- The developer lobby is the boy who cried wolf in Australian real estate. He’s actually right about something
and desperately wants to be heard, but no one is listening any more.
The recurring topic is the cost of housing. It’s absorbing far too much time and energy for stakeholders
everywhere, because politicians find the obvious solutions unpalatable.
If politicians stopped taxing real estate to within an inch of its life, life for home-buyers would become so
much easier. The cost of a new home for a first-timer could be massively reduced. One estimate suggests
the typical new home in Sydney could cost $250,000 less.
The developer lobby argues that stamp duty is the single biggest problem. I have to agree that stamp duty
is an obscenity. Having to cobble together a deposit is a big enough challenge for property buyers, without
having to save to pay an exorbitant and unjust tax as well.
Stamp duty on the median priced dwelling in Sydney ($752,000 according to RP Data) is almost $30,000.
It’s similar sum for the same purchase in Perth, while anyone buying a home at that price in Melbourne
would pay over $40,000.
It’s tantamount to paying a fine for the crime of buying a home or an investment to fund your retirement.
The developer lobby has been targeting this issue with one of its endless campaigns. It wants stamp duty
scrapped. It presents some compelling evidence, but I doubt anyone important will take any notice because
builders and developers have been crying wolf on multiple issues (e.g. the mythical housing shortage crisis)
And its proposal overall is a massive turnoff. Its argument essentially is this: everyone should pay more tax
so that the development industry can make more money.
The Property Council of Australia, arguably the most self-absorbed group in society, is suggesting that
stamp duty should end and the lost government revenue be recouped by increasing the GST.
The proposal, therefore, is that everyone should pay more for everything they buy so that real estate can
be exchanged cheaper. I’m sure that’ll go over well with the general public and the politicians they elect.
The council argues stamp duty is inefficient and "a runaway cash grab that's hurting Australia's economy
and locking out potential home buyers". It says the community should be outraged at figures like these:-
· The cost of stamp duty to a home buyer with an average-sized mortgage has increased 795% in
Melbourne and 749% in Sydney in the past 20 years.
· Property owners have become Australia's largest collective taxpayer, contributing 9% of total tax revenue.
· Property taxes make up as much as 46% of state, territory and local government budgets. Stamp duty
alone contributes more than 20% of the total revenues of the NSW, Victoria, Western Australia and
Northern Territory governments.
· The cost of stamp duty over the life of an average mortgage is now $61,542 in Sydney, $56,616 in
Melbourne, $49,701 in Darwin and $35,427 in Canberra.
The Housing Industry Association, another noisy member of the developer lobby, says property taxes add
around $250,000 to the price of a new home in Sydney. That, it says, accounts for 40% or $1,350 per
month for the life of a home mortgage.
"Taxes on new housing are a brake on economic activity, and represent a constraint on housing
affordability and labour productivity," the association's head of industry policy Graham Wolfe says.
Wolfe says stamp duty is the most inefficient tax in the system. However, he says there are many other
taxes on new homes, including developer infrastructure levies, which can add $70,000 to the cost of a new
home-and-land package. GST is also levied on new homes, but not existing properties, adding tens of
thousands of dollars to the cost.
The problem is: state governments will never give up their property taxes. They’re addicted to them.
We’ve seen what’s happened with the ACT Government. It went to an election promising to eliminate
stamp duty within a specific time frame. Now they’re reneging on their promise. They just can’t let go of all
that lovely money.
And, for them, the protests of the developer lobby are just background static. No one is listening.
Is this the one for me?
Knowing when to move on the right property
Buying a home is one of the most important and largest financial decisions that are likely to make. Getting it right will result in years of security and happiness from your home. As happy as the right purchase makes you, the wrong purchase can become a painful purchase – both emotionally and financially.
Given the expenses involved in buying and selling, and then buying again, it pays to get it right. To avoid the errors of others, it pays to be aware of the errors first.
Many home buyers unwittingly (but commonly) make one of two errors when selecting a property – they are too slow to move on the right property or they buy the wrong property out of frustration.
To find the right property early in the search can create complacency when buying. You can be lulled into thinking that another one will come onto the market soon. If you have a particular or unique criteria for your new home, it can be a real process to find another suitable property - should you let the right one pass you by. Alternatively, the more generic the property, such as apartments in high rises, the more chance there is that another one will become available.
Unique is an overused description in real estate marketing. It is worth being decisive if the right property with unique characteristics does become available though.
It can be surprising to find the right home in the first week or two of your property search. But if you intend to buy and it’s the right price that’s fits your needs, why risk missing it? There is no guarantee that the right home will become available when you are 100% ready to buy. If you pass up the right property and then struggle to find another home over the ensuing months, indifference can quickly turn to frustration.
Frustrated and fed up
Buyers that have missed out securing the right property overtime, can then become frustrated, inpatient and ultimately buy the wrong property. Having invested so much time, there is a desire to complete a purchase that over rides the need to find the right home. Aspects of the property that don’t work for you can be overlooked if you are in a frustrated and fed up frame of mind.
If you find yourself just wanting to buy something and so you can stop looking every weekend, you may be better off to not look at all. This is preferable to buying an unsuitable home just because the owner is willing to accept your offer.
People that have sold first and need somewhere to live within a certain time frame are prone to a fed up purchase. You are better off temporarily leasing than buying the wrong home. If you do buy the wrong home, it will be a temporary one, albeit more an expensive option than a short term lease.
If a property has been slashed in price, its imperative to not overlook the real reason the price has been reduced. Where a property is priced lower than the rest of the market and the price seems too good to be true, then it probably is to good to be true. Properties that are drastically marked down in price are often compensating for a flaw. Sometimes the flaw is obvious other times it may not be. The more research and independent advice you seek, the more likely that you will find the reason for the reduced price.
If you know the flaw and still decide to buy, at least you are buying fully informed.
The key to buying right is to be fully informed, decisive and patient. Decisiveness and patience are a rare, but complimentary combination when buying real estate.
I am constantly amazed and surprised by the sellers who opt not to disclose the price they would like to achieve for the sale of their property. What are they hoping to achieve using this tactic?
In the days when I was listing and selling real estate and sellers wondered if ‘no price marketing’ was possibly the way to go, I would ask them to put that question aside for the moment and consider one or two aspects of marketing.
First, I would establish where in the process of buying/selling they were at that moment:
Had they decided to replace their current home with another?
Had they started looking for the replacement home?
Having established that they were in going to be in the market for a replacement home, I would ask them one further question:
Wherever they were looking, (internet, newspapers, real estate magazines), what did they do when they found a property advertised without a price? Almost invariably they told me that they would ignore that listing and continue to look for properties that had a price.
Really, then, they had answered their own question.
As one seller said it to me
‘If they don’t know how much they want for their property,
how do they expect me to know?’
We are told by buyers all the time that they really like our straight-forward ways of selling property; they like to know how much the sellers are wanting and, if they are serious buyers (and they are the ones we really want to deal with), they like our ‘no open homes’ policy. Note: Our observation about open-home visitors is that they like open homes because ‘we don’t want to waste anyone’s time’ – i.e. they are not serious buyers.
Going back to the ‘no price marketing’, however, how would it be if all businesses operated on the guessing game principle. If it was such a great idea, why don’t the petrol station; pharmacy, supermarket, cinema or even your local doctor offer their goods or services without a price, so that you had to work out what you felt was a fair price, offer it and run the risk of being embarrassed by a refusal?
It is this chance of being miles away in their guesstimate that put many buyers off trying to buy a property that is not marketed with a price. With properties that do have prices, there is at least a guide as to sellers’ expectations.
Unfortunately, there are some unskilled salespeople in real estate, who will suggest that marketing without a price is a way to ‘hook people in’. This is a sure-fire way to attract low offers as those who do offer will want to make sure that they do not offer too high a price.
Think about it. If a salesperson is suggesting that you use such a method, they are actually suggesting that you try to trick buyers into putting in an offer. How do you think that they are going to induce a buyer to make an offer?
Yet another of the hurdles faced by sellers of properties without a price is the expectation by buyers that the sellers are ‘probably wanting too much’. This, of course, may or may not be true. The sellers may be quite realistic in their expectations but unfortunately, as far as the buyers are concerned there is no way of knowing this so their perception becomes reality and many potential buyers will avoid the problem by avoiding the property.
Sellers should try to consider the situation as if they were buyers and put themselves in the buyers’ moccasins. Sellers should not be too easily convinced by the blandishments of those real estate salespeople who advocate such a course of action.
Those who want to maximise the price they receive for their property should ask us for our free booklet ‘How to get the highest price for your property’.
It is a no-nonsense guide to doing just that. You’ll be glad that you did.
Ethics in Real Estate