REINSW spits the dummy over State Budget

ScreenHunter_01 Mar. 28 23.36

By Leith van Onselen

I have a simple rule: when the Real Estate Institute complains about a policy, it is generally good for society. And when they praise a policy, it is usually bad.

And so it goes with the Chief Executive of the Real Estate Institute of New South Wales (REINSW), Tim McKibbin’s, latest rant over the New South Wales State Budget, released on Tuesday, which confirmed that the Government would persist with its policy of only offering the First Home Buyers Grant on newly constructed dwellings. From Property Observer:

…the NSW 2013-14 budget has left first-home buyers out in the cold with the failure to reintroduce the grant for existing properties.

The budget was an opportunity for the NSW Government to reinvigorate the property market with a reduction in stamp duty rates and the reinstatement of first-home buyer incentives on existing properties.

They have failed.

We are very disappointed NSW first-home buyers continue to be disadvantaged by the decision not to reinstate the first-home owners grant for existing properties.

We are not satisfied with the grants being limited to new properties and neither are first-home buyers, who instead of purchasing new properties are choosing to purchase no property at all…

It is very disappointing that the government has not recognised the failure of this policy and amended its policy to include existing properties.

Many first-home buyers are not interested in purchasing new properties. The scheme introduced last year has failed to date because it assumes that supply is being hindered by demand from first-home buyers for existing properties.

It implies that by redirecting first-home buyers to new properties it will solve the supply problem. The truth is, supply is hindered not by first-home buyer demand but by a convoluted, inefficient planning system and a tax system that is overly dependent on property.

It is time for the government to recognise the critical role first-home buyers play in the property market and implement what really needs to be done to help them – reinstate the first-home buyers scheme for existing properties.

Oh, the righteous indignation. Doesn’t the New South Wales Government know that it is the REINSW’s god given right that taxpayers support real estate agents’ commissions? Doesn’t it know that artificially inflating pre-existing property prices is good for all, and a proven winner for the economy and society at large?

But seriously, you can’t make this stuff up. If the REINSW was truly concerned about first home buyers’ (FHBs) welfare, it would lobby against negative gearing, which encourages investors to compete directly against FHBs, crowding them out, whilst doing absolutely nothing to boost supply. But hey, such a policy would make homes more affordable by lowering prices, and we can’t have that.

About the only credible statement in McKibbin’s rant is his comment on New South Wales’ “convoluted, inefficient planning system and a tax system that is overly dependent on property”, which I agree with wholeheartedly.

The more that Australia’s governments ignore vested interests like these, the better.

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Unconventional Economist

Comments

  1. In other words, RE institute pronouncements are a slightly different avatar of the Pascometer. 🙂

    It would be truly hilarious if it weren’t so pathetic…

  2. As I like to say: “Home ownership policy” that does not address the price at which new homes are going to be supplied, is never “home ownership” policy at all. It is “big finance” and “big property” profit-increasing policy.

    The same cohort of society will still be “priced out” of home ownership. All that the “home ownership” policies relating to ease of credit and FHB subsidies determine, is the price that houses will inflate to, and the debt load taken on by those “not priced out”.

  3. General Disarray

    How to compose a REINSW newsletter for maximum spruik potential;

    1. Replace “real estate agents” with “first-home buyers”

    2. Apply generous amounts of righteous indignation

    Done!

  4. Why do RE vested interests seem preoccupied with getting people into the market and propping up prices? Surely they should be focused on a healthier market where there are more transactions and more mobility?

    Is it better to sell 1 house for $650000 or 5 houses for $300000?

  5. reusachtigeMEMBER

    More of our tax dollars needs to go towards supporting the real estate industry! This could come from that fancy R&D budget.

  6. I dont get much their point.The single thing that is hurting them, is the stamp duty, as it reduces the number of transactions.REA do not care much about the house price but they need transactions.

    They would be much better lobbying for a removal of all stamp duties and implementation of a proper land tax.

    They should take example on NZ, it s so easy to buy and sell properties there, it s a REA paradise.

    • I reckon that falling prices would also reduce the number of transactions unless accompanied by job losses/recession/forced sales.

      I think I remember reading something by Leith (either here or on his old site) that showed the highest numbers of transactions took place during the years with the most price growth.

  7. Lassie beat me to it, but I will post it anyway

    Excellent article as always, just this caught my attention
    “But hey, such a policy would make homes more affordable by lowering prices, and we can’t have that.”

    I would argue that it would be in the best interests of the REINSW to get house prices to come down, whatever amount they lose in the comission they would make up for it in number of transactions (they would just have to work harder, but such is life)

    They should indeed be pushing a different agenda rather than just price growth…

    • reusachtigeMEMBER

      Although sensible to us, that goes against everything they’ve ever known. Their job is to maximise price for their clients!

      • I understand your point but I don’t think they really feel that way. Their job is to sell properties and earn (more like be paid) commissions. If it happens to maximise price for their clients then happy days, but that’s not their primary focus.

        I spend 3yrs in real estate and it’s a nasty business. I made a great living but couldn’t handle the dishonest and unscrupulous things I was being asked to do. The focus was to pre-condition vendors to accept lower offers and the buyers to pay higher amounts, then play off the weaker of the two parties to close the eventual gap. Where it comes from who cares…so long as the sale closes and a commission is paid.

        Vested interests reign supreme, and I would suggest that if you looked at the investment preferences of around 80% of RE agents, you’d find that they would opt towards property every time. That’s just how they roll – they have marinated in a steady and consistent message of property always goes up, and negative gearing is the only way to make good money from investing, and it eventually takes over their consciousness. That’s partly why they like to say these things so much, it’s self-efficacy gone mad.

        Sure that’s not all of them, but does account for a large portion all the same.

    • The risk for the real estate folks is that a falling market could result in a freeze on transactions as vendors take their properties off the market. A booming market tends to be great for transaction volumes.

      Plus anecdotally it seems many of the agents are active investors. Makes sense I guess – you’d have to drink the coolaid a bit to work in the industry.

  8. “Many first-home buyers are not interested in purchasing new properties.”

    Reallllly….?

    What we are interested in and what we can afford are often two different things.

    I really hope MSM sees this for the vested interest tripe that it is.

    They won’t but I’m an optimist.

  9. notsofastMEMBER

    I like your rule and agree with it.

    As a corollary to this rule I would also add what the Australian banks say too. As an aside to this, a big challenge for the Australian Banks is that in all too many cases they got rid of the loan officers, lower and middle management who new what they were doing to put in people who were more than happy to have the banks offer low LVR and high DRTI ratio loans to all and sundry in a race for market share and short term profits. That is they got rid of the people who could work out, or better put were practitioners of the art of “sniffing out”, a good loan risk from a bad loan risk. Simply put, people with these skills would not have been making the required number of loans because of concerns over potential future default and they would have been shown the door as non performers. But it is exactly these people that the banks now need if they are to make successful loans going forward in a very tough business environment. So in addition to overcoming all their other challenges the Australian Banks will have to overcome this “banking common sense” vacuum that is now prevalent right across their ranks.

  10. The fact that Real Estate agents ranked 45th out of Australias 50 Professions We Trust survey probably means that most people will treat this with the contempt it deserves. Its also interesting that sex workers came in at 46, at least you know what you’re getting with this lot.

    • No doubt your average Australian “business” is something attached to the ponzi. What a disgusting article. Microsoft started in Albuquerque and IBM has just moved a lot of jobs to NZ because they won’t need to pay employees as much because housing is cheaper.

    • Consider my flabber well and truly gasted at that piece of mealy mouthed doublespeak.

      FFS….

  11. Whenever the spin starts flying, remember this:

    If people aren’t buying something, it’s usually because prices are too high.

    First home owner grants do not lower prices. They raise them.

    End of story. Go away REAICT.

  12. They are right and see what Pascoe says about high house prices:

    “The possibility or question is based on the role sharp increases in house prices played in providing the funding for new businesses in previous generations: Get on the mortgage treadmill, watch the value of the house rise to create equity that can then be borrowed against to fund a new enterprise, for better or for worse.”

    http://www.smh.com.au/business/the-hidden-victims-of-affordable-housing-20130620-2okkg.html

    This stuff comes from the Reserve Bank’s head of domestic markets departments, Chris Aylmer.

    This is really delusional and somehow allows banks to duck the role they should have had which is lend to business anyway so the RBA is endorsing this. Break up the RBA if that is their policy thinking.

    • Jesus Wept….

      If this is the quality of what passes for serious economic analysis out of the RBA, we are well and truly up the creek without any means of propulsion.

  13. “The Policy Whose Name Must Not Be Spoken” (…whisper it quietly… negative gearing) would surely be the first to face the axe if the powers that be were serious about home affordability.

    • It is for this very reason that I would quite like to see an activist group (not a party) forumlate an action plan to have a representative at every last political meeting in the coming months to ask candidates of all parties (regardless of their positions on any other policy)

      What is your position on negative gearing?
      How do you believe this contributes to housing affordability?
      Do you believe that 3.7 billion spent from the federal budget each year represents an effective allocation of taxpayer funds?

      etc etc etc