Since the year 1996, Australia has witnessed a boom nationwide in its property prices with the real adjusted prices rising by about 121 % in the year 2014. It is claimed to be the largest and persistent price growth the country has ever seen since the year 1880. But in June 2016 the OECD or the Organization for economic cooperation and development reported that the boom in the Australian property market could end dramatically, and real estate may suffer badly. It has been a topic of debate since the year 2001 whether the Australian Property market would continue to rise as it has been touching the pinnacle of success since 1996.
The Australian property market witnessed a steady rise of around approximately 3 % every year since the year 1970 and after. Even after the year 1990, the rise in the property market was around 6 % per annum. But in late 2000, speculations began that Australia may be experiencing a real estate uncertainty complaining that the prices of properties that has risen as compared to the relative incomes of the people.
The increase in the prices of property in Australia is the result of many underlying factors, and some of the commentators have blamed the policy of the State Government to restrict the supply of land for this increase in the prices of property in Australia. However other factors are greater availability of loans and credit as a result of deregulation, low rate of interest on loans since the year 2008, limited release of new land by the Government, a favorable tax system for investors, owners with tools and policies like negative gearing and tax discounts in capital gain, high population growth and urban densification.
Speculations are doing rounds in the Australian economy market that the overpriced property market can cause excessive borrowing to the residential sectors and that too at the cost of the businesses. Increased borrowings may result in housing payments becoming more complex. This is eventually resulting in developing a banking system which is bad in every aspect; bad for the country’s growth, bad for the competitive environment that prevailed in the country so far, bad for the employment, bad for business and overall for the development of Australia’s economy. This can be overcome if the mortgage lending can be increased and commercial lending is decreased. This will ensure that the firms receive lesser loan amounts paying high interest and thereby investments will be reduced.
From May 2016 it has been declared that foreign buyers will have to provide all the necessary details regarding their visa and citizenship and also their clearance from the Foreign Investment Review Board. Everything will be done through the process of stamp duty.
From June 21st, 2016, all the foreign buyers will have to adhere to a stamp duty surcharge amount to 4 % and a surcharge on land tax amount to 0.75% with effect from 2017. The stamp duty surcharge and land tax surcharge will rise from 3 % and 0.5% to 7 % and 1.5% respectively in Victoria from July 1st, 2016.Learn More