US President Donald Trump and First Lady Melania Trump. Photo: Mandel Ngan/AFP.
HE doesn’t even live here and has no property developments here, but Donald Trump has been named one of the top 10 movers and shakers in the Australian housing market.
The US president comes in at number 6 on a list put together by independent property researcher SQM Research, identifying the top individuals they believe have moved housing prices in 2018 — and may move them again in 2019 — with just the stroke of a pen or a spoken word.
One thing they have in common is that they are all trying to make their mark, or make money, from one of the most talked about assets — property.
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TOP 10 MOVERS AND SHAKERS IN AUSTRALIAN PROPERTY IN 2018
1. Philip Lowe, Reserve Bank of Australia Governor
RBA governor Philip Lowe speaking at an ASIC forum.
Dr Philip Lowe takes the top spot because he is the most significant individual setting interest rates, according to SQM Research head Louis Christopher.
“No other economic variable has more impact on the level of property demand than interest
rates, and Dr Lowe chairs the RBA board meetings that set the crucial cash rate at
their monthly meetings,” Mr Christopher said.
“He’s well connected with those in government and financial markets, and since he is head of the central bank, everyone listens to what he has to say.
“It’s fair to argue that he has more power over the property market than anyone else in Australia, and his power comes without any of the rhetoric that comes with the
politicians who feature further down our list.”
Mr Christopher said he believed Dr Lowe had also influenced APRA’s clamp down on investor lending.
Looking ahead, Mr Christopher expects Dr Lowe to have a significant influence over home prices in 2019.
“Will he cut rates to stop a potential housing crash?” he said.
“Will he lean on APRA to loosen lending once again?
“Would he introduce quantitative easing in a worse-case scenario?
“Will he warn the Prime Minister of impending recession?
“Or will he do nothing and let market forces take their course?“Overall, there are multiple scenarios that could play out next year and Dr Philip Lowe will be very much a main conductor to the events that will unfold.”
2. Wayne Byres, APRA Chairman
APRA chairman Wayne Byres speaking at Finsia event. Photographer: Adam Yip.
Wayne Byres was appointed chairman of the Australian Prudential Regulation Authority (APRA) in 2014 for a five-year term.
He has overseen the setting of tighter controls on bank lending to residential property investors.
By raising lending standards on investment loans, Mr Christopher believes APRA has had a big impact on investor demand for property.
“Its power as a regulator gives it huge influence on the demand for property loans and as a result, on the demand for property,” he said.
“The trigger to this current downturn can be placed back to the point in March 2017 when APRA announced that there was going to be a major crack down on interest only lending.
“At the time, interest only lending represented 40 per cent of all new loans written.
“Wayne wanted the number to come down to 30 per cent.
“That effectively created an ‘embargo’ on most investment lending, which subsequently smashed housing demand.”
Mr Christopher said Mr Byres might have a quiet year in 2019 because APRA had recently stated it believed its actions had improved lending standards in the banking sector.
3. Matt Comyn, Commonwealth Bank Australia CEO
Commonwealth Bank CEO Matt Comyn speaking during a hearing of the House Economics Committee at Parliament House in Canberra. Image: AAP/Lukas Coch.
The big banks’ influence on mortgage lending, and therefore property demand, has
increased significantly since they started to raise interest rates independently of the
central bank, according to Mr Christopher.
“The RBA controls the cash rate, which sets a floor under the whole interest rate structure of the Australian economy,” he said.
“The cash rate used to be the sole factor that could influence rates, but the big bank heads have now taken that power to themselves by raising rates even when the cash rate has not moved.”
Mr Christopher said Matt Comyn led the list of influential bank CEOs because the Commonwealth Bank was the nation’s biggest residential mortgage lender.
“Overall, we see there is still risk of further credit restrictions adopted by the banks in 2019, such as the additional cross check on loan applicants stated expenses.”
4. Brian Hartzer, Westpac Bank CEO
Westpac CEO Brian Hartzer speaking during a hearing of the House Economics Committee at Parliament House in Canberra. Image: AAP/Lukas Coch.
Westpac is Australia’s second largest residential mortgage lender behind the CBA
and it too has been raising interest rates outside of the RBA’s moves.
“Not only have the decisions by the big bank CEOs to raise home mortgage rates impacted
their own customers, but they have also set an example for many smaller lenders,
which have also raised their own rates independently of RBA moves,” Mr Christopher said.
“Westpac, in September, gave some of its riskier property investor customers less than a month to find another lender amid growing concerns about loan defaults.
“The bank reportedly sent letters to property investors warning it can ‘no longer support our commercial relationship with you’.”
If you curb demand for property from investors, then you are taking away a significant support for house prices, Mr Christopher said.
5. Scott Morrison, Australian Prime Minister
Prime Minister Scott Morrison. Picture: Kym Smith.
Prime Minister Scott Morrison has power over many economic variables, including
government spending, immigration and the taxation laws that allow negative gearing.
Mr Christopher said all of those factors affected property prices one way or another.
“Morrison also has the final say over government spending,” he said.
“This can influence property prices directly, through infrastructure projects such as airports, and indirectly through expansionary government policies that can boost employment, putting money into people’s pockets to buy homes.”
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Mr Christopher admitted Mr Morrison had had little time as prime minister to influence the housing market, but said his role in capacity as federal treasurer early this year and last year did have an influence.
“Last year, Morrison signed off on cutting some of the negative gearing benefits such as travel cost deductions and plant and equipment depreciation,” he said.
“Arguably this was a double whammy for the investor market as it was also dealing with new lending restrictions.”
6. Donald Trump, US President
US President Donald Trump points to the media as he speaks during a campaign rally in Charlotte, North Carolina. Photo: AP/Chuck Burton.
As arguably the most powerful man in the world, Donald Trump is on the list for good
reason, according to Mr Christopher.
“He is responsible for the US Government’s economic policies and therefore has
a big influence on the growth of the global economy and the level of global market
interest rates,” he said.
“Trump’s big spending and revenue economic policies in the world’s largest economy, such as the massive company tax cuts introduced at the beginning of 2018, have put upward pressure on US Bond yields and therefore interest rates globally.
“This, in turn, has forced some of Australia’s big banks to raise mortgage lending rates outside of the RBA because their funding costs have increased.”
In September, all major banks except for NAB lifted mortgage rates by 15 to 18 basis points, citing overseas lending cost increases.
Mr Christopher said he believed the direction of the US economy also set global economic sentiment.
“Any US economic growth boom boosts global growth because the US is simply so large,” he said.
“This influences demand for Australian exports, which can directly influence the fortunes of some of our cities, such as Perth, Darwin and Hobart, in particular.”
There is also an inflationary impact, according to Mr Christopher.
“Higher inflation can pressure interest rates higher and therefore reduce demand for property,” he said.
“We see this as the key risk in 2019 — the banks being forced again to lift interest rates based on higher international lending costs and the RBA staying put despite the probable rise in inflationary pressures, which would most certainly happen if our currency were to fall.”
7. Gladys Berejiklian, Premier of NSW
Gladys Berejiklian speaks on stage during the Invictus Games opening ceremony in Sydney. Image: AAP/Brendon Thorne.
Gladys Berejiklian has the power to set the rate of stamp duty, to apply
exemptions or concessions and to control the release of land which affects property supply and demand.
“While the threat of a new smoke stack from an underground road may kill demand for property in a certain area, the promise of better roads or public transport can give it new life,” Mr Christopher said.
“Just consider the light rail project in Sydney’s CBD and eastern suburbs.
“While construction of the rail line has been delayed by a year — greatly inconveniencing millions of people — eventually that transport connection will boost demand for homes located near it.
“Property owners just need to be patient to realise those gains and hope that in the meantime they won’t get caught in one of the traffic jams that are now a feature of life in the eastern suburbs near the route.”
Last financial year, NSW reportedly netted more than $7.3 billion in stamp duty.
Mr Christopher said that while stamp duty was a big revenue winner for the state, it was also a big killer of property demand in Sydney.
“With the downturn, it is very likely stamp duty revenues for FY19 could be cut by up to one-third, potentially putting the state budget heavily back into deficit,” he said.
“This will no doubt be felt on Macquarie Street, and with an election looming, could Gladys attempt to stimulate the market next year?”
8. Daniel Andrews, Premier of Victoria
Victorian Premier Daniel Andrews addresses the media at the Wangaratta Hospital in North East Victoria. Image: AAP/James Ross.
Daniel Andrews has a major influence on the release of land for housing and urban planning and development.
Mr Christopher said the release of more land for housing would boost supply and therefore help to reduce Victorian property prices.
He also believes tax policy has had a big impact in Victoria.
“In 2017, Andrews introduced a stamp duty exemption for first-home buyers who purchase properties valued up to $600,000, plus stamp duty concessions for homes worth up to $150,000 more,” Mr Christopher said.
“This move has given a big boost to first-home buyer demand and supported the value of properties in Melbourne through to the end of 2017.”
Figures from Victoria’s State Revenue Office have been interpreted as showing that the exemption helped underpin 17,090 home purchases between July 1, 2017, and February 28, 2018.
In the same period a year earlier, there were just 9834 first-home buyers.
Mr Christopher said the Andrews government had also clamped down on foreign buyers by lifting a stamp duty surcharge on foreign buyers to 7 per cent from 3 per cent in 2016 and introducing a tax on vacant homes last year.
9. Bill Shorten, Federal Opposition Leader
Federal Opposition Leader Bill Shorten speaks to the media during a news conference. Image: AAP/Paul Braven.
Negative gearing is proving to be one of one of the key election issues for 2019.
If Bill Shorten wins the election next year, his threat to disallow negative gearing and reduce capital gains tax concessions has property investors worried.
Mr Christopher said any change to the negative gearing rules would significantly cut demand for investment properties and, therefore, dent property prices.
“One of the reasons property prices are so high in Australia is because investors underpin about one-third of all residential property purchases,” he said.
“Reduce that demand and Shorten would chip away at the floor under property prices.
“Indeed, it is possible that as the downturn has deteriorated in late 2018, investors may well be eyeing the ramifications of the next election now.”
10. Mark Steinert, Stockland CEO
Stockland managing director Mark Steinert. Photo: Hollie Adams/The Australian.
Stockland is one of the country’s largest residential developers with a long track record of creating some of the best masterplanned communities across the nation.
The company has a combined development pipeline of more than 82,000 residential lots and 3000 retirement units in key growth corridors.
Steinert has real connections inside governments at all levels, both federal and state, and strong views on housing and taxation policy, according to Mr Christopher.
“Last year, Steinert argued for curbs to negative gearing, in de facto support of Labor’s policy to curb concessions,” he said.
“Abolishing negative gearing on established homes could be a boon for developers of new properties, which would put Mark and his company in a box seat.
“So as the election gets closer to the day, we expect Mark to be advocating with force.”