ROBIN HOOD POLITICS RISKS MAKING AUSTRALIA’S HOUSING CRISIS WORSE
The Federal Budget has created a supply freeze that could push rents higher, reduce investment and hand more of Australia’s housing stock to offshore institutions.
4 min
For months, I have been one of the few commentators openly stating what the data was already showing: property prices had begun to fall.
The latest figures confirm it. Cotality’s June 1 Home Value Index showed Sydney values down 0.9 per cent in May and Melbourne down 0.8 per cent. ANZ has cut its national capital city forecast to 2.8 per cent growth this year, down from 4.8 per cent in April. CBA has also downgraded its outlook.
So the Federal Budget arrived at the worst possible time, with the wrong prescription, to treat a problem it fundamentally misunderstands.
Treasurer Jim Chalmers has suggested that making it easier for first-home buyers to get a fair crack at auctions is a good thing. The reality is more complicated.
Driving property prices down does not simply hand a discount to first-home buyers. It affects the 1.4 million Australians employed by the property sector, the 67 per cent of household wealth tied to housing, and the state government revenues that fund schools, hospitals and roads.
The government had a choice: tackle supply constraints, link migration growth to housing completions and reduce spending, or increase taxes on property investors. It chose the latter.
Property is an economic pillar
Property is not simply another investment class. It contributes about 10.6 per cent of GDP directly, up to 15 per cent when flow-on effects are included, and employs more than 1.4 million Australians. It also generates more tax revenue than mining and underpins consumer confidence through the wealth effect.
Against that backdrop, the Budget removed negative gearing from established residential properties purchased after Budget night and replaced the 50 per cent capital gains tax discount with cost-base indexation and a 30 per cent minimum tax from July 1, 2027.
The government calls this fairness. I call it a misdiagnosis.
The grandfathering trap
The policy is also internally contradictory.
Properties purchased before Budget night are grandfathered, allowing existing investors to retain full negative gearing and capital gains tax benefits until they sell. The logical response is simple: hold.
That means fewer properties coming onto the market, fewer rental listings and reduced transaction volumes.
The result is likely to be higher rents, reduced stamp duty revenue and further inflationary pressure at a time when the Reserve Bank remains focused on bringing inflation under control.
The government is attempting to fight inflation with one hand while fuelling it with the other.
Who really owns investment properties?
What is often lost in this debate is who Australia’s property investors actually are.
According to ATO data, 71 per cent of investors own just one investment property. They are not wealthy property moguls.
They are teachers, nurses, police officers and small business owners who have purchased an investment property as part of their retirement strategy.
For many Australians, property remains the most tangible and trusted pathway to building long-term wealth.
Removing the incentives that supported that investment does not hurt a billionaire developer. It hurts ordinary Australians trying to secure their financial future.
Investors aren’t the affordability problem
It is true that housing affordability has deteriorated significantly over the past two decades. However, negative gearing is not the primary cause.
Research by economists Ross Kendall and Peter Tulip found planning and zoning restrictions significantly increase housing costs.
Their work showed zoning lifted detached house prices well above marginal construction costs in Sydney, Melbourne, Brisbane and Perth.
Low interest rates, strong population growth, chronic under-supply and restricted access to development-ready land have all played a much larger role in pushing prices higher.
Punishing private investors does nothing to address these structural issues.
The Build-to-Rent advantage
At the same time the government is reducing incentives for Australian investors, it has created a more attractive tax environment for foreign institutional capital through Build-to-Rent projects.
Under current arrangements, foreign institutional investors can access a 15 per cent withholding tax rate through Managed Investment Trusts, accelerated depreciation benefits and exemptions from the new negative gearing restrictions.
State governments have added further concessions, including land tax reductions and exemptions from foreign investor surcharges.
Australian mum-and-dad investors receive none of these advantages.
The cumulative effect is striking. Foreign institutions can access a range of tax benefits unavailable to Australian private investors, while local investors lose concessions they have relied upon for decades.
This is not solving the housing crisis. It risks transferring ownership of Australia’s rental housing stock from local investors to offshore institutions.
Why state governments should worry
There are already signs these changes are affecting the credit cycle.
Major banks are removing negative gearing benefits from serviceability calculations for investment loans.
As market conditions soften, lenders become more cautious and investors find it harder to secure finance.
That matters because property transactions are a major source of state government revenue.
In NSW alone, transfer duty generates more than $12 billion annually. If transaction volumes fall significantly, the impact on state budgets will be substantial.
The consequences extend beyond stamp duty to GST collections, payroll tax receipts and land tax revenue.
The 95 per cent loan trap
There is another aspect of the Budget that concerns me.
The government has expanded first-home buyer deposit guarantee schemes, allowing eligible purchasers to buy with a five per cent deposit backed by the Commonwealth.
The intention is admirable. The timing may not be.
If prices in Sydney and Melbourne fall further, buyers entering the market with 95 per cent loan-to-value mortgages could quickly find themselves in negative equity.
They become trapped. They cannot sell without crystallising a loss, while the taxpayer guarantees the loan and the bank remains protected.
That is not wealth creation. It is a debt obligation.
After three decades working with debt and investment, I would never encourage my own children to borrow at a 95 per cent loan-to-value ratio.
A policy built on politics
The government had an opportunity to address the housing crisis by encouraging supply, reforming planning systems and reducing development costs.
Instead, it chose Robin Hood politics.
The optics may be appealing, but the economics are not.
Australians may ultimately pay the price through higher rents, weaker investment and a future in which an increasing share of the nation’s housing stock is owned by offshore institutions rather than local investors.
Paul Miron is the Co-Founder & Fund Manager of Msquared Capital.
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Two architecture lovers created a real-life version of the home in Utah. It is now on the market for $45 million.
5 min
Near the end of “North By Northwest,” Alfred Hitchcock’s 1959 thriller, the protagonist, Roger Thornhill (played by Cary Grant), follows the seductress Eve Kendall (played by Eva Marie Saint) to a sprawling Modernist house reminiscent of Frank Lloyd Wright’s Fallingwater.
Except this house is situated not over a waterfall but, absurdly, atop Mount Rushmore.
The Vandamm House, named for the movie’s villain, never existed except on a Hollywood soundstage.
But it seems so real on the screen that Christine Madrid French, an expert on the architecture of Hitchcock’s films, says people sometimes tell her: “I went to Mount Rushmore, but I forgot to visit the house.”
John Boccardo, who grew up in Los Gatos, Calif., was 11 when the film came out. He saw it nearly a dozen times at the Studio Theatre in San Jose.
He was especially taken with the Vandamm House, which seemed completely real to him.
“I promised myself I would visit it one day,” says Boccardo. In the meantime, he drew surprisingly realistic renderings of it, from memory, while still in grade school. undefined
Years later, as an architecture student at SCI-Arc (Southern California Institute of Architecture) in downtown Los Angeles, he learned that the house didn’t exist.
A couple of rooms and two small sections of its exterior had been built on MGM’s Culver City lot under the supervision of production designer Robert Boyle.
For scenes in which the house was in the background, Hitchcock relied on paintings of the imaginary building by special-effects artist Matthew Yuricich.
The paintings, known as mattes in Hollywood, weren’t terribly realistic, but with Cary Grant and Eva Marie Saint moving across the screen, moviegoers didn’t notice.
“It may be the most famous Modernist house that never existed,” says French, an architecture and film historian and the author of “The Architecture of Suspense: The Built World in the Films of Alfred Hitchcock.”
Boccardo went on to become a successful architect who worked in both northern and southern California.
Then, while semi-retired and living in Utah, he decided it was time to build the Vandamm House. His partner, Derek Esplin, threw himself into the project, working out details of everything from financing to furnishing. Says Esplin, a film producer, “I took it on as my life’s work.”
Boccardo, 78, Esplin, 59, and their three dogs (two schnauzers and an aussiedoodle) moved into the house in February.
The men have used it the last four months to ensure that everything is working perfectly. Now they are offering the house for sale at $45 million. The furniture and fixtures are available separately. “It can be turnkey,” Esplin says. The broker is Paul Benson of Engel & Völkers in Park City.
“I expect to get the full price,” says Benson. “It is not an outlier. We sold a house by the same architect in Park City last year for $65 million. And this is one of the most exceptional homes ever built in the state of Utah. You couldn’t recreate it for $45 million.”
Boccardo and Esplin declined to say how much it cost to build the house. But they got a bargain when they paid about $2 million for the 1.7 acre lot in 2021. (Benson says the land alone would command $7 million to $10 million today.) They chose the site, high above Park City, after searching for property that would let the house, with its dramatic cantilevers, be seen from below.
The property, which offers unobstructed views of the Wasatch Range, is in the Pinnacle , a gated community (complete with a clubhouse and a concierge) within the Promontory, a larger gated community—like a nightclub’s VVIP room entered through its VIP room.
With the site selected, they turned to Salt Lake City architect Michael Upwall, who is known for designing very large houses for the very rich. The dramatic aerie in HBO’s “Mountainhead,” with Steve Carrell, was one of his.
Laying out the house, Boccardo and Upwall, who served as co-architects, knew it would have a large living room with a wall of windows at one end and a stairway at the other. The stairway would lead, via a mezzanine, to one of the bedrooms. But that was all they could glean from the movie.
To finish the floorplans, says French, they had to answer all the questions the filmmakers never asked, such as “What’s behind that door?”and “What’s around that corner?”
And how many bedrooms, bathrooms and kitchens are there? Their answer: six, eleven and three. (Boccardo and Esplin met French when they attended a lecture she gave about Hitchcock. The two men have since hired her to write about their house.)
Boccardo and Esplin also had to answer questions the filmmakers, even the wildly imaginative Hitchcock, would never have thought to ask:
How many black leather seats, fully reclining and heated, should there be in the home theatre? (18)
How much will it cost to fire-harden the house? (Over $1 million. “You can’t make a house completely fireproof, but you can improve its chance of surviving,” Esplin says. A special pump allows the water in the extra-deep, 75-foot lap pool to be used for firefighting.)
How much should we spend on custom walnut cabinetry? (Also over $1 million.)
What if our dogs’ feet get cold? (Relax. The house’s 100-foot-long gravel dog run is heated.)
Structural engineer Cambria M. Flowers figured out how to support the living room, which cantilevers 40 feet into thin air. The answer was to build two 160-foot-long steel-reinforced concrete beams, 120 feet of which anchor the cantilever while also supporting the ceiling of the garage.
Thick diagonal beams, like those shown prominently in “North By Northwest,” were slipped in later to provide additional stability. In the end, the project required 400 tons of steel, 4,000 cubic yards of concrete and 24 miles of electrical wire, according to contractor Gary Hill.
Now the men are ready to return to the last dream house they built, against dramatic red rocks in the southern Utah town of Ivins. Boccardo hopes the buyer of the Vandamm house is a lover of “North By Northwest.”
Esplin says that he and Boccardo, who dreamt of the house for more than 60 years, occasionally wonder if they really want to sell it. But then they remind themselves that it will be okay for someone else to own it. After all, Esplin says, “Many houses are built without stories. But this house has a story. And the story of this house belongs to us.”
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