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Property News

High transaction costs could see residential property focus on rentals

December 21, 2011

The Housing Industry Association (HIA) has released its seasonal report into the state of local residential property markets, saying that lower rates of construction have once again proved to be a prominent feature.

According to the peak industry body, housing investments fell by a total of 4.9 per cent in the 2010-11 financial year - perhaps indicating an air of uncertainty in the construction industry.

Speaking on further projected declines in new housing developments over 2012, HIA's chief economist Harley Dale suggested that certain "inefficient and inequitable" elements of the market were driving homeowners and investors to focus on improving their existing investments rather than purchasing new ones.

"The high transaction costs involved in moving home, the largest of which is a highly inefficient tax in the form of stamp duty, creates an inherent bias towards households considering renovation work over new home building," said Dale.

While the HIA has estimated approximately 141,000 new homes will be constructed in the new year, this could be a signal to investors to further investigate the prospects afforded by older, established dwellings.

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