Housing Market

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EXPERT INSIGHT

The temporary supplement to JobSeeker payments in Australia are set to finish at the end of March 2021. The JobSeeker ‘coronavirus supplement’ was a temporary boost to new and existing recipients of welfare schemes in response to the onset of COVID-19 including JobSeeker, Youth Allowance, Austudy and the Parenting Payment. 

In early 2020, the supplement was set at an additional $275 per week, virtually doubling payments for some recipients. Recently, it was announced that as the coronavirus supplement is wound down from March, a permanent $25 increase will be added to payments. While a permanent increase will make some better off, welfare recipients will be worse off by $250 per week compared with the onset of COVID-19.

But will the removal of the JobSeeker supplement have any impact on the housing market?

First and foremost, it is important to acknowledge that the JobSeeker supplement has already been reduced significantly in recent months, with no dampening impact apparent on the housing market as a whole.

In late March 2020, the original JobSeeker supplement was set at an additional $275 per week. In late September, the supplement was reduced to $125 per week, and it was reduced further to $75 per week through the first quarter of 2021.

However, housing market momentum has increased from September to January, amid the reduction in the supplement. Between the end of September and January, the CoreLogic national home value index rose 3.2%, and rental values increased 2.5%.

Another consideration is that even as the JobSeeker coronavirus supplement was reduced, fewer Australians have been reliant on welfare due to a strong recovery trend in the labour market.

Data from the Australian Government Department of Social Services (DSS) suggests there were 11.7% fewer JobSeeker recipients toward the end January 2020, compared with the end of September. However, there is still a heightened risk to wider-spread housing stress, as the number recipients at January was still 55.9% higher than at the onset of COVID-19 in March 2020.

Changes to JobSeeker would likely have little direct impact on housing market values. With lower income households generally having lower rates of home ownership, it is more likely that households receiving JobSeeker are renters. This would imply an indirect impact on housing prices, where reduced rental return could impact an investor’s willingness to pay for a property.

However, even looking at regions with the highest proportion of JobSeeker recipients in Australia relative to the local population, rental outcomes have been mixed since the significant reduction of the Jobseeker supplement in September. 

Only one region has actually seen a decline in rental values, while other SA2 markets have seen an average increase in market rents of 4.2%, which is actually above the 2.5% increase in rent values nationally over the same period.

Importantly, there is no counter-factual for rental performance in these markets where the coronavirus supplement is unchanged. Under these circumstances, rents may have increased even further.

However, what this data does highlight is that the impending changes to JobSeeker could create increased divergence between incomes and housing costs for some of Australia’s most vulnerable households. While these rental markets may be increasing in aggregate, housing stress, and even homelessness, may be faced by individuals whose livelihoods have been impacted by COVID-19.

While changes to JobSeeker are unlikely to impact the housing market, the welfare reduction could greatly disrupt housing situations for many.

Eliza Owen is the Head of Research Australia at CoreLogic
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Will changes to JobSeeker impact the housing market? CoreLogic's Eliza Owen

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GUEST OBSERVER
The domestic market fundamental’s remain strong for housing development following yesterday’s announcement from The Treasury to implement a four percent stamp duty charge on foreign investors.
The Treasury’s move may intend to stabilize foreign investment and increase revenue for the State, however it has little regard for dealing with the ever increasing issue of housing affordability, particularly in Sydney. 
Based on the Sydney median house price of $995,804, the stamp duty bill for an off-shore investor will increase from $40,305 to $80,137 and generate $1 billion over four years for the government.
Increased investment in employment, transport, health, education and recreation infrastructure has been committed by the private and public sector particularly the South West Sydney, and for this reason there is a continued surge of new property sales and importantly ‘occupation’ in developments offering properties well below Sydney metro’s median price.
Sekisui House Australia’s outlook is supported by the newly reported industry data. 
According to the latest Autumn Housing Industry Association (HIA) report for NSW, the ‘AIG–HIA Performance Of Construction Index’ reports new orders in the house sector during early 2016 were somewhat stronger than at the end of 2015.  The index reading in March 2016 was 53.0 points, indicating an expansion in new orders during the month, a positive signal for detached house building activity over the near to medium term.
As the Government shifts goal posts for property investment particularly from off-shore investors, it’s important to focus on the owner-occupier market returning to the fore. Foreign property investors will always play their part in the NSW residential market, but with lower Loan-to-Value ratio being offered by the major banks, we foresee property sales for occupation potentially taking the lead in 2016 and beyond.
Craig D'Costa is the project director at Sekisui House Australia and can be contacted <a href="https://www.sekisuihouse.com.au/" target="_blank">here</a>.
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Treasury's stamp duty move to increase state revenue: Craig D'Costa 

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<img src="https://counter.theconversation.edu.au/content/74841/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Lots of ideas are being thrown about: the test for the Treasurer is to sort the good from the bad. Reports that the government was again considering using superannuation to help first homebuyers won’t inspire confidence.
It’s not the first time a policy like this has been floated within government. While these latest ideas to use super to help first homebuyers are marginally less bad than proposals from 2015, our research shows they still wouldn’t make much difference to housing affordability.
A seductive idea with a long history
Allowing first homebuyers to cash out their super to buy a home is a seductive idea with a long history. Both sides of politics took proposals to the 1993 election, before Prime Minister Paul Keating scrapped it upon his re-election.
Former Treasurer Joe Hockey last raised the idea in 2015 and was roundly criticised, including by then Coalition frontbencher Malcolm Turnbull.
Politicians are understandably attracted to any policy that appears to help first homebuyers build a deposit. Unlike the various first homebuyers’ grants that cost billions each year, letting first homebuyers cash out their super would not hurt the budget bottom line – at least, not in the short term. But as we wrote in 2015, that change would push up house prices, leave many people with less to retire on, and cost taxpayers in the long run.
Having learned from that that experience, the government has instead flagged two different ways to use super to help first homebuyers. Neither proposal would make the mistake of giving first homebuyers complete freedom to access to their super. But nor would they make much difference to housing affordability.
Using voluntary super savings for deposits
The first proposal reportedly supported by some in the Coalition, but now denied by the Treasurer, would allow first homebuyers to withdraw any voluntary super contributions they make to help purchase a home. Any compulsory Super Guarantee contributions, the bulk of Australians’ super savings, could not be touched.
Using super tax breaks to help first homebuyers build their deposit would level the playing field between the tax treatment of the savings of first homebuyers and existing property owners.
First homebuyers’ savings typically sit in bank term deposits, where both the initial amount saved and any interest earned is taxed at full marginal rates of personal income tax. In contrast, the nest eggs of existing property owners are taxed very lightly. For owner occupiers, any capital gain is tax free. For investors, capital gains are taxed at a 50% discount, and they get the benefit of negative gearing.
But even if there’s some merit in allowing first homebuyers to use super tax breaks to save for a home, it’s unlikely to make much difference. Few people are likely to take advantage of the scheme. Households are reluctant to give up access to their savings, especially when they’re already saving 9.5% of their income via compulsory super.
In fact the proposal works out to be very similar to the former Rudd government’s First Home Saver Accounts, and is likely to be just as ineffective. First Home Saver Accounts provided similar financial incentives to help first homebuyers build a deposit. Treasury expected A$6.5 billion to be held in First Home Saver Accounts by 2012. Instead only A$500 million had been saved by 2014, when Joe Hockey abolished the scheme, citing a lack of take up.
A “shared equity” scheme for super funds
The Turnbull government is reportedly also considering a “shared equity scheme” where workers’ super funds would own a portion of the property investment, and money would presumably be returned to the super fund when the property was sold.
Details are scarce, but the proposal raises several questions.
First, would the super fund use only the super savings of the co-investor to help buy the home, or would they add capital from the broader super fund pool?
Second, how would the super fund generate a return on the investment? A super fund that invests in rental housing gets the benefit of a rental income stream. A super fund co-investing in owner-occupied housing would not. The super fund could take a disproportionate share of any capital gains to compensate, but that hardly seems attractive for the funds in a world where interest rates are already at record lows.
Third, why involve super funds in a shared equity scheme in the first place? Australia’s super sector is already notoriously inefficient – total super fund fees equate to more than 1% of Australia’s GDP each year. A shared-equity scheme would inevitably add to super funds’ administration costs.
If the federal government is serious about super funds investing in housing, it needs to encourage wholesale reform of state land taxes, which levy a higher rate of land tax the more investment property a person owns. This discourages institutional investors such as super funds from owning large numbers of residential properties, because they pay much higher rates of land tax on any given property than a mum-and-dad investor.
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Focus on what matters
If Scott Morrison really wants to tackle housing affordability, he can no longer ignore those policies that would make the biggest difference. That means addressing both the demand and the supply side of housing markets.
On the demand side, that means reducing government subsidies for housing investment which have simply added fuel to the fire. Abolishing negative gearing and cutting the capital gains tax discount to 25% would save the budget about A$5.3 billion a year, and reduce house prices a little - we estimate they would be about 2% lower than otherwise.
The government should also include the value of the family home above some threshold – such as A$500,000 – in the Age Pension assets test. This would encourage senior Australians to downsize to more appropriate housing, while helping improve the budget bottom line.
At the same time the government should support policies that boost housing supply, especially in the inner and middle ring suburbs of our major cities where most of the new jobs are being created. Population density in the middle ring has hardly changed in the past 30 years.
The federal government has little control over planning rules, which are administered by state and local governments. But it can provide incentives to those tiers of government, if it is looking to do something that would really improve home ownership.
While there are plenty of ideas to improve affordability, only a few will make a real difference, and these are politically hard. In the meantime, the latest thought bubbles about using super savings for housing might be less bad than in the past, but they would be just as ineffective.
John Daley is Chief Executive Officer, Grattan Institute and can be contacted <a href="https://theconversation.com/profiles/john-daley-1870" target="_blank">here</a>. 
Brendan Coates is Fellow, Grattan Institute and can be contacted <a href="https://theconversation.com/profiles/brendan-coates-154644" target="_blank">here</a>. 
Both are authors for The Conversation.
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The latest ideas to use super to buy homes are still bad ideas

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Where you live may be an important factor in the sorts of jobs you find, where your children go to school, and how safe you feel walking home after working late. A tight rental market clearly limits housing choices for the less well-off. But are there other factors that might affect this – such as ethnicity?
<h2>How we tested for discrimination</h2>
To investigate this, we designed an experiment to compare the experience of Anglo, Indian and Muslim Middle Eastern “renters” in Sydney, to see if they were treated differently. We chose to look at these two ethnic minorities because other studies have reported they experience housing discrimination.
Each week between August and November 2013, we sampled properties advertised for rent across Sydney. We used paired testers (people of the same gender and age, but different ethnicities) as “mystery shoppers”. They phoned the listed agent and then, if possible, attended an inspection in person.
The testers completed a detailed questionnaire about what the agents told them. We completed a total of 537 phone-call tests and 369 in-person inspection tests.
The study covers only the enquiry and inspection stages of the housing search. We couldn’t test what happens once an application is actually submitted, because that would have involved lying. However, even at these early stages, we found some clear differences in how Anglo testers were treated compared to Muslim Middle Eastern or Indian testers.
<h2>What happened in the tests?</h2>
The chart below summarises the proportion of “tests” (properties that both testers visited) falling into one of three categories: the minority tester was favoured; both testers were treated identically; and the Anglo tester was favoured.
We tested which of these differences were statistically significant (not likely to be the result of random variation). The net difference between the numbers of Anglos and minorities favoured is shown in the chart labels, along with the statistical significance of the difference.
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On some dimensions, minority testers were more likely to be favoured. Agents were more likely to tell the minority tester when the property would be available and that all adult occupants must sign a lease.
Agents were also more likely to take the minority testers' details – although they were less likely to contact them after the inspection.
But on most dimensions, particularly those that might meaningfully affect someone’s search for housing, agents favoured the Anglo tester. Agents were three to four times more likely to offer Anglo (but not minority) testers an individual appointment to inspect the property, to ask Anglo testers about their housing needs and to tell them of other available housing.
Agents also gave Anglo testers information about the application process that the minority partner was not given (such as the deadline for applications). And, although agents did this in only a small number of cases, they were more likely to contact Anglo compared to minority testers after the inspection.
All of these differences might make it far easier for Anglo renters to find the right property, at the right price and in the right location.
<h2>What can we reasonably conclude?</h2>
Paired testing has its limitations. It is difficult to match individuals perfectly. Underlying characteristics (such as how confident someone is) might affect how they are treated.
We screened testers carefully and spent time training them. We also monitored the weekly survey responses to control quality.
One obvious limitation is that we looked at the experiences of only two ethnic minority groups, because we had limited funds. It’s likely that other ethnic and racial groups might have quite different experiences in the rental housing market. Our results also don’t say anything about other Australian cities.
Despite these limitations, we believe paired tests offer unique insight into how people of different ethnicities are treated in the market. Surveying agents or renters about their perceptions would have resulted in just that – a study of perceptions.
No-one can accurately compare their own experience of the world to someone else’s. So, relying only on complaints of discrimination is likely to underestimate substantially the actual incidence of differential treatment. We think our study offers a much more robust glimpse at housing inequity and has the potential to supplement anti-discrimination enforcement.
 
Heather MacDonald is head of the school of built environment and professor of planning in the Faculty of Design, Architecture and Building, University of Technology Sydney and author for The Conversation.
She can be contacted <a href="https://theconversation.com/profiles/heather-macdonald-219145" target="_blank">here</a>.
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Sydney's discriminatory rental housing market

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GUEST OBSERVER
As always, a plethora of information on lending for housing-related purposes. The headline number, which is the value of total lending over July, rose by 1.5%. The detail reveals that loans to owner-occupiers (O-Os) rose by 2.2% and loans to investors were 0.5% higher. 
O-Os: There has been pretty reasonable growth in lending to O-Os over the past year. By value lending is up 14.0% through the year and by number it’s up 3.9%. The difference between the two largely reflects the strong lift in dwelling prices which means that the average loan size has risen quite 5 solidly. Today’s data shows that the average new loan size for an O-O was 365k in July – up 9.8% through the year. Clearly, interest rate cuts have helped contribute to a lift in average loan size because the capacity to borrow rises when borrowing costs fall.
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Investors: For much of the past two years, lending to investors has been the dominant driver of housing-related lending growth. 
But in the last few months lending to investors has cooled a little. It’s still early days, but there are some tentative signs that some of the measures introduced by a number of banks to slow investor-related lending growth are having the desired impact. A gradual decline in rental yields is also playing its part in moderating the rate of lending growth to investors. We expect this trend to continue over coming months. 
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Construction: Total lending for dwelling-related construction fell slightly over July to leave annual growth at 12.9%. The solid growth in construction lending mirrors the lift in building approvals and residential construction surge currently underway. This story still has a way to run and the latest building approvals data shows that the pipeline of residential construction to come is deep. Dwelling construction generates jobs and the multiplier effect benefits other sectors of the economy. It will also help to alleviate some of the supply/demand imbalances in the property market, particularly in Sydney where dwelling prices have been running riot. 
States: The data on O-Os by State in July shows that annual growth in the number of loans is strongest in NSW (+11.0%), followed by QLD (+4.3%) and Vic (+3.6%). Unsurprisingly, the capital cities of these States have had the strongest house price growth over the past year. Other State results were Tas (+2.0%), SA (+0.4%) and WA (-6.8%). An update on lending to investors by State will be in Friday’s Lending Finance publication.
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First home buyers: The number of loans to first home buyers fell by 1.0% in July to be down 1.1% through the year. First home buyers represent just 15.4% of all dwellings financed – close to record lows. 
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Gareth Aird is economist at Commonwealth Bank and can be contacted <a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/gareth-aird/14/790/905" target="_blank">here</a>.
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Housing-related lending up in July: Gareth Aird

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GUEST OBSERVER
Today's RBA semi-annual financial stability review focused on increasing risks in Australia's property market.
On housing, the RBA noted some tentative signs that market activity was pulling back in Sydney and Melbourne, from rapid rates of growth, which is positive. At the same time, they suggested that recent lending standards had been weaker than had been previously thought and that the Melbourne and Brisbane apartment markets look to be over-supplied.
On commercial property, they re-iterated concerns that prices are rising much faster than rents. In our view, a further RBA rate cut, as the market is pricing, seems unlikely in an environment of already 'frothy' property markets.
Facts
The RBA noted that 'recent investigations by regulators had revealed that housing lending standards in recent years have been somewhat weaker than had originally been thought'.
They noted that 'while the housing market remains a long way from oversupply nationwide, some geographic areas appear to be reaching that point, particularly inner-city areas of Melbourne and Brisbane'.
They noted that 'many existing borrowers also continue ... to pay down their mortgages faster than required' and that 'aggregate mortgage buffers remain around 16% of outstanding loan balances, equivalent to more than two years of scheduled repayments'.
They noted that 'risks are rising in the commercial property sector' with 'oversupply evident in the Perth and Brisbane office markets'.
Implications
The property market has been a keen focus of RBA observers recently. Some are arguing that the signs of slowdown in housing price growth and construction may mean the RBA needs to cut interest rates further to maintain growth momentum in the economy. In contrast, we still see the RBA as more worried about excessive property market exuberance than the modest pullback we have seen recently.
Today's semi-annual financial stability review sheds some light on the RBA's own view of the property market situation. First, they note that, although there are some 'tentative' signs of some slowing in the Sydney and Melbourne housing markets, demand remains strong in these markets (prices are still rising at 17% and 14% annually). Second, they noted that the upswing in housing construction is starting to lead to pockets of oversupply of housing, in the Melbourne and Brisbane apartment markets, although they suggested that the nationwide housing market is a long way from oversupply.
Finally, they suggested that although lending standards have been tightening, as the prudential regulator has been turning up the dial on its micro-prudential settings, it appears that the starting point was that lending standards were looser than had been previously thought.
In our view, the RBA still seems more concerned about making sure that financial conditions and lending standards are tighter in the housing market, rather than being concerned about needing to deliver more stimulus.
In this regard, the recent increase in effective mortgage rates (as a result of a lift in mortgage rates by a major bank), partly in response to the authority's requirement that banks hold more capital, may not be as much of a surprise to the central bank as the market has been suggesting.
Keep in mind that, for some time, the RBA's challenge has been that it wanted to maintain loose financial conditions to support the rebalancing of growth, but has been increasingly worried that very low interest rates could over-inflate parts of the housing market. A modest lift in effective mortgage rates, combined with continued low business lending rates and a lower AUD may, in fact, be closer to the ideal policy setting at the moment.
On commercial property, the RBA noted increasing concerns about the gap that is opening up between prices and rents. Much like in housing, the risk that is building up appears to be geographically concentrated. In particular, the central bank noted that oversupply is evident in the Perth and Brisbane office markets. Office vacancy rates are rising to quite high levels in these cities and these are the areas most exposed to the mining downturn. In contrast, vacancy rates are lower in Sydney and falling in Melbourne.
Overall, the RBA stated that the Australian banking system faces 'heightened, but manageable, risk' but it is clear that having interest rates at low levels for a long time may be starting to create some unwanted problems. 
 
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<a href="https://www.about.hsbc.com.au/hsbc-in-australia/management-team" target="_blank">PAUL BLOXHAM</a> IS CHIEF ECONOMIST (AUSTRALIA AND NEW ZEALAND) FOR HSBC. 
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Property market risks rising: HSBC's Paul Bloxham

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GUEST OBSERVER
The minutes from the RBA’s October meeting suggested little change for the near term path for monetary policy. While there are clearly concerns over growth prospects in China and East Asia, on the domestic front the tone was quintessentially ‘glass half full’. 
On the domestic front, the minutes suggested:
Soft GDP growth in Q2 reflected temporary weather-related disruptions and overall growth was expected to have strengthened in Q3. There was further evidence of a rebalancing of growth supported by the lower AUD (through net services trade) and lower rates (through housing construction and consumer spending).
The Board remains uncertain about the housing outlook. The minutes noted that it was too early to be confident that signs of slowing house prices would be sustained. They also highlighted the unreliability of the housing finance numbers, noting that “the data on the split of lending to owner-occupiers and investors were of questionable quality at present”. On the financial stability front, the Board noted that increased competition in the owner-occupied and business lending sectors suggested that “a key challenge would be to ensure that lending standards at both Australian and foreign-owned banks did not weaken from this point”.
The Board seems somewhat more comfortable about the risks posed by strongly growing house prices, noting that ”the response of the banks to supervisory measures implemented by APRA were helping to manage risks in the housing market”.
On the global front the tone was more cautious:
Concerns remain raised about the outlook for growth in China and East Asia. In particular, the minutes highlighted the slowdown in industrial production and exports in the region and noted that ongoing below-average growth remains “a source of concern for the strength of the global economy”. 
The October board meeting pre-dated last week’s move by Westpac to increase mortgage rates by 20bps, although the announcement would not have come as too much of a surprise to the RBA. Governor Stevens noted in July that higher mortgage rates were to be expected given the increased capital requirements for major banks. We continue to expect the RBA to wait until next year to cut rates, when the stimulus from housing and the lower AUD are likely to fade. However, if other major banks follow Westpac’s lead in coming weeks, a late 2016 rate cut cannot be ruled out. 
Felicity Emmett co-head of Australian economics, ANZ Research and can be contacted <a href="https://www.propertyobserver.com.au/https://au.linkedin.com/pub/felicity-emmett/5a/3ba/256" target="_blank">here</a>.
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No direction change from RBA: ANZ's Felicity Emmett

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<div>GUEST OBSERVER</div>
<div>
 Australia has roughly “six weeks” to prevent a housing market collapse caused by the banks’ crackdown on foreign investment, a US-based security think tank has warned, according to a News Limited press report.   Quite clearly, you can tell from the website of the think tank, the International Strategic Studies Association, are not exactly experts in the field of Australian housing.   As I tweeted out yesterday, if we are truly six weeks away from a national housing crash, why are most leading indicators such as auction clearance rates and total real estate listings suggesting otherwise?   And surely we would also be already recording a significant rise in non-performing loans? The chart below shows that’s clearly not the case. Such loans, in fact, remain at low levels. <a href="/images/2016/09/15/e7a43fa6-d686-4b6d-b16d-d1e7f2464075.png" target="_blank">Click to enlarge</a>
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<div><img src="/images/2016/09/15/e7a43fa6-d686-4b6d-b16d-d1e7f2464075.png" alt="">   We pretty much have had from the time the national market started to rally in late 2012, a pile of market bears declaring the imminent crash of the Australian housing market. They are, what I call, the boys who cried wolf. And one thing they all have in their favor is a media circus who will give them all a front page and reporters who rarely check their credentials, qualifications or their previous track records, which too often leave little to be desired.   I guess, in the above story at least, News Limited, who had the 'exclusive', asked for a counter view. I am also pleased to say one very major television network opted out of taking the ‘story’ any further when they contacted the SQM Research office for its view.     More than this, I am convinced there is an industry of bear spruikers who earn a living preaching the end of the financial world, and for that matter, the demise of Australian housing. Take this example from Harry Dent -   a very public figure who has repeatedly made trips to Australia preaching the end of our housing market.  No wonder he enjoys coming out here.  You see, if you want to hire out Harry for a speaking engagement, the cost will be US$20,000 to US$40,000. Not bad for a day’s pay!   I’m sure if I were to dig deeper into a number of these very public bears, we would most certainly uncover a prosperous industry. That is, so-called experts making big dollars out of preaching doom.   Now, I have always said that I have no problem with those voicing the risks in the Australian housing market. There are indeed many risks, particularly those associated with the ever-rising level of household debt to GDP and what that would mean if our country just returned to ‘normal’ cash rate settings. That would indeed likely trigger a real rise in bad loans.  </div>
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<div>These risks need to be pointed out to all participants. That, along with particular risks within the housing market, such as a clear oversupply of Brisbane CBD apartments, as the elevated vacancy rate highlights.   And for that matter the ongoing collapse of the Perth rental market, particularly in the Perth CBD itself, where the vacancy rate is over 8 per cent.   But it’s when I see headline-grabbing stories like the one above, with no follow up investigation, that I feel the public are been taken for a ride by sections of the media and by 'experts' out to grab a headline and maybe a quick buck.   Sorry to say, the great Australian housing crash predicted by Harry Dent and other so-called experts in 2014, 2015, 2016 and 2017 is far from a certainty.   There are many other ways our overvalued housing market may return to some sort of sense of fair value, which could include the very ‘boring’ scenario of underperformance for a very long time.</div>
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<div>Louis Christopher is managing director, SQM Research and can be contacted <a href="https://sqmresearch.com.au" target="_blank">here</a>.</div>
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Housing collapse claims a money game: SQM's Louis Christopher

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GUEST OBSERVER
The property market fundamentals of Australia’s biggest city council are as bent as a banana.
While rates of population growth continue to ease, the high volumes of new housing supply are absurd, and the situation with Brisbane jobs is not as rosy as the state government are trying to portray.
Whilst Brisbane City Council (BCC) has the highest population out of all of Australia’s 550 local government authorities, its population growth rate has come down a long way from the dizzy heights which it consistently produced throughout the noughties decade. Its 2015 growth rate of 1.4 per cent is now back in line with the national average.
<a href="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%208.16.18%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%208.16.18%20AM.png" alt="">
In spite of the distinct easing in population growth (housing demand) the rates of new housing supply have gone in the other direction, scaling record levels.
During the four years ending June 2010, BCC’s population increased by 85,313, thereby creating demand for an additional 32,809 dwellings (BCC has 2.6 people per household according to 2011 Census); 28,409 new dwellings were approved.
Contrast this to the most recent three years, additional housing demand was 17,285 (based on population growth of 51,804) yet a staggering 47,977 new dwellings were approved. As shown in Chart 2, things are completely out of whack.
84 per cent of approvals over the last three years were for attached dwellings. Obscene!
<a href="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%208.17.48%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%208.17.48%20AM.png" alt=""> 
In 2014 and 2015, most property pundits repeatedly predicted that Brisbane’s property market would follow in the footsteps of Sydney and Melbourne; often referring to a ‘knock-on effect’ and Brisbane’s more affordable housing as their so-called ‘research’. Conversely, Propertyology downgraded its outlook for Brisbane in early 2014, instead forecasting that Brisbane was likely to see only modest price growth unless something significant occurred to help turnaround Queensland’s disappointing economic performance.
Median property values subsequently increased in Brisbane by 4 percent (2014) and 4.3 percent (2015), well below Sydney (15.1 percent and 15.1 percent) and Melbourne (9.1 percent and 12.7 percent).
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<img src="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%208.18.47%20AM.png" alt=""> 
On the surface, Greater-Brisbane’s unemployment rate of 4.9 percent [June 2016] looks very favourable compared to national and state averages of 5.8 percent and 6.3 percent, respectively. But, here’s the thing: a decline in Brisbane’s unemployment rate from 7.4 percent in February 2014 to the current 4.9 percent is totally at odds with the lack of confidence demonstrated by Brisbane business owners.
Where are all of these jobs that the Queensland state government continues to refer to in press release after press release since coming in to office in January 2014?
A close examination of the detail behind the employment data clearly illustrates that the economic reality is different to the broad-brush unemployment rate. According to official ABS data, the 46,921 extra jobs created in Queensland during the period February 2014 to May 2016 represents 9.1 per cent of jobs of the 517,333 jobs created nationally. Given that Queensland represents 20.3 per cent of Australia’s total population I’d say that banana-benders have been batting well below their weight!
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<img src="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%208.19.48%20AM.png" alt=""> 
Further analysis of individual industry sectors suggests that Queensland’s economic engine has actually seized up. Of the 46,921 extra jobs created, public administration, health and education have collectively increased by 51,622 over the period. One can’t help but scratch their head and question why, with a significantly smaller population than New South Wales and Victoria, that Queensland added more jobs in the Public Administration sector (8,838 additional taxpayer-funded government jobs) than any other state.
Sixteen out of nineteen industry sectors collectively LOST 4,701 jobs.  
<a href="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%208.21.10%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%208.21.10%20AM.png" alt="" width="583" height="583">
The 25,300 jobs lost in Queensland’s mining industry will include plenty of white collar jobs in Brisbane’s CBD where, according to Property Council of Australia, commercial office vacancy rates rose to 16.9 per cent in August 2016.
The most compelling statistic is the 22,167 jobs lost in Queensland’s retail sector; cash register activity is one of the most reliable measurements of a community’s economic pulse. Job numbers in the Retail Trade sector have increased in every Australian state except Queensland.
New South Wales and Victoria’s impressive volume of jobs growth in retail trade reflects the confidence shown at auctions and open homes. On the other hand, property sales volumes in Brisbane City Council declined from an already modest level over the last twelve months (2.8 per cent fewer house sales and 17.2 percent fewer apartments).
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<img src="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%208.23.11%20AM.png" alt="">
If Brisbane can get its act together, its property market does have potential. But, jobs and confidence are the key. Unlike New South Wales where an infrastructure boom is unfolding, the Queensland public voted against an asset sale proposal to fund new infrastructure projects. The Legacy Way tunnel and Moreton Bay Rail Link projects have recently been completed and there are very few new infrastructure projects in the pipeline.
Queensland’s third biggest employment sector, the 223,000 people construction industry, lost 8,095 jobs between February 2014 and May 2016 and, with an over-supply of housing already brewing, further construction industry job losses would have to be on the cards without several new infrastructure projects.
<a href="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%208.24.06%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/10/18/Screen%20Shot%202016-10-18%20at%208.24.06%20AM.png" alt=""> 
Yes, property is much more affordable in Brisbane than in Sydney and Melbourne. But, Queensland’s interstate migration trend is (again) falling and few people will relocate without being exceptionally confident of their employment prospects. The under-performing economy is why Brisbane’s property market hasn’t found its way out of first gear.
And, the ridiculous volume of new housing supply may soon see that gear changed to neutral. Propertyology will continue to invest in locations across Australia where cash registers are ringing louder than Brisbane.
Simon Pressley is Managing Director of Propertyology, a REIA Hall Of Fame Inductee, property market analyst, accredited property investment adviser, and Buyer’s Agent. <a href="https://www.propertyology.com.au/more-than-a-buyers-agent/" target="_blank">Propertyology works exclusively with property investors</a> to purchase properties in strategically chosen locations all over Australia.
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Answers to Brisbane property market found in cash register:  Simon Pressley

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GUEST OBSERVER
Treasurer Scott Morrison has outlined his vision for increasing home ownership at a speech to the Urban Development Institute of Australia.
The Treasurer acknowledged it’s hard for first home buyers to get into the Australian housing market and suggested a number of barriers to increasing housing supply. We asked an expert panel to analyse these and suggest what other ideas they might have for easing the problem.
What the states need to do
Nicole Gurran, Professor of Urban and Regional Planning, University of Sydney
The Treasurer’s comments about the planning system are out of date. A decade of state reforms to alleviate supply constraints have enabled the inner city apartment boom, and generated a steady supply of outer suburban land to build on. 
With housing construction at record numbers, state planning systems are clearly able to respond to rising market demand. Putting aside questions about the location and quality of new housing, increased construction hasn’t delivered cheaper homes, nor does the Treasurer seem to want that. In fact, he spends much of his speech cautioning about risks to the housing market from the removal of negative gearing or from an over-supply of apartments.
With our housing system so dependent on the private sector, the real question is how to keep construction running when the market cools. If Treasurer Morrison is truly concerned about affordability he should also be asking how to secure affordable homes as part of new development, without lowering values across the established market.
Providing incentives for developers to provide affordable homes is an obvious solution and one that the property industry itself has been lobbying for. This entails government support to drive investment towards affordable rental housing and to enable a new range of housing products such as shared equity and low cost home ownership.
At present, only around 2 percent of new homes are delivered by affordable and non profit housing providers. A larger affordable housing sector, assisted by government to draw on innovative sources of institutional finance, would be able to sustain new housing construction, irrespective of the market cycle.
The commonwealth should negotiate with states so that infrastructure investment and land release is closely linked to mandatory targets for including affordable housing. This way opportunities for affordable homes can be secured before land values rise. This will help stabilise housing production while boosting the supply of well-located and affordable homes. 
Cutting the cost of infrastructure to go with housing
Robin Goodman, Deputy Dean of Sustainability at the School of Global, Urban and Social Studies and Joe Hurley, Senior Lecturer, Sustainability and Urban Planning, RMIT
The planning, cost and provision of adequate infrastructure may add to the cost of housing. But the real cost of housing must include the ongoing costs of living. These will be greatly increased if there is little or no public transport, schools, services and jobs in anywhere near close proximity. 
The growing difference between expensive and unaffordable locations and prices on the urban fringe, shows people buying houses value infrastructure and services and the access to opportunities these provide. Morrison’s view of the costs of infrastructure as impeding housing supply, suggests we should spend less on infrastructure. Were we to do this we would be significantly adding to this growing inequality which will have implications for both liveability and prosperity. 
The way infrastructure is funded at the moment is partially through contributions from property developers and some of this will be passed on to the home buyer, increasing purchase costs. Governments fund some infrastructure directly however the current federal government has been more prepared to do this with freeways and roads, but less so with public transport and facilities. Housing affordability is a broader problem which involves the costs of both buying and renting and the ongoing costs of living within a house and a city. 
Rather than reducing the funding of infrastructure, or absolving developers of making some contribution towards it, the real issue is accurately targeting investment to where it most needed. The most urgent need for new outer urban areas is for adequate public transport to begin to give all residents more equal access to jobs and opportunities. 
Releasing more land and relaxing regulations
Steven Rowley, Associate Professor of Economics and Property, Curtin University Business School
The core driver of new housing supply is profit and that profit is a result of demand (the revenue from sales) and cost (the physical construction, land, finance, taxes). There are many barriers to this profit and hence new housing supply. A solution often put forward, and we heard again from the treasurer, is removing land use planning regulations that unnecessarily impede housing supply. 
Sounds sensible, but it’s no good just randomly releasing land and expecting development to occur. Policy makers must understand that more land does not necessarily lead to more development. For example, why would developers flood a local market with new product of a similar type; it will just reduce prices and hence profitability.
Infill development, where development occurs within existing built up areas, was barely mentioned in the speech. States are grappling with the challenges of increasing proportions of new dwellings on infill sites in an attempt to tackle urban sprawl. Large scale, coordinated infill projects can deliver open space and amenity, adding quality to our existing urban areas. This scale will be difficult to achieve without public sector intervention.
Challenges abound in the infill space and include community opposition, upgrades to existing infrastructure and allowing for housing diversity (attached houses and low rise apartments, not just high density towers). If the government wants to make a difference to the supply of dwellings, in places where many people want to live, they need to facilitate development at scale and deliver significant affordable housing contributions on government-owned land. This will not be popular with local communities and local council members, but is essential in delivering the diverse housing essential in our cities. 
Planning where to put more houses
John Daley, CEO of The Grattan Institute
Treasurer Morrison is right, planning is the biggest lever to make housing more affordable. Current rules make it reasonably easy to build apartments in the CBD – so that is what we’re getting. But it also makes it very difficult to subdivide and create extra residences in the middle rings of our capital cities, up to 20km out of the CBD.
It’s important that new supply is focused on the inner and middle rings (2-20km out of the CBD) of our large capital cities. New developments on the edge tend to be a long way from where additional jobs are being created. Over half of the net growth in jobs in Melbourne, Sydney and Brisbane in the last five years was within 10km of the CBD. 
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<h4>Grattan Institute, Author provided</h4>
Apartments in the CBD are never going to be enough to fill the demand for accessible housing – supply is limited by a very small area of land. There isn’t much governments can do about where employers decide to create jobs. But governments can set planning rules so that housing is built appropriately.
But unfortunately while Treasurer Morrison was spruiking the benefits of making it easier to subdivide and release land, he glossed over the impact on the prices of existing homes. And simultaneously he went out of his way to argue that reforms to negative gearing would both do nothing for housing affordability and lead to a crash in house prices.
Not all of these things can be true. By definition, if housing is more affordable, then prices are lower than otherwise. It would be more honest to recognise that changes to negative gearing will have less impact on home prices – and affordability – than to planning. On the other hand, changes to negative gearing will also reduce distortion in investment decisions, discourage excessive private sector leverage, and contribute to budget repair – outcomes which should all warm the cockles of a treasurer’s heart.
<div class="hover tooltip bottom">John Daley is chief executive officer, Grattan Institute and can be contacted <a href="https://theconversation.com/profiles/john-daley-1870" target="_blank">here</a>. Joe Hurley is senior lecturer, Sustainability and Urban Planning, RMIT University and can be contacted <a href="https://theconversation.com/profiles/joe-hurley-157161" target="_blank">here</a>.; Nicole Gurran is professor - Urban and Regional Planning, University of Sydney and can be contacted <a href="https://theconversation.com/profiles/nicole-gurran-759" target="_blank">here</a>. Robin Goodman is professor of Urban Planning, Deputy Dean, Sustainability and Urban Planning, RMIT University and can be contacted <a href="https://theconversation.com/profiles/robin-goodman-213975" target="_blank">here</a>. Steven Rowley, is director, Australian Housing and Urban Research Institute, Curtin Research Centre, Curtin University and can be contacted <a href="https://theconversation.com/profiles/steven-rowley-201914" target="_blank">here</a>.</div>
<div class="hover tooltip bottom"> </div>
<div class="hover tooltip bottom">All are authors for The Conversation.</div>
 
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