Aussies suddenly feel good about property again
Sydney prices have jumped up almost 20 per cent in 3 months.
The latest research from AMP Capital shows the Sydney property market has grown at an annualised rate of 19.6% over the last three months.
That is a significant rise, especially taking into account the recent property downturn. No wonder sentiment and expectations about the Sydney property market are also improving.
57 per cent of Australians who are in the property market say Sydney prices will rise over the next 12 months according to ME Bank's latest Quarterly Property Sentiment Report. That number is up from 24 per cent six months ago.
57 per cent also believe Melbourne prices will rise in the next 12 months.
ME’s Andrew Bartolo said the past three months have seen the property market turnaround firm and stabilise.
“After price declines in Australia’s key markets, consistent house price increases over the past three months have created a much-needed period of stability,” said Andrew Bartolo.
“Providing more certainty that early price increases weren’t simply a blip in the data.”
Growth in Sydney, and in most states and territories of Australia, is due to a number of factors.
“With the lowest ever cash rate of 0.75 per cent coupled with the relaxation of the 7 per cent mortgage rate serviceability test, well-heeled buyers are better placed to borrow than 12 months ago,” Wayne Walter, Principal of Raine & Horne Pymble/Gordon says.
“The political certainty delivered by the May Federal Election result has also fuelled buyer confidence.”
Angus Raine, Executive Chairman, Raine & Horne concurs saying, “The Sydney market is motoring along due to a combination of low-interest rates, population growth, improving rental yields, 80% auction clearances, mounting buyer and investor enquiry levels, and an easing in mortgage lending conditions.”
Conditions would thus seem ripe to buy. However, rising prices may indicate a shortage of homes for sale and this is partly due to empty nesters remaining in oversized family homes, stymieing housing supply.
Tax break makes downsizing look attractive
More than 4,000 Australians have taken advantage of a new tax break for retirees to encourage downsizing. One billion dollars has been contributed to superannuation funds since July 2018 by retirees who have downsized their home and claimed a tax concession.
Assistant Treasurer Michael Sukkar said that since the initiative began on 1 July 2018, 4,246 people have made an average downsizing contribution to superannuation of $235,000. 55 per cent of contributions have been made by females and 45 per cent by men.
Individuals can release up to $300,000 into their super as a result of the initiative, while couples can release up to $600,000.
And Aussie empty nesters and retirees are sitting on substantial wealth to fund a downsizing purchase or contribution to super according to Aussie Home Loans. Median house and unit values have grown 412 per cent over the last 25 years.
“Even with improved market commentary since June, many empty nesters continue to sit on their hands,” said Angus Raine, Executive Chairman of real estate chain, Raine & Horne.
Mr Raine said there is a lack of listings across Sydney as a result “but particularly in tightly held regions such as Sydney’s Upper North Shore and the Inner West.”
“Many retirees can’t afford to downsize because of the prohibitive costs involved in rightsizing into a smaller home.
“Stamp duty breaks for downsizers is one initiative the state government might consider to encourage empty nesters to move.”
The lack of incentive for downsizers is a major issue. Downsizing would seem a simple equation: sell a million to two million dollar property, buy a small house or unit for $600,000 and free up equity for retirement.
You can examine the most suitable suburbs to meet your budget here.
Yet, stamp duty can be crippling and affordability is still a factor if you want to live inner city or within a high-priced suburb.
Recent imposts have also included:
- Loss of part or all of the age pension: the family home is exempt from the pension assets test, but any home equity unlocked by downsizing is not;
- Stamp duty on any new home purchase;
- Earnings from the cash released are taxed, whereas capital gains on the home are not.
With those caveats, many empty nesters would be asking: why bother?
This is especially the case with empty nesters who have an emotional attachment to their home, or see it as a legacy.
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