Limitations To How CGRPT's Can Be Used
Owner occupier priority. Renting conditions? A CGRPT renter can make a bid to buy after two years tenancy which will be automatically approved. Exceptions being some institutions such as governments, student accommodation for Tertiary Institutions.
Buy ups by predatory “portfolio investor” groups such as the US’s Jared Kushner who it is said owns 10,000 units. The owner occupier rule and the renter 2 year buy option would temper such buyouts but the would still be scope for other opportunism.
The CGRPT property owner must accept that there property can only ever yield equal purchasing power over time to that at the time of their purchase. These owners, however, are better able to accrue savings with money not lost to higher mortgage interest costs as their incomes increase over time.
It is vital to understand that the participation in the CGRPT programme would be entirely a user choice option.
Why Can This Not Be Achieved With A Torrens Title
The essential function of producing a title with a covenant to limit property sale value with a link to a limiting parameter may be possible but it would be difficult in this way to achieve all of the functions of the CGRPT title.
The CGRPT title itemises various aspects of the title (land, buildings, shared features, improvements, etc) tracking the timing of additions and external changes all with relation to the local Consumer Price Index. Title maintenance will require a different management approach to Torrens Titles, and therefore would work best as a separate entity.
Various titles carry a public identity and set of expectations and titles modified heavily to achieve the Capital Growth Restraint feature of the CGRPT would create confusion
in the market.
What About The Loss Of Borrowing Power Against Assets
CGRPT’s are not for everyone. The entry level income to be in the top 10% of income earners in Australia is around $102,000. That means that 90% of income earners live on less than this amount.
A person on $100,000 with monthly living expenses of $800 per month and paying for a car(s) at $600 per month would be able to borrow as at March 2018 $452,000 for a house mortgage. The Australian mean house price is $1,200,000 and the mean unit price is $681,000. From http://www.abs.gov.au/ausstats/abs@.nsf/mf/6416.0
It is clear that there are people even on very low incomes who own rental property and utilise negative gearing, it is certain that these people are those who owned property from the time before 1995 when property values broke away from correlation with the CPI.
However, the income level for which CGRPT’s will be effective are those on or below the middle income at around $55,000 with monthly expenses of $600 per month and a car at $400 per month. This single person income can raise a mortgage value of $266,000. So the notion of borrowing against asset value very much hinges around the ability to service any extended debt. In the middle income and lower, spare discretionary income is very limited as most income above rental or housing costs is consumed by food and basic costs with communication costs for the younger generation taking a disproportionate chunk of that.
The person who posed the question had an income of $300,000 and was concerned about the funding of private school fees. This is not the category of person who would use CGRPT’s