House investors to lose interest

Apr 4 2011 / 8:19 am Was written by Atwell & Co. Comments Off

By Peter Taylor

THE bull run in house prices is set to run out of steam as investors realise that credit costs are dwarfing anaemic yields, according to a senior banker.

National Australia Bank finance chief Mark Joiner yesterday said the property market was fully valued and likely to languish.

“I don’t think property can go up from here,” he said.

“It’s at the top of the range on affordability. It’s well out of line internationally.”

Mr Joiner’s comments followed a speech in which he called for the Federal Government to further bolster the savings rate by delivering tax concessions to savers.

“Eventually people are going to realise that taking a 2 per cent pre-tax yield from renting a house that isn’t going up in value doesn’t make any sense, if you’re paying 7 or 8 per cent for the associated loan,” he said.”

The domestic share market was also likely to fall out of favour, he said, following an extensive bull run that had yielded “great stock market success (and) great property success”.

“I talk to international investors and they really feel Australia has had its run,” Mr Joiner said. “We had banks growing credit at 15 per cent per annum – that’s not going to happen any more. We had a mining boom – a lot of that’s priced in. I think they’re looking elsewhere.”

Speaking at a lunch in Melbourne, Mr Joiner said the Government should use its tax forum scheduled for October to “debate the importance of a stronger deposit market in Australia”.

Tax concessions for savers would bolster the market, he said.

“I would like to see (a situation where) interest earned on up to $20,000 of money on deposit was tax free, or taxed at a concessional rate.”

Read more: http://www.news.com.au/money/property/house-investors-to-lose-interest/story-e6frfmd0-1226031748033#ixzz1IWcYvVxX

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