Designed both for prospective and for existing property owners and buyers, the event featured SQM Research managing director and founder, Louis Christopher; National Australia Bank private client executive, Nick Lipscombe; Day Legal founder, Ian Day; and Edney Ryan Group founder, Stephen Ryan.
The four were asked to provide their insights on finance, legislation and tax changes, as well as on possible modifications to negative gearing rules following the coming federal election.
When asked about the proposed changes to negative gearing and how these would impact the property industry if the Labor Party were to win the election, Mr Christopher predicted there would be a “rally” in the market prior to the legislation kicking in on 1 July 2017.
He added that if the ALP is elected, there will be an increase in the number of property investors in the marketplace wanting to take full advantage of the current negative gearing tax concessions, prior to the changeover.
“There’ll be some participants where I think animal instincts will kick in and we’ll see that motivation to go and buy property,” he said.
Mr Christopher does not believe that current property investors would give up their tax concessions, therefore creating a possible shortage of stock on the market in the short term, along with property developers potentially pulling out of certain projects, which would also cause a shortage of supply.
“We think what will happen is that those sellers that have tax concessions will be very keen to hang onto it but there will be very few buyers out there as well so the sales turnover, I hate to say, for real estate agents is going to be a very hard time,” he said.
“Our forecast says that our sales turnover [over a three-year period] will be down somewhere along the lines of about 17-20 per cent.”
However, Mr Christopher said following the three-year period, the market will begin to stabilise.
“Eventually the market will go into equilibrium,” he said. “Sales turnover will pick up [and] the buyers will start coming back into the market. So there will be an adjustment period, we're pretty sure of that.”
The panel was also asked about the possibility of investors being responsible for “overheating the market”, which NAB’s Nick Lipscombe said was an idea based on “too much media hype these days”.
He noted that applicants are assessed on a case-by-case basis, on the strength of their application and lending history, not whether they’re an investor in a particular postcode.
Furthermore, Mr Lipscombe said interest rates are on the way up, irrespective of what the RBA decides to do and that the reason for this is that lending institutions are facing higher costs in acquiring funds from offshore markets.
Next Day Legal founder Ian Day was asked to share his opinions on the changes to legislation, effective from 1 July 2016, that cover selling a property of more than $2 million.
Mr Day said the changes will see every vendor required to attach a “clearance certificate” from the ATO, in addition to 10 per cent of the purchase price, which will need to be forwarded to the ATO prior to the completion of the property sale.
“This is a big game changer,” he said. “When selling a property above $2 million, this is now a requirement that will involve a CPA (certified practising accountant),” he said.
Mr Day also noted the change is not dissimilar to the GST and that residents are now more than ever “collectors of tax for the government”.
According to Mr Day, the $2 million threshold is only temporary since the ATO may not be able to take on the volumes of transactions. However, in the long run, he believes that this will become a requirement for all property transactions.
The event concluded with Edney Ryan Group’s Stephen Ryan who agreed with Mr Day’s comments in regards to the “clearance certificate”. However, he added that this new legislation will eventually be “detrimental to property owners” who have not declared their full income over time, or if the vendors have a tax liability with the ATO.
The next Di Jones Real Estate ‘In Conversation’ event will be posted on the network’s website in the coming weeks.