Controversy That Hounds Property Investment In Australia

One difference in Australian Finance as compared to other countries is that its people

work hard to invest in owning a home; and most Australians invest not on low cost housing but by and large, well constructed and highly budgeted dwellings.

Talking about housing markets, in general, one could say that it is a predictable market since people who engage in the housing market do not change needs and wants, as compared with the stock market which solely depends on who sells hot in the market.

Having laid these foundations, one can conclude that we should be able to foresee timing and issues that hounds the housing industry. However, there are commentaries that say there is a real estate bubble in Australia. This means that trade of goods and property is traded at puffed up values.

All capital cities in Australia, except Sydney, have shown rapid increase in property prices over the years. Some factors that could have caused the rise Australian property finance are:

1. Credit card standards have relaxed.

2. Due to low interest rates starting 2008 onwards, borrowing capacity has increased.

3. Government limited the release of new land.

4. A tax system that is to the advantage of financers and home-owners.

5. Rapid increase in population.

6. Seminars on property investment Australia promoting purchase in property which the government did not regulate.

7. And, public speculation that there is a high demand for housing property due to the belief that housing property is a sure deal.

These are just a few of the factors that may have caused the increase of property outlay in Australia.

Moreover, in December 2008, the Australian federal government passed legislation that loosened rules for non-Australian citizens in acquiring Australian property. This also led to an increase in foreign investment on Australian real estate. However, seeing this was not such a hot idea, in April 2010, the government amended the legislation regarding foreigners owning land and house properties in the country. This situation led to commentaries implying the housing market in Australia is more than it is actually worth.

In 2002, the Australian government made inquiries and studies asking if it is the general taxation accord that have caused the thrust to the rising surge of investment in housing rental thus also causing the surge of house prices. In the end, the report said there is no way a definite conclusion could be ascertained that the tax system has a significant effect on house prices. In 2008, another study was also conducted on the same housing prices issue, and the conclusion was that the citizens do not have enough money to afford a decent home, the lowest so far, they say. As you can see, the results of the studies the government conducted contradict each other.

In response to this, a tax review was conducted and gave proposals intended to make an impact on the housing market. These are:

1. Enforcing land tax on all land property, no excuses, no exemptions.

2. Remove taxes on property transfer. And,

3. Changing the personal income tax handling on private residential property.

These policies, however, are not implemented on family homes nor land tax on family homes.

by: Anthony Davis

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