Veteran Diggers fall victim to national housing scheme spruiker

Veteran Diggers that served in Iraq and Afghanistan have fallen victim to the lure of promised returns from National Rental Affordability Scheme (NRAS) residential housing projects promoted by a spruiker working on commissions with the National Australia Bank and property developers.

As many as two hundred Aussie veterans lost up to $160,000 each on NRAS property developments in Darwin promoted by ex-Royal Australian Navy diver, Mr. Hugh Ochremienko from the Gold Coast.

In a statement to the Herald Sun, the ex-navy diver said, “a citywide decline in prices and general delay in receiving government subsidies were offset by tax benefits built into the deals.”

Some Middle East war veterans including Officers and Special Air Service (SAS) personnel are deep in debt and reached into their superannuation funds to enter the deals.

Image: Mr. Ochremienko property investment planner at centre of Diggers fury Photo: David Clark – Herald Sun

Although the actions of Mr. Ochremienko are not illegal, he used his trust as an ex-serviceman to win the fellow soldiers business. “He claimed to be able to make their pay slips work for them, that he knew the system well so he could help them create wealth,” federal MP Andrew Hastie stated to the Herald Sun reporter.

Townsville soldiers were also targeted by the property development salesmen. He took them out for meals near Lavarack Barracks promoting cheap properties that were being subsidised by the federal government mainly in the outer suburbs of Darwin.

As the property market softened and the demand from tenants dropped, properties were left vacant in Darwin. A similar scenario occurred in Townsville with its record vacancy rates. In this horrific case of ‘buyers beware’, the soldiers had to wait up to 2 years for the government tax incentives to go through.

The NRAS investors struggled to sell and clear their mortgages because the property prices in the market had dropped and the balance of equity or loan to value would not cover their debts.

Mr. Ochremienko denied any responsibility and questioned whether the veterans had lost any money at all. “But have they really? I’m say no.” he said. The development middleman has not been licensed to offer financial advice since 2008 and said he helps investors with financial planning and his advice is general in nature.

Veteran investors appeal to come forward

Mr. John Rolfe, the reporter from the Herald Sun who broke the story asked if anyone knows more or has been affected to come forward.

TREN has broken similar stories in Townsville about the impact of NRAS and property spruikers luring unsuspecting investors into property developments that have damaged their financial history and even caused some people to file for bankruptcy.

We encourage people to come forward with any information. Do you have a story? Submit story.

Further reading:

Treasurer sparks free market concerns over Domain Central $6 million revamp

Turnbull federal budget could wipe out Townsville property owners

Bank fees in billions for home owners

Townsville sold out by PM Turnbull Smart City Deal

Guide to selling a luxury home

Guide to 22 knockout marketing tips to sell a home

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Taxing empty homes: a step towards affordable housing, but much more can be done

Vacant housing rates are rising in our major cities. Across Australia on census night, 11.2% of housing was recorded as unoccupied – a total of 1,089,165 dwellings. With housing affordability stress also intensifying, the moment for a push on empty property taxes looks to have arrived.

The 2016 Census showed empty property numbers up by 19% in Melbourne and 15% in Sydney over the past five years alone. Considering that thousands of people sleep rough – almost 7,000 on census night in 2011, more than 400 per night in Sydney in 2017 – and that hundreds of thousands face overcrowded homes or unaffordable rents, these seem like cruel and immoral revelations.

Public awareness of unused homes has been growing in Australia and globally. In London, Vancouver and elsewhere – just as in Sydney and Melbourne – the night-time spectacle of dark spaces in newly built “luxury towers” has triggered outrage.

This has struck a chord with the public not only because of its connotations of obscene wealth inequality and waste, but also because of the contended link to foreign ownership.

Early movers on vacancy tax

Against this backdrop, the Victorian state government has felt sufficiently emboldened to legislate an empty homes tax. Federally, the shadow treasurer, Chris Bowen, recently backed a standard vacant dwelling tax across all the nation’s major cities.

Similar measures have come into force in Vancouver and Paris. And Ontario’s provincial government recently granted Toronto new powers to tax empty properties.

Emulating Vancouver, Victoria’s tax is a 1% capital value charge on homes vacant for at least six months in a year. Curiously, though, it applies only in Melbourne’s inner and middle suburbs. And there are exceptions – if the property is a grossly under-used second home you pay only if you’re a foreigner.

Also, as in Vancouver, tax liability relies on self-reporting, which is seemingly a loophole. This might be less problematic if all owners were required to confirm their properties were occupied for at least six months of the past year. But that would be administratively cumbersome.

This highlights a broader “practicability challenge” for empty property taxes. For example, how do you define acceptable reasons for a property being empty?

In principle, such a tax should probably be limited to habitable dwellings. So, if you own a speculative vacancy, what do you do? Remove the kitchen sink to declare it unliveable?

How can we be sure a home is empty?

Lack of reliable data on empty homes is a major problem in Australia. Census figures are useful mainly because they indicate trends over time, but they substantially overstate the true number of long-term vacant habitable properties because they include temporarily empty dwellings (including second homes).

Using Victorian water records, Prosper Australia estimates about half of Melbourne’s census-recorded vacant properties are long-term “speculative vacancies”. That’s 82,000 homes.

Applying a similar “conversion factor” to Sydney’s census numbers would indicate around 68,000 speculative vacancies. Australia-wide, the Prosper Australia findings imply around 300,000 speculative vacancies – 3% of all housing. That’s equivalent to two years’ house building at current rates.

According to University of Queensland real estate economics expert Cameron Murray, a national tax that entirely eliminated this glut might moderate the price of housing by 1-2%. Therefore, although worthwhile, dealing with this element of our inefficient use of land and property would provide only a small easing of Australia’s broader affordability problem.

Making better use of a scarce resource

Taxing long-term empty properties is consistent with making more efficient use of our housing stock – a scarce resource. A big-picture implication is that tackling Australia’s housing stress shouldn’t be seen as purely about boosting new housing supply – as commonly portrayed by governments.

It should also be about making more efficient and equitable use of existing housing and housing-designated land.

Penalising empty dwellings is fine if it can be practicably achieved. That’s especially if the revenue is used to enhance the trivial amount of public funding going into building affordable rental housing in most of our states and territories.

But empty homes represent just a small element of our increasingly inefficient and wasteful use of housing and the increasingly unequal distribution of our national wealth.

One aspect of this is the under-utilisation of occupied housing. Australian Bureau of Statistics survey data show that, across Australia, more than a million homes (mainly owner-occupied) have three or more spare bedrooms. A comparison of the latest statistics (for 2013-14) with those for 2007-08 suggests this body of “grossly under-utilised” properties grew by more than 250,000 in the last six years.

Our tax system does nothing to discourage this increasingly wasteful use of housing. It’s arguably encouraged by the “tax on mobility” constituted by stamp duty and the exemption of the family home from the pension assets test.

A parallel issue is the speculative land banks owned by developers. The volume of development approvals far exceeds the amount of actual building. In the past year in Sydney, for example, 56,000 development approvals were granted – but only 38,000 homes were built.

In many cases, getting an approval is just part of land speculation. The owner then hoards the site until “market conditions are right” for on-selling as approved for development at a fat profit.

Properly addressing these issues calls for something much more ambitious than an empty property tax. The federal government should be encouraging all states and territories to follow the ACT’s lead by phasing in a broad-based land tax to replace stamp duty.

Such a tax will provide a stronger financial incentive to make effective use of land and property. The Grattan Institute estimates this switch would also “add up to A$9 billion annually to gross domestic product”. How much longer can we afford to ignore this obvious policy innovation?

Author: Hal Pawson, Associate Director - City Futures - Urban Policy and Strategy, City Futures Centre, Housing Policy and Practice, UNSW from

Further reading:

Smart city Townsville, creative city...whose city is it?

Real truth about negative gearing changes in Morisson federal budget 

Botched media coverage of Turnbull spin? Negative gearing in Federal Budget

First home buyers grant "pitted" by the Queensland Treasurer

Townsville sold out by PM Turnbull Smart City Deal

Guide to selling a luxury home

Free Subscription Offer

You’re fired! The best summer. Bugger – Go Digital. Join TREN. It’s Free. Explore more..

Click on image above to Join TREN

How to stay up-to-date

Do you have an opinion about the taxation of unoccupied housing?

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Disclaimer

Real truth about negative gearing changes in the Morrison federal budget

The federal budget captured the concerns about housing affordability, particularly in the capital city markets, so it was inevitable that the volume of measures that were announced would substantially impact the housing sector.

Essentially, the policy announced can be divided into supply and demand perspectives so Townsville investors and owner occupiers can appreciate the depth and breadth of changes affecting their respective situations.

With respect the negative gearing, which the government and some media outlets had claimed were untouched in the federal budget, will have "a major impact on investors", Mr. Beer, CEO BMT Tax Depreciation said in his media release.

Mr. Beer reported; "This change will have a major impact on investors, essentially reducing the annual deductions they can claim therefore reducing their cash return each year. This could lead to investors being in a tighter financial position and may discourage future investors from purchasing a second-hand residential property."

Also, read here further analysis of the federal budget;

Turnbull federal budget could wipe out Townsville property owners
Botched media coverage or Turnbull spin?; negative gearing in federal budget
Townsville government organisations structures damaging to funding pipeline

A summary of the changes include from a demand perspective;

• First home super saver scheme allowing First Home buyers to salary sacrifice their income directly into their superannuation account limited to $15,000 per annum capped at a maximum of $30,000

• Capital gains tax concessions have remained untouched

• Banking industry changes including; change to the Australian Prudential Regulatory Authority (APRA) aimed at minimising investors seeking funds outside the banking sector and in demographic areas of higher risk such as declining regional markets where Loan to Value Ratio (LVRs) are unfavourable

• The big four major banks plus Macquarie will be levied 0.6 percent on bank funding with likely increase in interest rates passed on to borrowers to recoup costs      

Supply perspective:

• Seniors over 65 years of age can now sell their principal place of residence they have lived in for a minimum of 10 years and make non-concessional contributions up to $300,000 into their superannuation account outside the existing caps. 

• The Affordable Housing Agreement with States will be amended to promote better local town planning and to ensure housing targets are achieved from the unchanged funding of $1.3 billion per annum.

• A Commonwealth Land Registry will be created to identify government owned land for residential development. 127 hectares has been released in Victoria for 6000 new dwellings

• Infrastructure spending of $70 billion ($50b more than the last budget) between now and 2021. This is an extensive plan but negligible spend is planned for the Townsville or North Queensland region. Queensland's Bruce Highway repairs amount to $844 million mainly in the Southeast corner.

• Implementation of the Smart "City Deal" aimed to provide better coordination between governments to improve town planning and land management for maximum affordable housing development, currently operating in Townsville, Western Sydney and Launceston

• A new National Housing Finance and Investment Corporation is being set up to provide low-interest long-term funding to community housing, using bond markets instead of the more expensive bank markets aimed at community housing providers such as local and state governments

• Investors will not be able to claim travel associated expenses, likely to impact regional investors the most.

• Claiming depreciation of plant and equipment such as dishwashers, hot water systems, etc.;  Investors can claim deductions only on plant and equipment they purchase directly, rather than plant and equipment purchased by the previous owner. This could impact investment activity in second-hand stock, slowing investment demand but possibly directing investors to upgrade to new stock prompting more unfavourable supply in the market.

• A new $5,000 levy on foreign owner properties left vacant at least 6 months over 12 month period

• Foreign owners and temporary residents are exempt from capital gains concessions

• Developers can no longer sell more than 50% of project stock to foreign investors

Property owners that have purchased assets before the 9th May 2017 will be able to claim depreciation as per normal.

The property owners and investors of Townsville North Queensland have been left with more questions than answers from this federal budget.

With this fresh analysis undertaken by TREN, the property owners and stakeholders of Townsville North Queensland can forge a conclusive understanding of the impact of the federal budget on local real estate investors and owner-occupiers. 

Do you have an opinion about the federal budget or negative gearing? The TREN community wants to hear your story.

Become a subscriber to TREN eMagazine and be the first to receive local breaking stories, analysis and opinions on the Townsville real estate market. It's free to join now.

Botched media coverage or Turnbull spin?; negative gearing in federal budget

Image 1: Sydney Morning Herald website 

Now that the fine print of the Turnbull-Morrison federal budget has been digested, the real extent of the damage likely to impact property investors can be brought to light for full consideration.

Even though the Turnbull government must negotiate the Federal Budget Bill through the Senate, the nominal federal budget measures announced on the 9th May addressing housing affordability also captures negative gearing to produce cost savings in the budget,  and likely, the beginning of massive reform of the taxation system.

The Australian Institute of Company Directors (AICD) said; "negative gearing has lead to ineffective tax outcomes and, in part, distortions in the housing market. The AICD also went on to claim that negative gearing encourages investment in relatively unproductive assets, such as existing residential property. Negative gearing should be reformed so that it applies only to productive assets", (Business Insider, 4th April 2017)

These measures will hit property investors in ways that will be more detrimental than the anticipated losses of the main housing affordability packages announced, as reported by TREN in Turnbull Federal Budget could wipe out Townsville property owner.

In addition to the aim of government cost savings, this budget was a typical Turnbull-Morrison smoke and mirrors announcement, just like the federal funding announced for the North Queensland stadium, Townsville sold out by Turnbull smart city deal.

Instead of coming clean on the reality of the productivity savings for business and government through an innovation program in the detail of the smart "city deal" in Townsville, its purposeful dual announcement focused on the alluring message of more federal money for infrastructure.

As predictable as ever, the mainstream media headlining the Turnbulll message that "negative gearing is untouched" leading up to the budget, was reported as "fake news".

The Sydney Morning Herald was embarrassed and discredited and have since completely removed the article from their website, as shown in Image 1 above.

The Turnbull brand of politics and his business-like ethics to win at all costs brings into perspective the Morrison federal budget that its principal aim is to capture an overwhelming number of voters susceptible to "click bait" marketing, deceiving the public.

Directing the social media spin towards the naive "bleeding hearts", green and traditional left-wing labor constituency are child's play in the contemporary technology age.

After all, Turnbull is ambitious and conscious of colonial history. He admires the greatness of that era and is hungry to be remembered by the people and historians as a great Prime Minister, etching his place on the monuments of Westminster square along with Winston Churchill, Gandi and Abraham Lincoln. While Morrison wants the prime ministership handed down to him in traditional succession.

Holding onto power is what this budget says more about Turnbull's legacy than the dreams and hard work of risk-taking investors and small business owners, who have been the backbone of Australia's economy for multiple decades like the venture pioneers before them.

On one hand the AICD encourages the abolishment of negative gearing all together because it allegedly supports unproductive housing assets, yet on the other hand, it demands lower company taxes, higher GST and personal tax. Nearly 80% of businesses fail in their first 3 years of start up rendering a substantial burden on the economy, taxation revenues and insurance premiums.

Either the Turnbull-Morrison government leaked and mislead the media leading up to the budget announcement on May 9th, or the blatant inaccuracies in the mainstream news reporting has shone a bright light on the "fake news" phenomenon of the post-Howard and Bush era of distrust and now the launch of the digital revolution.

TREN has compiled examples of the mainstream media who reported that negative gearing has not been touched in this budget. This news content is consumed, believed and in many cases decisions made by ordinary Australians based on the twisted reality of profit-oriented media conglomerates, or left-wing social science campaigners such as Crikey, Get Up and the New Daily to name a few.

No doubt Turnbull is knowledgeable of the fact the majority of people are watching the mainstream media, especially engaged investors, home buyers, and renters. The massive increase in the number of people that get their news from social media has become a cultural characteristic of modern times where the "quick bite" headline is all that matters.

To start with, the article by the Sydney Morning Herald (SMH) that reported "Negative gearing to remain untouched", prompted an embarrassing retraction in light of the real truth about negative gearing in this budget.

"Sorry this page could not be found (404 error) displayed in Image 1 above is what is displayed for its readers on their website. However, this article in Image 2 shows the subliminal caption of the negative gearing untouched message. 

Image 2: Sydney Morning Herald website

Perhaps one mainstream media outlet getting it wrong is forgivable, and maybe two, but to see multiple mainstream media outlets reporting that negative gearing has not been effected in this federal budget rings alarms bells.

How could the media get this reporting so wrong?

The integrity and credibility of journalism and editorial oversight in Australia and across the world is manipulated both by governments and media outlets pushing a social agenda. Unfortunately, the mainstream media has botched the reporting of this federal budget.

Or does it provide answers more so about the Turnbull brand and how politics and Australian interests have become a social sideshow across the world, congruent with the material influence of United States politics?

From these examples, the reader can draw their own conclusions about it being about a simple consumer choice, or whether it is a broader conclusion about the health and wellbeing of Australia's liberal democracy, a democracy built on courage, freedom, mateship and hardwork.

Some liberal commentators argue that courage, freedom, mateship and hard work is not just under threat but these values have been eroded and denigrated to the point that the very institutions that have helped our democracy function during peace time, promoting opportunities and keeping the people safe and secure have lost their integrity and real meaning. 

The federal government, few educated professionals, and some of the national mainstream media institutions have got it wrong this time.

Below are examples of the misreporting or "fake news".

Image 3: ABC News website

Image 4: The Daily Telegraph website

Image 5: News Ltd website

Image 6: The Guardian website

Image 7: The New Daily website

Considering the fact these headlines and wrap ups occurred prior to the actual budget announcement, and knowing that politicians seek to control the public message to maintain momentum in the delivery of key policies and election cycles, the likelihood is that the Turnbull government and their "spin doctors" set up the media.

The following media outlets even reported negative gearing would be untouched on the day of the budget or after the budget papers were released to the media, which suggests poor journalism or a blatant use of "fake news" to push a social agenda.

Image 8: Crikey website

The property owners and investors of Townsville North Queensland have been left with more questions than answers from this federal budget.

With this fresh analysis undertaken by TREN, the property owners and stakeholders of Townsville North Queensland can forge a conclusive understanding of the impact of the federal budget on local real estate investors and owner-occupiers. 

Do you have an opinion about the federal budget or negative gearing? The TREN community wants to hear your story.

Become a subscriber to TREN and eMagazine and be the first to receive local breaking stories, analysis and opinions on the Townsville real estate market. Its free to join now.