Subsequent house price movements were modeled out to March 2016 by modeling past price behaviour after Brisbane property booms and likely impacts of Federal government policy initiatives � e.g. the possible removal of investor\speculator incentives such as negative gearing and capital gains tax concessions. The modeling suggests that house prices will trough around September 2011 at a median price of $294,000 (a 30% decline from peak).
If maintained, the investor incentives will cause another �mini� bubble around 12 months prior to the first participants gaining access to the First Home Savers Accounts (FHSA). In this mini bubble, house prices are forecast to rise by $66,750 (more than the likely average FHSA balance). Consequently, affordability will continue to impact first home buyers and the bubble will fade out to March 2016.
However, the central forecast is that the Federal government, following the taxation review, will cease these investor incentives because they are shown to be ineffective and damaging through their impact in causing bubbles and maintaining a speculative premium in our house prices. Modeling of this forecast suggests that house prices will form a solid base over a few quarters post September 2011. Prices will bounce off their lows over couple of quarters in late 2012/early 2013 due to first home buyer activity after first participants gain access to their FHSAs. Price rises are then roughly inline with inflation from 2013 out to the end of the modeling period at March 2016.
Under both scenarios, the median price is $334, 224 at March 2016, the end of the forecast period. If Brisbane wages increase at the rate of 4% pa, at March 2016 the Brisbane house price to income ratio will be 4.43, 10% higher than in 2001! However, over the very long term, beyond the forecast period, affordability will continue to improve for first home buyers as baby boomers sell down their assets through retirement. The continual supply of existing housing on the market should have a downward impact on Brisbane house prices over the next several decades.
In conclusion, this study and its forecasts show that poor Federal government policy has been, and will continue for a long period to be, damaging to the needs and aspirations of everyday Australians, and �working families�. That very much includes the less sophisticated investors that joined the boom late, thereby transferring their current and future wealth to the earlier �smart money� investors. And that is precisely why the current Australian federal government must finally take action and get rid of these ineffective taxation policies which promote, and provide an opportunity for spruikers to aggressively promote, Australian houses as speculative assets. They are our homes not casino chips! |
