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Housing Problems causes in Australia.
Housing problems causes in Australia.
Welcome to our article (141) Housing problems
causes in Australia.
Dear readers, as I have said before, I want
to inform you that I have followed the rental market for a long time, and I
have written several articles about it, pointing out what I think can help to
solve the rental problem. I have done that, hoping that someone in power takes
notes of what I am saying, and does something about it, but so far nothing has
happened. Anyhow, I believe that the main problem is that the Australian Social
Security System must be equal for everyone, but it discriminates against the
small investors away, to fix it they can start by abolishing the ASSETS TEST
that keeps off the small investors that could have a property for rent. Anyhow,
I will continue to write more rental articles, hoping that something positive
happens, so, let me go on writing.
So, let me make a short list of the most
important things that in my view need to be done, to fix the rental problems
that exist today. Now what I am going to say next is not what the people in
power want to hear, because I believe that they are the people that have caused
it, because of their greed, they are charging very high levies, and then hide
behind the landlords, saying that it is the landlord greed that is causing this
rental shortage, but it is not, because most of the landlords of affordable
rental properties, are family people that have one or two properties for rent,
the rich people keep away from rental properties, they cannot be involved,
because they are hard to run, and cause too many problems, so, for them it is a
waste of time.
Anyhow to make this brief I must say, I have
found two things that hurt the rental market most. The first one is the land
tax, that sometimes is so high that it is not worth to have rental properties,
the second one is the ASSETS TEST, that in some cases can be even worse than
the land tax, because it cuts off the small property owners to receive the
government pension, and it also stops the disabled, the jobseekers and others
to receive help from the government. So, hereunder I am going to describe step
by step, how the ASSETS TEST affects the property owners in a negative way.
The land tax and the assets test problem.
Now to explain how the land tax and the
assets test affects the small investors in a negative way, I am going to write
an example. To make it easier to understand, the example that I am writing will
be exaggerated a bit, so that it is easier to understand the message I want to
convey. So, let me start to write this imaginary situation.
Mr and Mrs Lee have worked hard all their
lives, they saved as much as they could, and have invested their saving, on two
houses, and both the houses are on two large blocks of residential land, and
the land value is over one million dollars each. They may be able to avoid the
land tax for the house they live in, but they must pay the land tax on the
rental property that could be around $6000.00 each year, just because they
owned that house and land on the 30th of June.
Now Mr and Mrs Lee are retiring, so, they
would like to apply for the Age Pension from the government, because they do
not have much money, since they have spent most of their money on these two
properties. but it is very unlikely that they will qualify, because of the
assets test. So, let us try to work out if they can receive any pension from
the government. But they cannot because they have over one million assets. So,
the assets test cuts them off, because the maximum they can have for part
pension is $986,500. So, they cannot have any pension, and they must live with
what rent income is left, after paying all expenses, which is not enough.
Now let us work out how much money is left
from their rental property.
They are renting the house at $600.00 per
week, which in a year is about $31,200. Now from this money they must pay all
the rental property expenses. So, let us see how much they expenses can be.
In Mr. and Mrs Lee case
Land
tax $6000.00
Council Rates charges $3000.00
Urban Utilities $1800.00
Insurance $1500.00
Maintenance $1000.00 or more
Real estate charges to rent property. Over
$2000.00
Now let us add them up.
6000+3000+1800+1500+1000+2000=$15,300.
So, the expenses are nearly 50% of the rent.
And Mr and Mrs Lee, only earn about one per
cent of the value of rental property net.
If they did not have this house for rent,
they would have received the full pension, which today is:
- Couple (each): $802.00
per fortnight (approximately $20,852 per year)
- Couple (combined): $1,604.00
per fortnight (approximately $41,704 per year)
From the imaginary example of Mr Lee
property, we can say that this is one of the reasons why there are not enough
rental properties in Australia, but there is more to talk about, one of which
is the foreign ownership, see below.
What other problems we have in rentals.
Then there is the problem of foreign
ownership. See what I found on the internet.
New Treasury figures show the Chinese spent $2.4billion on Australian
residential real estate in 2021-22, with investment surging in the following
financial year. (Shortened article)
But we will talk about that in our next
article.
So, if the government want the rental market
to be self-sufficient, they must abolish the assets test on affordable rental
properties, owned by Australians and permanent residents of Australia, or they
can set the assets test at minus one dollar per thousand instead of minus three
dollars per thousand a fortnight. So that some people may still want to own a
rental property, because the way it is now, people are losing money, if they
own a rental property and are on a government pension.
There are more issues that influence the
rental market to talk about, but this article is becoming too long, So, see you
in our next article, where we are going to talk about the foreign ownership and
Australian politics.
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