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  1. #1
    Join Date
    Jul 2003
    Location
    Kapiti in New Zealand
    Posts
    4,032

    Default Removal of vendor duty may backfire

    Hi all,

    News for today

    ABOLITION of the NSW vendor duty, which developers said was sending property investors to lower-tax states, could backfire, with warnings yesterday it could lead to a collapse in apartment prices.

    JP Morgan chief economist Stephen Walters said abolition would not bring on a sustained revival in the investment market and would trigger steeper falls in house prices as investors who had delayed selling put their property on the market.
    "Most of the new supply of properties for sale is likely to be units and apartments favoured by investors, which will add unwanted supply to an already oversupplied segment."

    He said the tax was also unlikely to have dissuaded buyers in the last two years, because it only applied to properties that had increased in value by 12 per cent, and prices had then been flat, or falling.

    The warning was a sour note on a positive day for the property industry, as the Reserve Bank held official interest rates steady at 5.5 per cent and the building industry shrugged off the mildest housing downturn on record with a surge in commercial construction.

    The number of plans for houses and apartments approved by councils last year dropped by 12.3 per cent, while the value of residential building work dropped 3.7 per cent.

    This was offset by a 14.1 per cent rise in the value of commercial construction.

    Building approval figures for June show a 0.9 per cent rise in the value of residential plans and a 1.8 per cent lift in the value of commercial construction.

    "The building industry is in great shape with order books growing across all key sectors. Commercial approvals are at record highs, renovations are approaching peak levels and house approvals have risen by 10per cent in four months," CommSec chief economist Craig James said yesterday.

    BT Financial Group senior economist Tracey McNaughton said the worst was over in the housing construction market, following three consecutive monthly rises.

    "The downturn lasted just over a year and was the shallowest on record," she said.

    Even the apartment market has levelled out, and trend figures show just over 4000 approvals a month for the first six months of the year.

    The $1.6 billion in June's non-residential construction approvals included retail projects worth $330 million, offices ($260 million) and factories and warehouses ($300 million).

    AMP Capital Investors chief strategist Shane Oliver said the removal by new NSW Premier Maurice Iemma of the vendor tax - a 2.25 per cent slug on the sale of investment property - did not change the fact that residential property prices were "dramatically overvalued". In the longer term, abolition should remove some market pessimism and may attract the marginal buyer back into investing, Dr Oliver said.

    Cheers

    Marc
    Free business resources - www.BusinessBlogsHub.com

  2. #2
    Join Date
    Aug 2005
    Location
    Melbourne
    Posts
    18

    Default

    That's basically what happens whent he government tries to do things which influence the market. The biggest loosers in this will be the renters, as the vendor tax forced landlords to increse rents to cover costs.

    A very similar thing happened when the government, got rid of negative gearing in the 80s, then reintroduced it because rental costs were rising.
    Last edited by PT_Bear; 06-08-2005 at 09:18 PM.


 

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