So when the Big 4 Banks don’t pass on the full rate cut announced by the Reserve Bank, there is an instant cacophony from the Prime Minister through to every day citizens. But as Ian Narev, CEO of the Commonwealth Bank recently pleaded in his bank’s defence – there also has to be consideration given to all those other stakeholders, like deposit holders, superannuants and shareholders. What about them. The reality is that many of us fall into more than one of these categories – we are home owners, landlords, shareholders, deposit holders and have superannuation.
Despite this, it is easy to see why our overriding concern seems to be as property owners. We are constantly bombarded by the latest statistics on auction clearance rates, whether or not we are in a property bubble, the best suburbs for investment properties, the plight of first home buyers, the great Aussie dream of owning our own home, tips and traps of owning a holiday home, sensationalist property renovation TV shows, tax reform debates on negative gearing, the cost of CGT concessions for the family residence, foreign ownership of Australian property and the list is endless.
Maybe our dinner table or BBQ talk occasionally mentions Australian v international shares or property v shares or diversification or the growth of impact investing. But not enough to move the focus from interest rates and residential property. After all, we still have one of the highest rates of home ownership in the world, some of the best tax concessions for investment property, a relatively low interest rate environment and a popular culture which celebrates property.
Is it time to rebalance?
If we’re really stuck on property we can wean ourselves with alternative real estate investments like generally higher yielding commercial or industrial real estate or listed property trusts. Some might prefer owning a small part of a large portfolio of residential and other real estate rather than a property in outer Sydney which may be going well now but has lagged for 10 years. Don’t forget about bad tenants, tenant disputes and ever increasing body corporate fees as property is a depreciating asset. And of course, there is the certainty that interest rates will have to eventually go up.
If you’re outside Sydney or Melbourne, which over 60 per cent of us are, then good luck with your property values and good luck with employment, confidence and zoning laws. In the meantime, we can think about our other roles as deposit holders, shareholders and superannuants. There’s more to building wealth than just residential real estate.
Vicki Stylianou, executive general manager, public affairs, the Institute of Public Accountants
