Oliver Searles - Perth Real Estate Agent

The Australian Federeal Government released its Budget on Tuesday night. Overall i thought the Budget was okay but that the $1.5 billion dollar surplus seems unlikely. I mainly think the Government dropped the ball by not helping the real estate market at all. Also they introduced the mining royalty tax and then did not pass on the promised 1% company tax drop. This will only hurt the Australian economy and the mining industry which is the back bone of the Australian economony. On the positive side cutting down on golden handshakes is a good thing as is increasing the Superannution guarantee from 9% to 12%.

I would like to have seem some money spent on addressing housing affordability in Australia and possible reductions in stamp duty (which i know is a State tax). Instead i felt alot of the benefit of the Budget went to lower income families and families with school aged children.

Heres hoping the State Budget provides more for the real estate market.

The Western Australia Government has just released its new housing strategy which is sure to help the Perth proerty market. The paper is called ‘Affordable Housing Strategy 2010-2020: Opening Doors to Affordable Housing’. Below are the key aspects of the strategy

• Aiming  to achieve 20,000 additional dwellings in Perth by 2020 for households on low to moderate income
• Provide an additional 8,000 home loans through Keystart
• Construct an additional 3,500 social housing dwellings by 2013
• Introduce planning reforms
• A commitment to deliver affordable house and land packages (MY THOUGHTS: I am unsure how they are going to do this without funding it themself. Also the risk of this is that it could cause property and land prices to fall as they have to compete with these lower prices.)
• A commitment to working with industry to help develop affordable housing developments
• The exploration of market based investment options to attract insitutional finance to the sector to address current under investment

It has been talked about in the news that Julia Gillard has come to a compromise with the mining companies over the Labor Governments proposed mining super tax. Instead of it being a tax at 40% it is now being known as the Minerals Resource Rent Tax (MRRT) and the tax will apply to iron ore and coal and be capped at 30%.

Is this a good thing for the Perth housing market?

I think it is. It is not as great as scrapping the tax altogether but does provide some relief for mining companies and will hopefully stop the negativity and pulling of investments from the industry. This can only have a good affect on the WA economy and hence on property prices in Perth.

On the flip side the tax may still have a negative affect as the industry is still being heavily taxed and this is bound to reduce growth in the area. Also on an Australian wide view the cutting of about $1.5 billion from the estimated revenue of the tax will make it unlikely for the Federal Government Budget to be balanced by 2013. This could a long term affect on as expenditure is likely to have to be cut to balance the books.

Some of Perth’s biggest land developers have warned the super profits mining tax could add as much as $20,000 to the cost of building a new house. This is assuming that the tax affects all resources used in building a new property.

According to Nigel Satterley an average house costs $200,000 to build. $100,000 of this is labour, $70,000 on materials that would be taxed under the new scheme.  Midland Brick confirmed any extra tax on clay and other materials to make bricks would be passed onto the consumer.

Builders were also concerned that the tax would cause building costs to rise and hence put upward pressure on house prices.

Building Products and Resources Used:

Tiling – cement and clay

Steel Roof Frames – iron ore

Brickwork – sand, clay, shale, lime, silica and concerte

Aluminium Windows – alumina

Glazing – silica

Electrical – copper, aluminium, lead

Plastering – sand, lime, cement

Earthworks and Foundation – may need sand

Concrete Slab – sand, lime and blue metal

Plumbing – some copper, lead

Internal Plasterboard – gypsum, cement wall sheets use silica

After hearing and reading about the 2010/11 Federal Budget handed down last night i am starting to think that they have. This new 40% mining super tax is only bound to cause more problems than good things.

I understand the theory behind the tax. Tax an industry which makes a lot of money and use this money to provide other services. Also they are taxing an industry which cannot be taken overseas or done elsewhere as the minerals are in the ground.

There are however some holes in the theory. The biggest one being that a lot of these companies will just delay the projects in favour of other more profitable projects overseas. The companies may also scale back the current projects and this will reduce employment and hence contract the economy. These big companies as well do alot of their own investments in the industry and the area and this will surely be reduced by this tax.

To me it seems this policy and tax by the Labor Party is crazy, short sighted and is biting the hand that feeds them. Only time will tell if i am right but we have already had some companies saying they would stop projects in WA if the tax occurred, what will happen now the tax has been officially announced.

What do you think? Please let me know.