Capital Gains

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Entering the property market is a tough gig for first home buyers, especially when faced with competition from buyers who hold larger buying budgets, some of which has been accrued from property equity earned as a result of recent strong capital gains.  
While home value rises have been moderate over recent years outside of Sydney and Melbourne, it provides little comfort for first home buyers in the two largest cities who struggle to compete with those that already own homes.
In 2008, combined capital city home values fell by -6.1 percent in the space of 9 months. By the end of the year, home values had reached and began to climb further thereafter. 
<a href="/images/2016/05/25/Screen%20Shot%202016-05-26%20at%203.35.10%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/25/Screen%20Shot%202016-05-26%20at%203.35.10%20PM.png" alt="">
The growth drivers largely came from two forms of stimulus: aggressive interest rate cuts and a boost to the First Home Owners Grant (FHOG). Since the removal of the FHOG boost and scaling back and complete removal of others, first home buyers have continued to languish at near record-low levels.
The increase in home values across each capital city from December 2008 to April 2016 can be seen in the first of the adjacent charts. Another way to think about this is that if in December 2008 you owned a home worth $500,000 it is now worth $758,418 which is $258,418 more than in December 2008. Looking at this same calculation across each capital city, the increases in value over that time based on a $500,000 home owned in December 2008 are: Sydney ($400,825), Melbourne ($338,866), Brisbane ($73,417), Adelaide ($81,029), Perth ($64,096), Hobart ($11,263), Darwin ($109,293) and Canberra ($126,262).
The data clearly shows that the value property for home owners has undergone some massive rises, the increase in inflation and wages has been comparatively more sedate. 
Although combined capital city home values have increased by 51.7 percent between December 2008 and April 2016, inflation has increased by a significantly lower 17.1 percent over the period. CPI has increased by a greater amount than values in Brisbane, Adelaide, Perth and Hobart indicating ‘real’ home values have fallen. Meanwhile in Sydney, Melbourne, Darwin and Canberra CPI growth has lagged that of home value growth. 
Looking at wages growth between December 2008 and March 2016, the data shows that nationally, and in New South Wales, Victoria and the ACT, it has lagged value growth across the capital cities; wages are now growing at their slowest pace in at least 18 years. 
While the increases highlighted include strong wage increases in the latter part of the mining boom, nonetheless, it shows that in NSW and Vic wages are increasing at a much slower pace than home values in Sydney and Melbourne are. 
The last chart shows the change in the value of new lending (excluding refinances) to investors, owner occupier first home buyers and subsequent buyers between December 2008 and March 2016, and highlights how the value of lending to owner occupier first home buyers is now lower than it was in December 2008 across each state and territory. 
This has occurred despite the increase in home values over the timeframe.
While lending to owner occupier first home buyers has fallen, lending to investors and subsequent buyers has increased in most states and territories with substantial rises in NSW and Vic.
Outside of Sydney and Melbourne home values have increased below or at a similar pace to inflation and wages, however, it is a very different story in the two largest capital cities where existing Sydney and Melbourne home owners have seen significant increases in the ‘real’ value of their home.
Those that do not yet own a property will struggle to compete with investors and upgraders who have been active in the market and where significant equity has been acquired.
<a href="/images/2016/05/25/Screen%20Shot%202016-05-26%20at%203.36.10%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/05/25/Screen%20Shot%202016-05-26%20at%203.36.10%20PM.png" alt="">
The simple answer for first home buyers, particularly in Sydney and Melbourne, is to look to buy properties outside of these cities however, that may seem a little simplistic given jobs creation has not been as strong outside of Sydney and Melbourne and for many moving interstate, employment opportunities are generally a big decision.
Even buying outside of Sydney in nearby regional cities may not be attractive because transport infrastructure does not provide quick and efficient access to Sydney and Melbourne from nearby regional cities. 
Whatever the outcome, we certainly don’t advocate for the return of grants for first home buyers as they have tended to just push up the cost of housing.
Cameron Kusher is research analyst for CoreLogic RP Data. You can contact him <a href="https://blog.corelogic.com.au/about/">here</a>.
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ckusher-ujnxiKuFQs

Investors and owner occupiers keeping first home buyers out of market: CoreLogic RP Data's Cameron Kusher

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Hi Margaret,
We have a 1 acre or 4000 sq metre block of land , zoned farming in country Victoria. We bought it in July 2014 as an investment to develop it as a future home site.
If I sell a block of land with contract of sale dated in 2017 financial year, but settlement is in 2018 financial year, is CGT based on contract of sale date or on settlement date? It will make a difference as we will be retired in 2018 financial year and will be in  a different tax bracket.
The block of land, zoned farming, did not have a planning permit to build a dwelling or shed and has generated no income while we have owned it but we have made improvements. Are the cost of the improvements deductible? We have planted 600 trees at a cost of $1100.
We have drawn up a set of house plans and successfully applied for a planning permit to build a dwelling and shed at a cost of $1400. Are maintenance costs deductible?
E.g. 100 trips to the block of land to mow lawns, water trees, earth moving costs to remove dead trees, loan costs and purchase costs and selling cost.
Can we deduct stamp duty on purchase? Legal costs on purchase? Loan borrowing costs? Loan interest from date of purchase to date of sale? Loan discharge costs? Legal costs on sale of land? Council rates from purchase date to sale date? Break fees on a fixed loan for the land purchase if I sell before the 4 year fixed term is completed?
Thanks for your suggestions
Regards
Kevin
 
Hi Kevin,
According to the Australian tax office:
When you sell or otherwise dispose of real estate, the time of the event (when you make a capital gain or capital loss) is usually:
<ul>
<li>when you enter into the contract (generally the date on the contract), not when you settle – the fact that a contract is subject to a condition, such as finance approval, generally doesn't affect this date</li>
<li>when the change of ownership occurs if there is no contract (such as when a property passes to a beneficiary), or</li>
<li>if the real estate is compulsorily acquired – the earliest of</li>
<ul>
<li>when you receive compensation from the acquiring entity</li>
<li>when the entity became the property's owner</li>
<li>when the entity enters the property under a power of compulsory acquisition, or</li>
<li>when the entity takes possession under that power.</li>
</ul>
</ul>
In your case this means the event occurs in 2017 and this is the year the tax becomes due and payable.  If you have already lodged your tax return before settlement and the receipt of the proceeds, you would need to request an amendment to the prior year’s return. 
As for the remainder of your questions, you do need specific advice which takes into account all of your circumstances, including the purpose for which you originally bought the property and your intentions at the time.  Generally speaking though, I can tell you that:
1.   If this is not a working farm the zoning should not impact deducibility of any bona fide investment property related deductions.  You will need to get some specific advice around the planting of the trees, though, as they may not be deductible, unless such planting was required for the purposes of earning property related income.  
2.   Improvements to a rental property are deductible as long as the purpose for the block was to build an investment, and not to build future own home. 
3.   Once a property becomes income producing, maintenance costs are deductible.  If your intention was to build a property to rent out but instead you sell, some of your costs may become capital costs, but again this one would have to be determined by your accountant.
4.  You have a large list of other costs and again, their deductibility depends upon the reason you bought the block – if it was for an investment some may be considered capital costs (and so add to your cost base for the purposes of determining capital gains tax) and others, as long as the property was income producing, may be deductible as yearly expenses.  Even some costs which are normally yearly expenses can be added to the cost base in certain circumstances.  
It is critical that you consult with a highly skilled accountant who has experience in this area to be sure that you get the right advice.  Remember, regardless of what any one tells you, the responsibility for making the right claims rests with the tax payer.  Bad advice won’t get you out of trouble if you make an incorrect claim.
 
Have a property question?  <a href="mailto:news@propertyobserver.com.au" target="_blank">Ask Margaret!</a>
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mlomas-KC9MUPZ6Ca

Ask Margaret: Is CGT based on contract of sale date or on settlement date?

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Hi Margaret, my wife &amp; I live on 50 acres we bought the property 20 years ago , built a house &amp; lived in since. We have 10 cows which we make a little money on each year &amp; is the only income of the property. Our main income is away from the property (apart from the office &amp; shed) my question is would we be CGT exempt because we use the other 45 acres for farming, although it's not our main source of income?
Answer: The answer to this question has many parts and depends on a number of circumstances, and so I checked with Property Success tax expert Ian Rodrigues to see what he thought about it. The first this to check is the actual date that you purchased the property.  It appears to be after they introduced the Capital Gains Tax rules but that is worth checking first as if it was before, then everything changes.  It's also important to know if you bought the property or if it was passed to you, perhaps through an inheritance as this impacts as well. The Principal Place of residence exemption should apply to the house and surrounding land up 2 hectares (about 5 acres). You mention an office and shed - were these rented out, or did you use them for conducting any kind of business, and subsequently claim any proportional deduction on them?  If you did then this will mean that a part of your principal place of residence will be considered to be liable for capital gains tax and this will need to be established. The rest of the land outside the 5 acres are subject to CGT regardless of how they were used. There are major issues to consider here in regard to:-         1. was farming a business for tax (and so, what went into your tax returns?). Small business CGT concessions could apply here and         2. what is the valuation split of PPOR and acres? Sometimes the house is the substantial part of these acres and therefore carry the much of the value of the entire block, and at other times the acres are prime land and therefore make up a substantial part of the calculations.  Your situation is a little complicated,  and it is absolutely critical that you get advice based on all the facts of this situation. Although the outcome may end up the same, you need some serious planning put in place, as you may have access to small business CGT rules and super rollover rules too. 
Have a property question?  <a href="mailto:%20&lt;script%20type='text/javascript'&gt;%20/n%20&lt;/script&gt;&lt;script%20type='text/javascript'&gt;%20%20&lt;/script&gt;This%20email%20address%20is%20being%20protected%20from%20spambots.%20You%20need%20JavaScript%20enabled%20to%20view%20it.%20&lt;script%20type='text/javascript'&gt;%20%20&lt;/script&gt;" target="_blank">Ask Margaret!</a>
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CGT exemption and farmland: Ask Margaret

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The strong capital gains evident across the Sydney and Melbourne housing markets have created a significant boost in wealth for home owners who were fortunate enough to own a property through the latest growth cycles.
However, the rate of capital gain has been remarkably lower across other markets with home owners outside of Sydney and Melbourne now seeing far less accrued equity from their housing assets.
On the flipside, there are also those housing markets where dwelling values have fallen, particularly in areas associated with the mining sector where a larger proportion of properties in these regions are now worth less than their original purchase price.
The wealth effect analysis measures two aspects of wealth accumulation via the housing sector: what proportion of dwellings are now worth double their purchase price and what proportion are worth at least 10% less than their purchase price.
Proportion of properties worth at least double their purchase price
Nationally, the proportion of dwellings where the value of the property is at least double the purchase price has slipped over the past decade falling from 45.4% of dwellings in 2007 to 39.1% in 2017.
The slippage is evident across regions outside of Sydney and Melbourne where capital gain conditions have been much softer over the past decade.
The proportion is highest in Sydney, where 48.1% of dwellings are now worth at least double what their owners paid for them; ten years ago the proportion was much lower at 37.2% Melbourne follows close behind with 47.3% of dwellings worth at least twice what their owners paid (up from 38.1% ten years ago).
The remaining capital cities show a much lower proportion of dwellings that are worth at least double their purchase price, ranging from 25.9% of dwellings in Darwin to 37.4% in Hobart.
Across the broad ‘rest of state’ markets outside of the capitals, regional Victoria stands out as showing the highest proportion of properties worth at least double the purchase price at 40.8%, followed by regional Western Australia at 34.8%.
The high proportion of properties worth at least double their purchase price across regional WA may come as a surprise, given the weak performance of the housing market across this region over the past five years, however a decade ago the proportion was substantially higher at 60.8%.
Proportion of properties worth at least 10% less than their purchase price
Over the past decade, the proportion of properties valued at less than 10% of their purchase price has risen slightly from 3.2% to 3.4% between 2007 and 2017.
The national figures hide a significant difference between the major regions of the country. The highest proportion of dwellings worth at least 10% less than their purchase price can be found in regional Western Australia, at 17.8%. Darwin (15.1%), Perth (11.1%) and regional Queensland (11.0%) have also recorded a significant proportion of dwellings where values have slipped more than 10% below the purchase price.
Ten years ago only, while the mining boom was in its early stages, regional Western Australia and Perth were recording the lowest proportion of dwellings where the value was more than 10% lower than the purchase price. In 2007 only 1.1% of Perth properties and 2.3% of regional Western Australian properties fit this profile.
The lowest proportion of dwellings with a valuation more than 10% lower than the purchase price can be found in Sydney (0.7%) and Melbourne (2.1%). Ten years ago, 7.1% of Sydney dwellings recorded a valuation that was more than 10% less than the purchase price, highlighting the effect of strong capital gains post GFC.
<a href="https://www.propertyobserver.com.au/images/2017/09/Screen%20Shot%202017-09-28%20at%2010.09.26%20AM.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/09/Screen%20Shot%202017-09-28%20at%2010.09.26%20AM.png" alt="">
Drilling down to the suburb level, it is clear how hard mining towns have been hit. The Bowen Basin town of Dysart tops the list with 65.7% of dwellings showing a valuation that is at least 10% lower than the purchase price. Queensland’s Gladstone Central is close behind at 64.2% followed by South Hedland in the Pilbara region of Western Australia at 64.0%.
The good news for many mining regions is that housing market conditions seem to be moving through the bottom of their cycle.
Transaction numbers are generally rising and advertised stock levels are reducing which should help to promote some value recovery in these regions.
As growth eases across Sydney and, to a lesser extent Melbourne, we may start to see a slow reversal of these trends.
It will be harder to double the value of a property in Sydney and Melbourne after such a sustained period of high capital gains, however markets such as Hobart and Canberra, which have gathered some momentum, are likely to see home owners benefit from improved capital gains that is likely to boost their overall wealth profile.
Similarly, the worst appears to have past across the mining sector, although it is likely to take many years before property values recover to their previous highs in many of these regions.
TIM LAWLESS heads up the CoreLogic RP Data research and analytics team and can be contacted<a href="https://blog.corelogic.com.au/author/timlawless/"> here.</a>
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tlawless-5VLUrbAk9s

The wealth effect of housing

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Dear Margaret,
I bought an investment property in 2010 and was rented for 3 years before my family moved in. We are still residing at the said property.
My question is: If I sell the property, will I pay capital gains tax? I have read that if you bought an investment property but lived in it within the first six years, you are exempted.
Can you please explain this further?
Thanks a lot.
Maria
 
Hi Maria,
Capital Gains tax is very misunderstood, and the 6- year exemption even more so.  Many think, as do you, that you can live in a property sometime in that first 6 years to stop capital gains tax from accruing.  Others believe that you only have to move into an investment property for a while before you sell it in order to render it free from capital gains tax.
The tax office is not about to  let you off that easily!  Here are some important basics to know about Capital Gains tax: 
1.       Your own home is capital gains tax free as long as you are living in it.
2.       If you move out of your family home and rent it out, you can have a capital gains tax exemption for up to 6 years from the day you move out.  The conditions for this are that you don’t have another property which becomes your principal place of residence (as you can only have one exemption at a time) and you either move back into it, or sell it within that six years. This might apply if you moved elsewhere and rented with the intention of moving back some day.
3.       If your absence is longer than the 6 years you will have only a partial exemption for the six years.
4.       A property bought for the purposes of earning an income accrues capital gains tax from the moment you buy it.
5.       If you move into the property and it becomes your principal place of residence, then you still have a pro-rated capital gains tax liability for the time that it was a rental.  The purchase price will be your cost base, and the gain will be established from the sale price, and then pro- rated for days rented/days not rented. There are a range of adjustments which can be made to these figures, but they are many and you should check with your accountant to find out what they are. 
Moving into a former investment property cannot wipe your capital gains tax obligations in any circumstance. Equally if you move out of a family home and buy another one to live in, you must decide which property you want your principal place of residence exemption on – the former home or the new home.  If it is the former home, the new home you live in will attract CGT.  There are additional rules, such as the 6 month overlap rule – but this is where it gets complex and where advice from an accountant is paramount.
 
Have a property question?         <a href="mailto:news@propertyobserver.com.au" target="_blank">Ask Margaret!</a>
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What's my capital gains tax on an investment property? Ask Margaret

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<img src="/images/2016/06/22/D819360E-D22F-45A0-950B-1527D8EA443823.png" alt="">
 
SPONSORED POST
Capital gains can make up a significant proportion of your investment return on a rental property.
The capital gain is the difference between the sale price you receive when you sell and the cost base. The cost base includes the purchase price, plus buying expenses and the cost of any improvements or repairs you needed to make before you started renting the property out.
If you sell your investment property at a profit, you’ll usually have to pay tax on the capital gain.
Capital gains tax is not charged at a at rate, but rather at your marginal tax rate.
In general, you’ll receive a 50 percent CGT discount if you’ve owned the property for more than 12 months, so you’ll be liable to pay tax on only half of the gain. 
For example, if you bought an apartment in 2002 for $285,000 including purchase costs and sold it in 2016 for $500,000, the capital gain is $215,000. Since you’ve owned the property for more than a year, you’ll receive a 50 percent CGT discount when tax is calculated. That means $107,500 of the gain is taxable at your marginal tax rate for the year.
This ruleapplies to properties purchased on or after September 21, 1999 when the CGT discount was introduced for pro ts made on assets that had been held for more than 12 months.
Different rules apply to properties purchased before September 21, 1999 and there are many exceptions.
VARIATIONS
CGT was introduced on September 20, 1985. If you bought the property before that date you won’t usually have to pay tax on profits from selling.
The family home is also exempt from CGT. But you will have to pay CGT on pro ts made in selling a holiday home or other investment property that you don’t rent out. You may be able to include the costs of ownershipin the property’s cost base, which would reduce the CGT liability.
Special rules also apply to capital gains made on properties you’ve inherited, and to gains you make where your investment property started out as your primary residence or became your home after having been rented out for a period of time.
INVESTMENT LOSSES
Some investors make a capital loss when they sell their rental property. In this case, the loss can be offset against capital gains made on other investments.
If you made a net capital loss during the year, you can carry it forward and deduct it from capital gains you make in future. Capital losses can only be deducted from capital gains: you can’t claim a capital loss against income you’ve earned.
The CGT rules can be complicated. It’s wise to seek professional advice to see what applies in your situation. 
To download a free ebook on new financial year taxation tips for property investors,<a href="http://propertyobserver.com.au/forward-planning/tools/ebooks-and-webinars/55208-new-financial-year-tax-planning-tips-for-property-investors" target="_blank"> click here</a>.
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po-LsXgBTHBmX

Capital gains and rental property investment returns

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GUEST OBSERVER
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The Federal Treasurer, Scott Morrison’s, draft legislation to assist with housing affordability for Australians is a positive move.
The key initiative is to enable investors to obtain a 60% capital gains discount for investment in affordable rental housing. 
This will encourage Managed Investment Trusts (MITs) to invest in affordable housing as a quality investment product with a positive rate of return.
The Treasurer has restricted MITs to only acquiring affordable housing and therefore eliminating investment in general residential property. The Urban Taskforce believes this is a good policy to encourage additional investment in affordable housing.
Affordable housing and housing affordability are complex issues. There are many more initiatives required by various levels of government to make a serious impact on housing affordability. Importantly these initiatives must have to provide sufficient incentives to the private sector development industry to generate enough take-up to make a real impact on the provision of more affordable housing.
The Urban Taskforce has proposed a modification to the NSW State Environmental Planning Policy for Affordable Rental Housing 2009 that could lead to a large supply of affordable housing. 
The current SEPP does not have sufficient incentive for private developers to take up the provision of affordable homes. What is needed is a 20% floor space uplift to provide 20% of a housing project as affordable homes over a 10 year period. 
We estimate that this could add 40,000 affordable rental dwellings over a 10 year period.
Initiatives that provide incentives to invest in, or develop, affordable housing will ensure a long-term, sustainable supply of affordable housing. Mechanisms that deter investment – such as affordable housing levies, taxes, or mandatory targets, only increase the cost of housing production and deter supply. 
The Urban Taskforce is willing to work proactively with all levels of government on mechanisms to encourage supply and investment.
CHRIS JOHNSON is chief executive officer of property development industry group Urban Taskforce and can be contacted <a href="https://www.urbantaskforce.com.au/index.php?option=com_content&amp;view=article&amp;id=97&amp;Itemid=126#.Vdaart55dFI" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

Federal Treasurer’s affordable housing initiatives a positive move: Chris Johnson

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GUEST OBSERVER
Current market mechanisms need to be reformed to give better price signals to developers, and to direct subsidies to achieve the goal of affordable housing.
Ideally, the reforms would be comprehensive, including road congestion charges, capital gains taxes and negative gearing, tax-advantaged investment, and other measures. But such comprehensive reforms are unlikely. 
Furthermore, general solutions that apply throughout Australia may be unnecessary for problems concentrated in major cities. It is strategic to focus on more incremental, local responses that target problem areas.
A targeted solution
The suggested package of practical measures would be based on a special rate applying to new residential developments in selected urban centres. This strategic intervention is justified by being a form of benefit capture– one that would send more efficient price signals to the market. 
Also, this rate would improve the capability to deliver affordable housing with appropriate infrastructure.
This approach also creates an asset from the flow of future income from the special rate. This reliable income flow will help attract long-term investment by the private sector at relatively low interest rates (government guarantees or tax-advantaged provisions could also help attract investment).
The special rate is levied on the land area of a centre. The total income from the rate is enough to service debt used to fund infrastructure provision, as well as to compensate government for the removal of stamp duty and contributions paid by developers. 
Removing these costs will reduce up-front dwelling prices, and make the market more efficient.
How would a special rate work?
The standard rate per dwelling is set according to a target number of dwellings for the centre. A dwelling target and special rate are then allocated to each site based on its area. 
The allocated rate for a site is apportioned to individual properties at subdivision. A buyer of a dwelling would purchase property with a known obligation to pay the special rate.
If a development has fewer dwellings than its site target, then the average special rate per dwelling will be correspondingly higher. A denser development would have a lower rate per dwelling. This creates an incentive to supply more affordable dwellings at higher density.
Measures to promote transit-oriented development would be complementary. So too with inclusionary zonings that give priority to housing associations or long-term rental investors. 
This proposal could be extended by giving the agency responsible for setting the rate and providing infrastructure the authority to acquire and rezone land, and sell it to developers. This would reduce land costs and risks with gaining approvals. 
Furthermore, land could be sold for long-term rental housing at reduced prices but with additional special rates.
What’s wrong with current approaches?
Currently, no strategic pricing mechanism applies to infrastructure servicing new development. There are either no charges on development or capped ones with providing water, sewerage, drains, public domain and other infrastructure. This means developers do not have to take into account the costs of providing such infrastructure when considering their proposals.
The lack of pricing discipline does not encourage efficiency. This means subsidies, with unpriced resources used, increase with inefficiency. High-cost infrastructure developments get greater subsidies than low-cost ones, and the lower the density, the greater the subsidy per dwelling. This promotes less dense and more dispersed development. 
In essence, current pricing mechanisms are at odds with the policy goals of affordable housing and denser and better-structured urban development. This feeds, in turn, into problems like congestion management, productivity, and economic growth.
Under current arrangements, the wider public bears the cost of subsidies. The criticism here is not against subsidies, but against policies that are not efficient in achieving social objectives. Reforms are needed if markets are to be more efficient at producing affordable housing and improving wider urban outcomes.
Current policies on economic growth and affordable housing presume coherence between them. But this presumption may not be realistic. 
Economic and population growth are accompanied by increased demand for housing. The prevailing policy response is for more-of-the-same, prioritising land rezoning. This would work if it led to reduced demand for the lower-priced portion of the housing stock. This portion of the market desirably should increase with increasing prices.
This is not happening and cannot be expected to happen without some major adverse economic event. Complementary market reforms are essential to achieve economic growth with affordable housing.
The risks of blunt policy instruments
There is also a paradox: even if more-of-the-same policy worked, would it be desirable? Policy based on decreased demand for significant portions of the market may be undesirable as well as unrealistic. 
Price decreases would reduce owners’ equity. They would also reduce the value of mortgages held by lenders, such as banks. In turn, this would reduce the value of lenders’ assets and thus reduce wider lending, affecting the wider economy. 
Policies to reduce oversupply by reducing lending are sensible. However, they create a situation where prices are allowed to increase while significant decreases are prevented. 
Interest rate adjustments are a crude instrument for managing housing markets. Interest rate increases may curtail oversupply in some parts of the market but would exacerbate under-supply in the lower-priced market. 
Furthermore, government concern about perceived housing bubbles may distort interest rate policy to the detriment of the wider economy. Adopting more precise instruments would be strategic.
The proposed measures are complementary to current policies as they promote pricing reforms to make the market more efficient and more effective in producing affordable housing. They are better targeted than wider taxation and interest rate policies, and would make wider economic policy less dependent on housing issues.
Martin Payne is casual lecturer in Planning, University of Sydney and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/martin-payne-323295" target="_blank">here</a>.
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Send the market a price signal where affordable housing is most needed

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Interest rates have 'probably' bottomed and the next move by the RBA will be a hike but around the second half of 2018, according to AMP Capital's Shane Oliver.
In his latest research note he said the uncomfortably hot Sydney and Melbourne property markets, RBA expectations that GDP growth will return to around 3 percent and underlying inflation has bottomed argue against a rate cut.
"Against this, high unemployment and underemployment, the too high $A,  fragile economic growth and downside risks to underlying inflation all argue against a hike," he said.
"Meanwhile, bank rate hikes, regulatory moves to tighten lending standards and hopefully action in the May budget on the capital gains tax discount  should help deal with financial stability risks around house prices and household debt giving the RBA flexibility to set rates in the best interest of the wider economy and not just the Sydney and Melbourne property markets.
"The drip feed of cooling measures and negative news flow bank rate hikes, tightening measures by APRA and ASIC, talk of increased bank capital requirements which will only result in more out of cycle rate hikes and the frenzy of authorities and commentators warning about the risks of property markets.
"For investors who think that the 10-15 percent pa average home price gains of the last four or five years are a guide to the future its worth having a look at Perth home prices which are where they were ten years ago.
"Ten years of zero capital growth in Sydney and Melbourne would mean a housing return of just the net rental yield which is 2 percent or less."
 
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