Insights from the experts - Property Congress, October 2015
19 November 2015
BDO’s Advisory Principal Catherine Torres recently attended the Property Council of Australia's inaugural Property Congress and below shares the insights presented by a host of economists, developers and investors.
Property is now the largest industry in the Australian economy
- Strong growth has been underpinned by healthy domestic investment, and large volumes of foreign investment, which is driving built form completions to record levels.
- The economic position of states and territories is now categorically underpinned by the residential development industry, along with the broader property sector. Market indicators broadly support a continuing of the current record levels of dwelling construction activity, at least until mid-2016.
- Growth conditions are far from even across the states and territories, with housing market conditions in Sydney being the most significant driver of growth, while three of the eight capital cities have seen dwelling values fall over the past year.
- Converting the strong activity of the current property peak into long term activity will require the right policy settings for both state and commonwealth governments to maximise housing supply beyond the traditional peak and trough trends.
Tax reform agenda is essential, however with this reform comes the potential for additional costs, if reforms are not offset by the removal of property taxes
- In total the property industry contributes in excess of $75 billion in Federal taxes to the economy per year.
- Expected tax reform includes:
- Reduction in dependency on PAYG
- More concessions - considerations of negative gearing and the applicability of the 50% capital gains tax discount
- GST (significant impact on house prices)
- Wholesale tax reform
- Harmonisation of state taxes and the removal of inefficient taxes such as stamp duty and land tax.
Foreign investment remains very important for the Australian property industry, with South East Asia remaining focused on Melbourne and China and Hong Kong focused on Sydney
- Overseas buyers account for 28.3% of new property purchases in Victoria, there is however a need for more monitoring from the Foreign Investment Review Board. There remains a fear factor around China’s investment into Australia.
- Settlement risk with mainland China is considered very minimal post 2017.
The most important global trend impacting the property market is technology.
- In the last few years Australia has become one of the highest adaptors of technology in the world, with projects such as the NBN providing the enabling infrastructure.
- Access to infrastructure is a strong consideration in property purchasing decisions, particularly in the commercial sector.
Smart are the cities of the future, and the future of the industry.
- Predictions of future industry landscape include a decrease in union power, collaborative consumption and digital delivery/revolution.
- All levels of Government need to plan ahead by focusing on planning code, increasing capacity to buy (economic growth), and creating smart cities with a culture of innovation.
To understand more about tax reform, disruptive technologies and global influences affecting the property industry, contact your local BDO Real Estate & Construction advisor.