned by News Corp, will take a 20 per cent stake in Move for about $200 million, News Corp said. Major US competitors Trulia and Zillow merged in a $3.5 billion deal earlier this year, leading to speculation of further consolidation in the online listings market. Read the full story here.
Collections: Mortgage News