The housing crisis continues, and there's nothing renters can do about it By business reporter Gareth Hutchens Sun 7 Aug 202 Policymakers put Australia on the path of "landlordism" years ago, and we're living with the results.(AAP Image: Dan Peled) The national vacancy rate has fallen to its lowest level on record, and the rental market sits firmly in favour of landlords. According to Domain, tenants will be facing more increases in asking rent, and competition will intensify between families who are trying to find a place to live. So, if you're renting, or trying to find a place to rent, should you expect any sympathy? Rental markets the tightest on record If you've lived in your own home for a couple of decades and haven't had to live in the private rental market, you may not know what modern tenants have to do to secure shelter. The power imbalance between landlords and tenants is extreme. And a huge part of the problem has to do with the contradiction sitting at the centre of Australia's approach to housing. Shelter is one of the our most fundamental needs, but a generation of Australian policymakers who were bewitched by the siren call of "consumer choice" ended up building a system that restricted the choices of shelter available to people, especially for low income families. And it's feeding a generational and wealth divide between owners and renters, and a severe housing crisis. Have a look at the tables below from Domain's latest rental vacancy report. Nationally, the vacancy rate hit a record low last month, with record lows being recorded in Sydney and Brisbane. The "vacancy rate" is a percentage that indicates the proportion of estimated rental stock that is vacant over a month. A vacant rental property is defined as a property on the market for longer than 21 days. The next table shows the volume of vacant rental properties that were on the market last month. The number of rental listings has fallen dramatically over the past 12 months after COVID restrictions were lifted and the international border was reopened. Canberra was the only city to see an annual increase in rental stock, up 17.2 per cent, after more rentals were added to its market in 2022. Domain also published a graphic to show how rental listings have behaved in the COVID era. It shows what happened when the international border was closed in 2020, what happened when Melbourne endured its extended lockdown and huge numbers of people left Melbourne and Sydney for other states, and what happened after borders were reopened to international students and skilled migrants. The national vacancy rate has fallen to its lowest point on record(Source: Domain Rental Vacancy Report, July 2022) "All capital cities continue to operate in a landlord's market, with a shortage in supply and availability of vacant rentals driving up asking rents and further escalating competition between tenants," Domain said last week. "This creates a difficult environment for prospective tenants and highlights the need to address the rental crisis in many areas." We need to talk about pacified income At the moment, for people who are trying to secure a place to live in the private rental market, it's extremely easy to feel that you don't matter as a person. It feels like you're no more than a bank account to some landlords (though not the good ones, who can be fantastic). The euphemism in investment circles is that rentals provide landlords with a source of "passive income." But a more honest phrase would be pacified income, in too many circumstances, because that describes the situation of too many tenants trapped in the rental cycle. Try this thought experiment. Imagine you're not renting by choice. You've been locked out of the property market because the pace of property price increases pushed home ownership out of your reach years ago, and you didn't have the bank of mum and dad to give you a leg up. You somehow secured a place to rent, so you consider yourself lucky. But you only discovered how bad the place was after living there. It has extremely poor insulation, for example, so the energy costs are crippling. The internet connection is appalling. The plumbing is always blocking because tree roots have got into the pipes. But after a year, your landlord tells you they're increasing the rent by $50 a week because that's where the market is. They want you to pay them an extra $2,600 this year. It's insulting, but what can you do? Rental vacancies are at record lows. The average cost of moving is roughly $4,000 (not including the bond), so there's no way you can afford to move. You know this, because you've had four rentals in five years and it's broken you. So you're basically done. How can you save enough money to get out of the renting cycle and buy your own place? You resign yourself to the fact that you'll probably be facing multiple rent increases. You've become a source of pacified income. Why don't landlords have to provide much information? And remember, that all comes after the degrading process you had to go through to secure the rental in the first place. On your application form, you had to provide a copy of your passport, your drivers licence, and your bank statements. You had to provide your rental history for the past five years, with contact numbers. You had to provide details of your current employment, including if you had a full-time or part-time position, how long you'd been there, and what your gross monthly salary was, with contact numbers of your bosses. You had to do the same thing for your previous place of employment, including what your gross monthly salary was there. You had to explain why you left your last rental, and how long you planned to live at this rental. You had to describe, in 250 words or less, why you wanted to live in this place in particular, as though you were sitting a job interview. You were also asked if you planned to buy your own property soon. And you answered all of those questions, because what choice did you have? But once again, you wondered why the same amount of information is never provided to you about landlords. As a prospective tenant, it would obviously help you to make better decisions about where to live if you were given far more information during the application process. For example: What do former tenants say about this place? Did they enjoy living here? Did they have problems with the landlord? Are there problems with the plumbing here? If so, how long have those problems existed? Does this place have a problem with mould? How long does it take for maintenance to take place here? What have the average annual energy bills been for this place over the past five years? What's the internet connection here? How often has the landlord raised the rent in the past few years? How much was the rent raised each time? Does the landlord plan to raise the rent in the next three years? If so, by how much each time? How many investment properties does the landlord own? And so on. You could quibble about the questions, but you get the point. It should be a two-way street with important information like that, but it's not in Australia. Tenants are typically given less than 30 minutes to inspect a place, and they're largely flying blind with information after that. And if they can't afford to buy their own property, there are few housing options available for many people other than in this private rental market. Why is it like this? Build it, and they will come Well, as the Australian Housing and Urban Research Institute pointed out in 2020, policymakers put Australia on the path of "landlordism" years ago. For the past 40 years, policymakers have turned their backs on social and public housing, and they haven't explored alternative housing models with much enthusiasm. It's either home ownership or the private rental market where the rights of landlords are prioritised. Professor Andrew Scott from Deakin University says Australia's abandonment of important post-war building and funding arrangements after the 1970s created a very different society by the 1990s. "By the early 1990s, there was a clear shortage of housing for people on low incomes, which of course continues to the present day," he said in a recent report from the Australia Institute. "The effects of this are shocking — nearly 14 per cent of Australians today live in poverty after their housing costs are taken into account. That proportion rockets up towards 50 per cent among public renters. "The number of low-income private renter households in rental stress — paying more than 30 per cent of their income on rent — has doubled since the mid-1990s to now exceed 700,000 households." It makes you think about Australian "society." The former British Prime Minister Margaret Thatcher famously claimed there was no such thing as society, there were only individual men and women and families. But it's worth remembering the context of that quote. When she said that, Ms Thatcher was arguing that individuals needed to start taking more responsibility for themselves. She gave three examples of the types of complaints made by people who needed to take more personal responsibility. And coincidentally, one of those complaints had to do with housing. "I am homeless, the government must house me!" she mimicked. "They are casting their problems on society and who is society? There is no such thing! There are individual men and women and there are families, and no government can do anything except through people, and people look to themselves first." So, if you're struggling to find housing and you feel like you're not considered part of society, take comfort. You can't be part of something that doesn't exist, so it's one less thing to worry about.
Why the cost of negative gearing tax breaks is likely to rise By Tawar Razaghi August 11, 2022 Key points The cost of negative gearing tax breaks fell to its lowest point in two decades but is likely to rise as interest rates go up. Abolishing the contentious tax policy is one of the fairest and least economically damaging ways to help repair the budget, economists say. The federal government has ruled out changing the policy and will focus on multinational tax reform. The cost of negative gearing tax concessions is set to soar as interest rates rise, meaning Australian taxpayers could spend billions of dollars to offset private landlords’ lost income in coming years, experts say. Abolishing the contentious tax policy is one of the fairest and least economically damaging ways to help repair the public budget, top economists say. Negative gearing could cost the public purse $6 billion in coming years, one economist predicts.Creditenny Stephens A property is negatively geared when the cost of interest and expenses linked to owning a rental is more than the income it generates each year. Landlords can claim this cost as a tax deduction against their wage income to pay less tax. At its peak, negative gearing cost taxpayers more than $9 billion in 2007-08 thanks to high mortgage rates. That cost fell to $166.5 million in 2019-20, the smallest amount in two decades, the latest figures from the Australian Taxation Office released this week show. The federal government has repeatedly said it will focus on multinational tax reform, and ruled out abolishing negative gearing tax concessions. But experts have warned that the cost of negative gearing will significantly increase again thanks to rising mortgage rates with one economist predicting it could cost the public purse up to $6 billion. Negative gearing had been on the decline as the average variable rate dropped too.Crediteter Rae AMP Capital’s chief economist Shane Oliver said while it was unlikely the cost of negative gearing would reach peak levels of 2007-08, it would increase substantially. “We will see a substantial rise in the cost of negative gearing, which won’t get as high as 2008, but it will push substantially in that direction,” Oliver said. “I wouldn’t be surprised if we got to $5 to $6 billion per annum in net rental incomes, but it won’t go back to previous highs,” he said, adding that it would peak when the average variable rate hits 6 per cent and flow through in the 2023-24 financial year. He said the cost of negative gearing dropped to a low in 2019-20 due to declining variable mortgage rates and a slowdown in investor lending after macroprudential measures. But with rates on the rise again that rental income losses is tipped to climb again, experts say.Credit:Rhett Wyman While the current strength of the rental market would help partly offset negative gearing claims, an increasing number of investors piled into the market during the pandemic property boom at significantly higher levels of debt too, Oliver said. “A 10 per cent rise in rents will partly offset the increased loss of the property of higher rates but if interest rates double it doesn’t nearly offset that increase in interest costs,” he said. “It’s the same question as ‘will rising wages offset the cost of rising cost for owner occupiers?’ Partly but not much. The rents and wages are going up but when you see a doubling in interest rate costs they’re not going to keep up with that.” Independent economist Saul Eslake said the combination of negative gearing and the capital gains tax discount would cost taxpayers significantly in coming years as the tax settings encourage property investors to defer and permanently reduce tax. “With interest rates rising the probability is more landlords will start reporting losses again and those who do will report bigger ones,” Eslake said. He said defenders of negative gearing fail to highlight that it is overwhelmingly used by the wealthy to reduce their tax. “Someone in the top tax bracket is more than three times as likely to be a negatively geared landlord as someone who has taxable income of less than $90,000,” he said. “It is primarily used by people in the top tax bracket either to get them out or to reduce the amount they pay at the top rate.” The federal government has ruled out changing negative gearing tax concessions.Crediteter Rae Eslake said while it would be in bad faith for the federal government to break their election promise this term, it should be revisited in the next as it would be a fair and equitable budget repair measure in the long term and a policy decision that already lags international standards as the conservative Reagan administration in the US and David Cameron’s government in the UK had already abolished it in the 1980s and 2015, respectively. “The irony is this is portrayed as a left-wing thing to do. Scaling back tax privileges enjoyed by property investors is not the exclusive preserve of left-wing governments.” Grattan Institute economic policy program director Brendan Coates said it was inevitable negative gearing would increase. “It will cost the federal government substantially as interest rates rise. They’ve been going down over time as rates over time have decreased,” Coates said. Abolishing negative gearing and capital gains tax discounts are some of the easiest measures for budget repair, Coates said. “The interaction of those two distorts investment decisions, those tax breaks which largely benefit the wealthy, are substantial budgetary costs,” he said. “One less renter is one more first home buyer which is policy objective in its own right.”
Rental growth not keeping pace with inflation: Analysis By Staff Reporter 09 August 2022 A long-term view reveals that average rental costs — while rising rapidly at the present moment — have lagged behind the rate of inflation over the last decade. Data analysed by the Property Investment Professionals of Australia (PIPA) and the Property Investors Council of Australia (PICA) has shown that rents have grown at only half the rate of inflation since at least 2012. Using the Australian Bureau of Statistics consumer price index from June 2012 to June 2022, property analyst Peter Koulizos found that during the 10-year period in which inflation rose 25.6 per cent, rents increased on average by only 11 per cent. Averaged out, that means that rents experienced a rise of a little over 1 per cent across the country each year during the past 10 years. At a capital city level, Hobart was the only city in which rental rises kept pace with inflation. Darwin and Perth’s cumulative net rent growth actually fell back over the course of 10 years, recording dips of 5.9 and 2.7 per cent, respectively. Mr Koulizos remarked that this data was important to keep in mind, especially with the recent spurt of rental pressure. And he noted that the rate of inflation meant that investors had come under increasing pressure over that period of time. “As well as their cash flow taking a hit because of this income versus inflation imbalance, investors have also had to finance a huge variety of additional costs levied by all levels of government over the past decade,” Mr Koulizos said. “Governments deserted the supply of affordable rental properties years ago, expecting private investors to simply take over this responsibility, however more and more investors are deciding that it’s just not worth it.” PIPA chair Nicola McDougall agreed that the current situation of tight vacancy rates had been years in the making. “The lending restrictions in 2017 unfairly targeted investors, with many unable to transact for a number of years,” Ms McDougall said, noting that the COVID-19 pandemic had only exacerbated pressures on landlords. “Since the start of the pandemic, investors were initially asked to ‘take one for the team’ and supply free or low-cost housing to their tenants; are continually expected to pay higher costs for everything property-related — from council rates to stamp duty; and will soon be ‘double-taxed’ by the Queensland government. “It’s little wonder that we have heard of investors selling their properties in droves over the past two years because many have simply had enough.” The two bodies are calling on governments to ensure they’re pulling their weight when it comes to rental supply. PICA chair Ben Kingsley commented: “The current rental crisis is the result of government inaction and market interventions. There is no question that governments, at all levels, have played the biggest role in the rental supply mess — but, year after year, they expect private rental providers to simply pay more and more. “Well, I’ve got news for you, more and more investors are saying ‘enough is enough’ and are selling up with many, many more expected to follow. The severity of the current rental crisis will look like a walk in the park compared to what will happen next, mark my words.”
In a nutshell! And I'll add, the real estate industry as a whole are like unchecked cowboys riding wild and reckless.
Dogs and cats are being surrendered in staggering numbers as renters struggle to find properties that allow pets, with some even putting their animals down, intensifying calls to change tenancy laws. Credit: ksuksa - stock.adobe.com Perth pet owners face surrendering or euthanizing dogs and cats in heartbreaking WA rental crisis Rebecca Le May PerthNow August 18, 2022 https://www.perthnow.com.au/news/wa...s-in-heartbreaking-wa-rental-crisis-c-7917202 Staggering numbers of dogs and cats are being surrendered to animal rescue organisations or, even worse, put down as renters battle to find properties that allow pets, intensifying calls to overhaul WA’s Residential Tenancy Act. Dogs’ Refuge Home president Karen Rhodes said it had been a bad year for the Shenton Park facility but last month was the worst, with 134 applications for surrender submitted - one-third of those from renters who couldn’t get a pet-friendly new lease. Demand for help far exceeds capacity, and Ms Rhodes suspects some desperate dog owners have been setting their pets loose, judging by a spike in requests from pounds. One Facebook user angrily messaged that a friend had put their dog down because the Dog’s Refuge Home couldn’t take it. “It’s just awful all ‘round,” Ms Rhodes told The West Australian. “We’ve had two calls today (Wednesday) from people who have been evicted from their homes, and they’re in the car crying, saying, ‘can we drop our dog off?’ “We don’t have any room. “It’s just really heartbreaking.” It’s also dire across the road at the Cat Haven, which has taken in 1525 surrenders in 2022 so far, with many due to the lack of pet-friendly rentals on the market, chief executive Roz Robinson said. Some of the felines had been in care for more than four months while their owners searched for suitable accommodation, she said. The Mischewski family looked at 25 properties and made enquiries about plenty more for about two months before finally finding a landlord who accepted their pets, forced to move after the owners of their Dawesville rental advised they were moving back in. “It was very stressful,” Leonie Mischewski said, adding that surrendering their pets was never an option. “We would jokingly say to friends, ‘can we crash at yours?’ “But we were one of the lucky ones.” Susie Italiano, volunteer at the Cat Haven, with Muffin and Cupcake. Credit: Daniel Wilkins/The West Australian Under the proposed Residential Tenancy Act reforms recommended by Consumer Protection and under consideration by the McGowan Government, pets would be permitted in rentals by default. Landlords who were opposed would have to get an order agreeing it would be unreasonable to keep an animal at the premises. They would also only be permitted to terminate a tenancy without grounds during the first lease period, then have to rely on prescribed reasons such as failing to pay rent, behaving antisocially or using the property for an illegal purpose. The Real Estate Institute of WA has said a survey suggests an exodus of investors from the market if the changes are adopted.
Opinion Housing own goal worsens our inflation problem Ross Gittins Economics Editor August 22, 2022 https://www.smh.com.au/business/the...ns-our-inflation-problem-20220821-p5bbiz.html A key part of the economic response to the pandemic was to rev up the housing industry. It’s boomed and now it’s busting. What’s been achieved? Mainly, a big, self-inflicted addition to our inflation problem. That, and a lot of recent first-home buyers now getting their fingers burnt. Well done, guys. It’s not a crime to be wise after the event. Indeed, it’s a crime not to be. As we all know, you learn more from your mistakes than your successes. We have much to learn from our mishandling of the economic aspects of the pandemic. Because we had no experience of pandemics, our mistake was to treat the lockdowns as though they were just another recession. Turned out they’re very different. Because downturns in home building and house prices often lead the economy into recession, then a recovery in home building leads it out, the managers of the macroeconomy assumed it would be the same this time. The building sector has faced compounding problems when it comes to supply of materials and labour.Creditat Scala The federal government offered HomeBuilder grants to people ordering new homes or major alterations. The state governments offered stamp duty concessions to first-home buyers, provided they were buying new homes. But the doozy was the Reserve Bank’s decisions to cut the official interest rate from 0.75 per cent to 0.1 per cent, and then cut the base rate for 3- and 5-year fixed-rate mortgages. By the end of last year, according to the Bureau of Statistics, the median house price in Sydney and Melbourne had jumped by more than 40 per cent. In the following quarter, it fell by 7 per cent in Sydney and 10 per cent in Melbourne. By all accounts, it has a lot further to fall. Turning to building activity, we’ve seen a surge in the number of new private houses commenced per quarter, which jumped by two-thirds over the nine months to June 2021. Then it crashed over the following nine months, to be up only 14 per cent on where it was before the pandemic. It’s no surprise commencements peaked in June 2021. Applications for the HomeBuilder grant closed 14 days into the quarter. But to commence building a house is not necessarily to complete it a few months later. The real value of work done on new private houses per quarter rose by just 15 per cent over the nine months to June 2021. Nine months later, it was up 12 per cent on where it was before the pandemic. For the most part, the home building industry kept working through the two big lockdowns. It seems that, between them, the nation’s macro managers took an industry that was plugging along well enough, revved it up enormously, but didn’t get it building all that many more houses, nor employing many more workers. Perhaps it soon hit supply constraints – shortages of building materials and suitable labour. I don’t know if the industry was lobbying governments privately for special assistance, or whether it didn’t have to. Maybe pollies, federal and state, just instinctively rushed to its aid. But I wonder if the builders didn’t particularly want to get much bigger. There are few industries more cyclical than home building. Builders are used to building activity going up and down and prices doing the same. When demand is weak, they try to keep their team of workers and subbies together by cutting their prices, maybe even to below cost. Then, when demand is strong, they make up for it by charging all the market will bear. It’s the height of neoclassical naivety to think it never crosses the mind of a “firm” existing outside the pages of a textbook that manipulating supply might be a profitable idea. So maybe the builders found the thought of increasing their prices more attractive than the thought of building a bigger business to accommodate a temporary, policy-caused surge in demand. They may have taken a lesson from those property developers with large holdings of undeveloped land on the fringes of big cities. Dr Cameron Murray, a research fellow in the Henry Halloran Trust at Sydney University, has demonstrated that the private land-bankers limit the regular release of land for development in a way that ensures the market’s never flooded and prices just keep rising. So, back to our inflation problem. Whenever people say the recent huge surge in prices is caused largely by overseas disruptions to supply, which can’t be influenced by anything we do, and will eventually go away, the econocrats always reply that some price rises are the consequence of strong domestic demand. That’s true. As I wrote last week, it seems clear many of our businesses – big and small – have used the cover of the big rises in the cost of their imported inputs to add a bit for luck as they pass them on to consumers. But I saved for today the great sore thumb of excess demand adding to the price surge: the price of building a new home (excluding the cost of the land) or major renovations. This accounted for almost a third of the rise in the consumer price index in the June quarter, and jumped by more than 20 per cent over the year to June. The price of newly built homes has a huge weight of almost 9 per cent in the CPI’s basket of goods and services, making it the highest-weighted single item in the basket. This implies that new house costs have added almost 2 percentage points of the total rise of 6.1 per cent. When the econocrats worry about the domestic contribution to the price surge, they never admit how much of that problem has been caused by their own mishandling of the pandemic. Indeed, when people argued that the main thing further cutting interest rates would achieve would be to increase house prices, the Reserve was unrepentant, arguing that raising house prices and demand for housing was one of the main “channels” through which lower rates lead to increased demand. But the crazy thing is, this strange way of using the cost of a new dwelling to measure the cost of housing for home-buyers – which, I seem to recall, was introduced in 1998 after pressure from the Reserve – exaggerates the true cost for people with mortgages, especially at times like these. Few people ever buy a new dwelling and, even if they do, rarely pay for it in cash rather borrowing the cost. This is one reason the bureau doesn’t regard the CPI as a good measure of the cost of living, but does publish separate living-cost indexes for certain types of households. Ben Phillips, of the Centre for Economic Policy Research at the Australian National University, has used the bureau’s living-cost indexes to calculate that about 80 per cent of households had a living cost increase below the CPI’s rise of 6.1 per cent. The median (typical) increase over the past year was 4.7 per cent. What trouble the econocrats get us into when they use housing as a macro managers’ plaything.
Construction firms are collapsing after a loss-making boom, and 'massive greed' is to blame By business reporter Nassim Khadem Posted 5 hours ago https://www.abc.net.au/news/2022-08...-making-boom-sees-builders-collapse/101334170 Soheil Abedian has built tens of thousands of homes across the Gold Coast. (ABC News: Steve Keen) After witnessing four decades of boom-to-bust cycles in Australia's residential property industry, experienced Gold Coast developer Soheil Abedian puts the construction industry's current woes down to one simple reason: greed. In fact, it's "massive greed", he says, that is a product of "the capitalist system that we have in Australia and the Western world — that everybody would like to have more and more profit". He says the construction industry's current woes were created by too much government stimulus, short supply and unsustainable prices. Crucially, the cost of key building materials, such as steel and timber, lifted by more than 40 per cent in one year, although big developers were able to negotiate better prices than the smaller players. "Who is to blame? All of us," the Persian-Australian property developer, who co-founded ASX-listed Sunland Group, told ABC News in an exclusive interview. "Every single person that is taking part in the industry. "We increase the prices without understanding that, ultimately, it will backfire on every single part of the industry. And we see that [happening] now." Mr Abedian has built tens of thousands of homes across the Gold Coast and is also behind some of the strip's most iconic developments, including bringing the first fashion-branded hotel, Palazzo Versace, to Australia. Sunland co-founder Soheil Abedian says greed is behind the building industry's current loss-making boom.(ABC News: Steve Keen) Sunland Group is winding down by selling off its assets, but the family plans to continue to run a private development business. Mr Abedian predicts more builders will topple over the coming months. "Let me say that the collapse of construction companies has just started," Mr Abedian said. "I think for the next 12 to 18 months, we will see a decline in production, we will see a decline in sales, and then we will go through a period — maybe we call it a stabilised period. "I believe the second tier, third tier construction companies will be very vulnerable. "And I think the first tier construction companies, they will survive, although maybe the margin will be smaller than what they thought." Sunland's The Lanes Residences, a four-building waterfront project at Mermaid Waters, is scheduled to wrap up in the first quarter of 2023.(ABC News: Steve Keen) Another industry heavyweight who fears for the residential construction sector is Meriton founder Harry Triguboff. The 89-year-old Russian-Jewish real estate developer has seen the highs and lows of Australia's property market for almost 60 years. He built his first block of units in the Sydney suburb of Tempe in 1963. When he is asked whether greed is behind the industry's demise, Mr Triguboff, who became known as "high-rise Harry" for his signature skyscrapers in Sydney and Queensland, is more subtle in his response. He says, while he does not do pre-sales, too many builders locked themselves into this arrangement before material costs surged, and they were left out of pocket. Meriton founder Harry Triguboff has has seen the highs and lows of Australia's property market for almost 60 years.(ABC News: Billy Cooper) "They [builders] love to do it [building] — and so they go in and hope for the best," he told ABC News. "And normally, prices do go up. So even if he [a builder] thought that he would make only a small profit, in the end, it turned out OK. "This time, unfortunately, the price went down instead of up. So when he [a builder] had a small margin, he couldn't do it [make a profit]. This is the problem. "I hope that as many [builders] as possible will remain. And I hope they learn not to work with such small margins. "That is my advice to them as much as they love that business." Fixed price contracts became a burden As supply chains became constrained and the cost of building materials shot up, builders weren't knocking back work. They kept signing on new customers, even as they were asking existing ones for advanced payments to fund the higher build cost. Consumers had flocked to the market because of ultra-low interest rates and stimulatory COVID-19 pandemic support measures, such as the HomeBuilder grant, in the hope they could finally build their dream home. But suddenly, fixed contracts became a burden. For many builders, some of which had signed fixed-price contracts and had not locked in their own prices for supplies, the loss-making boom has become too hard to manage. Some were driven to the brink and many have fallen over. One of the many builders to recently collapse is Langford Jones Homes. The company had gained a solid reputation over more than 45 years of building homes around the Bayside and south-eastern suburbs of Melbourne and nearby regional areas including Phillip Island, South Gippsland and the Mornington Peninsula. But when it went under on June 30, it left many consumers, including San Remo resident Donna Taylor, in limbo. "It's heartbreaking," Ms Taylor told ABC News, breaking down in tears over the home that never got built. "It's just wrecked my life. And there's so many more people that are like me that it's just ruined." Donna Taylor wanted a dream home but was left with a rotting timber frame when her builder collapsed earlier this year. (ABC News: Nassim Khadem) Ms Taylor had sold her Wantirna home and purchased a block of land in San Remo in 2020. She signed contracts with Langford Jones Homes in November 2020. They were contracted to build her dream house in 365 days. But the company went into liquidation nearly 20 months after she'd signed on, owing more than $20 million to more than 400 creditors, of which around $7 million are loans made to the business by the Langford-Jones family. On Monday, the liquidators from RSM Australia Partners said "it's not clear there will be enough money to pay a dividend to creditors". Company founder Bruce Langford-Jones and his two sons are among the creditors. Now, all Ms Taylor is left with is a rotted timber frame that needs to be pulled out, and mounting debts and sleepless nights. At 53 years of age, Ms Taylor was hoping she could start to wind down. But now she's got to keep two jobs and take on a new mortgage to fund the extra build cost. She's looking for a new builder to do the job from scratch. While builders warranty insurance covers her for the money she had already paid Langford Jones Homes, Ms Taylor says she's still left out of pocket because the cost to build with someone new has increased significantly since 2020. "The first quote I've already had (indicates) I'll be out of pocket $180,000 just to finish the build," she said. "I just feel like there's just no justice … I've just wasted two years waiting and I don't have the house that I wanted, and I have to start again. "It will take another two years probably [to finish off the build]." Donna Taylor when she first purchased her land in San Remo in 2020.(Supplied. ) Like Mr Abedian, Ms Taylor also thinks greed is behind the building industry's current woes. She paid 45 per cent of her original contract price of about $365,000 for completion of frame stage, with a remaining $210,000 left to pay. She says she got an email from Langford Jones Homes in January 2021 requesting that she pay for her upgrades within 7 days or face a 15 per cent penalty, in her mind, this indicated that "they were definitely in trouble". The builder requested she pay for upgrades again in February, but she declined, given the frame had not gone up at that stage. She says the company finally started the frame later that month and completed it in April 2022. "I think a lot of companies have known they've been in trouble for some time and have just kept ... signing more customers up and taking their deposit funds," she said. "It just seems wrong that they can ruin so many people's lives, and nothing gets done. They just get to walk away." Langford Jones Homes founder Bruce Langford-Jones told ABC News in a written statement that the company's customers were covered by warranty insurance. "Our family have lost everything — my son has lost his house. My wife and I have lost our family home and holiday house," Mr Langford-Jones said. The problem, he argues, was that "the government's fuelling the market with grants [and this] is creating a demand/supply issue". He says, with labour and material shortages, costs had gone up by 30 to 40 per cent but contract prices received by builders were fixed. "Builders throughout Australia are just hanging on," Mr Langford-Jones said. He also added that the company lost $2 million when it was the subject of a cyber attack in December 2019 and January 2020. 'Double whammy': The list of builders collapsing mounts Since the end of last year, the list of builders going under, across the nation has been growing. Some of the big names to fall include: Probuild, PlanBuild, Condev Construction, Hotondo Homes Hobart, Willoughby Homes, BA Murphy, Inside Out Construction, Home Innovation Builders, Privium, Dyldam Developments, ABD Group, New Sensation Homes, Next, Pindan Group, Pivotal Homes, Waterford Homes, Snowdon Developments, Solido Builders, Langford Jones Homes, Affordable Modular Homes, Statement Builders, Blay Builders Wulfrun Construction, Westernport Constructions, FSA Services Group and Blint Builders. Other companies have held on by a thread, thanks to cost-cutting and/or state government support. Construction giant Metricon was teetering on the edge of collapse in May before being lent a hand, and last month sacked about 225 out of its 2,500-strong national workforce in a restructure. The demise of builders happened as shipping costs soared amid pandemic delays and the price of building materials and labour skyrocketed. ABS data shows reinforcing steel prices jumped 42.2 per cent over 2021/22, structural timber by 40.7 per cent, steel beams and sections by 37.6 per cent, plywood and board by 35.6 per cent, timber windows by 31.4 per cent, timber doors by 27.9 per cent and terracotta tiles by 26.5 per cent. The cost of reinforced steel and structural timber has shot up by more than 40 per cent in one year.(ABS, HIA.) At the same time labour costs have jumped by almost 10 per cent across all trades. The Housing Industry Association's (HIA) trades report found over 2021 to 22 the highest increases were for the cost of bricklayers (up by 16.4 per cent), carpenters (up by 12.5 per cent), painters (up by 12.2 per cent), plasterers (up by 10.6 per cent), joinery specialists (up by 10.2 per cent), electricians (up by 9.5 per cent) and plumbers (up by 8.8 per cent). The price of labour has also jumped, feeding into contract price rises. (HIA) Union and peak trade association representatives from across the construction industry have been calling on federal government to do more to protect the payments and livelihoods of subcontractors before they face collapse. And the word from insolvency and industry analysts is that many more small and medium sized business will fall over in the coming months, particularly in construction. In July, research firm IBISWorld forecast that enterprise numbers across the home building industry would fall by 9 per cent in 2022-23, "contracting for the first time in a decade" by thousands. IBISWorld predicts the industry will contract over the coming months. (IBISWorld.) "We expect that [more builders going bust] to probably play out over the next 12 months, particularly for the small and medium-sized firms," BIS Oxford Economics senior economist Maree Kilroy said. Economist Maree Kilroy also thinks more builders will collapse in the coming months.(ABC News: John Gunn) She says the sector is facing a "double whammy" of high demand amid tight supply and that "builders have a backlog a pipeline of activity to get through". "The books will be full for at least the next 12 months," she said. "But then you'll find the effect of the rising interest rates and build costs causing demand destruction. "We don't expect that impact to happen until next year. "On the supply side, we expect the cost to build a home to rise in double digits next year as well." But she also thinks that long-term migration will underpin the construction sector's growth in the future. 'If there's a recession it will be short-lived': Triguboff Meriton's Harry Triguboff believes rising interest rates could cause further industry chaos. He wants the Reserve Bank to tread more carefully, and goes as far as suggesting they cut interest rates. But he believes even if they move aggressively, a recession won't last long. Harry Triguboff wants governments to ease planning approvals and to increase migration. (ABC News: Billy Cooper) "If there'll be a recession, it will only for a very short period. So who knows?" Mr Triguboff said when asked whether higher rates could tip us into one. But Mr Triguboff — who has to date completed an estimated 50,000 residential dwellings — knows the reality of Australia's political system, that politicians both state and federally never let the property market tank. To that end, he says whatever happens, Australia's housing market will need to be supported by all levels of government with easier and faster planning approvals and more migration. "Now the government wants the price to go up - because if [prices] don't [go up], they [governments] don't get stamp duty, they don't get all the money that we pay them," Mr Triguboff said. "We are the main source of income for the state governments. Now they can't afford to lose that forever." Regulators also know that moving too hard on rates could tip borrowers like Queensland couple Stacey and Anthony Ashton into financial stress. The couple's journey to build their dream home has been an ordeal, starting in late 2019 when they bought their first home in Cedar Creek. They contracted builder PlanBuild in 2020, but the company went into insolvency in April 2021. It happened the day before their wedding. "It was quite stressful and quite upsetting – there were a few tears," Ms Ashton said. "And then our honeymoon was essentially ruined, because we were just trying to find a new builder as soon as we could to get our home started." Mr Ashton says building prices had escalated and they were in a rush to find a new builder so they could get the $25,000 HomeBuilder grant available at the time. In the end the new builder they chose (who they do not wish to identify) was not their preferred option, but Mr Ashton says they made their decision based on price. The couple are now having to pay extra to fix what they claim are building defects. And their application for the $25,000 grant also ended up being rejected by the state revenue office, as they subsequently learnt that while the new builder held a builder's licence when they contracted to build, he did not when their grant was assessed. "The whole build process was extremely taxing on us emotionally," Mr Ashton said. They still owe a big mortgage on the land and house, and with rising rates they might have to sell. "We're having to budget quite tightly, and we don't have a cent spare each week — we're living pay cheque to pay cheque at the moment," Ms Ashton said. 'Every promise is broken' Mr Ashton urges Australians to be careful when signing contracts. "I would just say there's no gentlemen's agreements anymore," he said. "There's no pride in people's work. All you can rely on is contracts these days. "And that's the sad thing about the market at the moment. Every promise is broken. "So, you fall back onto your contract. Rely on that and budget with money for legal fees, because unfortunately when things go wrong, that's all you have to rely on." Ms Taylor also urges people to be careful and hold off building for now if they can. She fears that as the carnage unfolds, more consumers will suffer. Donna Taylor wants more consumer protections. (ABC News: Peter Drought) "I just wish there was more out there to protect us, you know, some sort of governing body that kept an eye a closer eye on businesses, before they went into all this debt and left all these people in trouble," she said. "Because it just does doesn't seem right that we have to cop the brunt of it."
Look no further, China is a very good example now. Everyone is playing musical chair and hoping to sell to the next sucker.
Soaring rents adding to job vacancies in major regions By Shane Wright August 24, 2022 https://www.smh.com.au/politics/fed...cancies-in-major-regions-20220823-p5bc2f.html Soaring rents across regional areas are exacerbating the shortage of workers, costing parts of the country such as Geelong and the Sunshine Coast more than $700 million each in lost economic activity every year. Research released on Wednesday, ahead of next week’s jobs and skills summit, shows the surge in housing costs that accompanied the COVID-19 pandemic is a growing factor in the struggle facing many businesses to get staff as prospective workers are in effect priced out of the rental market. Soaring rents in regional areas have made it more difficult to attract workers, hurting local economies.Credit Peter Rae The summit will focus on ways to maintain the low unemployment rate, drive up productivity, lift wages, reduce barriers to work and improve the quality of the workforce. Issues around migration and female participation are expected to dominate. But the impact of the housing market, which has tightened nationally but especially in regional areas, is not on the summit’s agenda. Compiled for the “Everybody’s Home” affordable housing campaign, the research by Impact Economics and Policy shows the surge in prices and rents is making it much more difficult for regional areas to attract workers. It shows that while issues such as migration, female participation and skills are key components of Australia’s worker shortage, the high cost of housing and rents is also a major impediment, particularly in areas where accommodation options are restricted. “A well-functioning labour market requires labour mobility, where workers can move from one region to another to fill gaps,” it found. “A lack of affordable and secure housing options limits the ability of workers to easily move between regions and undermines the efficiency of the labour market. The crisis in our rental market is not only producing large rent increases in regional areas, but it is also impacting labour mobility.” Researchers found that across the Sunshine Coast in Queensland, rents have increased by 36 per cent since March 2020. This has led to a 15 percentage point jump in the number of low-income households suffering rental stress, to 39 per cent. Over the same period, job vacancies across the region have soared by 259 per cent, to 3678 positions from 1415. In Geelong in Victoria, more than a quarter of low-income households are in rental stress after a 17 per cent lift in rents since the start of the pandemic. Vacancies in the area have jumped by 133 per cent to more than 3400. One of the worst-hit areas has been NSW’s Illawarra and South Coast region. Rents there have increased by almost 42 per cent since the advent of COVID-19, taking to 46 per cent the proportion of low-income households in rental stress. Vacancies there have lifted by 113 per cent, to 2848 from 1333. The report estimates the shortage of workers is costing the Sunshine Coast $786 million a year in lost economic output. In Geelong, the annual cost is $760 million while the Illawarra and South Coast is losing $642 million. It is not just rent that has soared in regional areas. Data from CoreLogic shows that at the start of the year, annual house values across the Illawarra were growing at more than 30 per cent. Although they have slowed since then, the median house value in the region is still above $1 million. House values along the Sunshine Coast hit an annual growth rate of almost 36 per cent, with the median value at $1.1 million. Geelong’s surge in values reached more than 22 per cent, with the median value at $838,000. Kate Colvin, spokesperson for the “Everybody’s Home” campaign, said regional areas were already facing a social crisis because of their chronic lack of affordable housing. They were now facing an economic crisis. “The inability to find a rental and eye-watering rent increases for the few places available is deterring people from taking up jobs in regional communities,” she said. “Employers tell us constantly that prospective employees tell them they can’t move to the community if they can’t find a place to live. Our completely lopsided housing system is choking off the economic potential of regional Australia.” Colvin said the link between employment and housing should be at the top of next week’s summit, arguing an increase in social and affordable accommodation would give people on modest incomes a chance to move to new jobs. The two-day jobs summit, which will feature 100 people from business, unions and the non-government sector, starts on September 1.
With the State in the grip of a housing crisis, new analysis reveals thousands of properties are being held off the market by short-stay accommodation hosts. Credit: Adobe Stock Housing crisis: Airbnb listings outnumber vacant rentals by more than 40 to one in many regional WA towns Josh Zimmerman The West Australian August 24, 2022 Airbnb listings outnumber vacant rentals by more than 40 to one in a swag of regional WA towns, many of which have fewer than a dozen houses available for long-term tenants. With the State in the grip of a housing crisis where rents have soared by 40 per cent compared to pre-pandemic levels, new analysis reveals thousands of properties are being held off the market by short-stay accommodation hosts. Figures extracted from website Inside Airbnb — founded by Australian Murray Cox to highlight the growing number of homes on the platform — reveals there were 1295 combined listings within the City of Busselton, which includes Dunsborough. By comparison, there were just 31 properties listed online for rent in Busselton and Dunsborough this week. Holidaymakers have nearly 700 Airbnbs to choose from in the Shire of Augusta-Margaret River, but there are just five properties available for rent in Margaret River and surrounds. The same situation is repeated across WA: Denmark has 185 Airbnbs but just three rentals, Albany has 300 Airbnbs compared to 22 rentals and Broome has 161 Airbnbs against just 13 rentals. Short-stay holiday homes also currently far outnumber rentals in many Perth councils — including Fremantle (394 Airbnb listings and 99 properties for lease), Cottesloe (106 Airbnbs and 13 rentals) and Mandurah (363 Airbnbs and 120 rentals). In total, there were nearly 10,000 properties listed on Airbnb across WA — around three times the number of available rentals. That figure also does not take into account holiday homes on offer through Airbnb competitor Stayz, meaning the number of properties removed from the rental market in favour of short-stay accommodation is likely even bigger. In December, the State Government unveiled a draft planning policy that would force Airbnb owners to place their homes on a statewide register and require them to apply to their local council for permission to lease the properties for more than 60 nights of the year. The proposed rules, slammed by Airbnb and Stayz for being among the toughest in Australia, were put out for public consultation until March. But Planning Minister Rita Saffioti is yet to introduce legislation to enshrine the changes, prompting a number of councils — including Busselton — to introduce their own local government rules imposing curfews on short stay accommodation guests and requiring property managers to respond to queries within 12 hour. Ms Saffioti said more than 2000 submissions had been received during the consultation process that would “inform development of a final option for the Government to consider”. She did not provide a time frame for the introduction of legislation to Parliament. Airbnb country manager for Australia and New Zealand Susan Wheeldon said nearly 118,000 WA dwellings were found to be empty on the night of the 2021 Census and that short-stay rentals “comprise a tiny proportion of the overall property market”. “In many cases, hosts make properties available on our platform that would otherwise be used only as holiday homes for themselves, and their friends and family — many of these homes are unlikely to be offered on the long-term rental market,” Ms Wheeldon said. “Short-term rentals also provide a way for everyday people to stay afloat and combat rising costs of living and growing mortgage repayments.” While Airbnb remains strongly opposed to the implementation of a 60-night cap for unapproved short-stay rentals in WA, Ms Wheeldon claimed many owners did not lease their homes out all year “with many doing so on an ad-hoc basis to help meet their mortgage repayments, pay bills or save for their retirement”. Australian Hotels Association (WA) chief executive Bradley Woods said the rental shortage was making it difficult for hospitality businesses to convince workers to move to country towns. “This is adding enormous frustration to businesses working hard to attract and hire new workers only to find that accommodation is restricted,” Mr Woods said. “It is very clear that unregulated short stay accommodation listings are taking up a large percentage of housing stock that was previously available for long-term rental.”