The Election & The Property Market

Election Day 2019 is almost here!

With the campaigns coming to a close and Australians getting ready to vote on Saturday, we have been considering how the outcome of the election might affect the property market.

Nerida Conisbee wrote the following for realestate.com.au and we found it to be a quick and a helpful overview of how the election may affect certain sectors of the market.

In Nerida’s view property is shaping up to be a key federal election issue, with negative gearing and capital gains tax concessions standout differentiators between the ALP and the Coalition.

Property is set to be a big issue at the federal election.

It would be business as usual under a Coalition government – prices would stabilise, and rental levels would stay close to what they are now.

However, under the ALP, prices would drop and rents rise. Ultimately, the best party will depend on where you are in your property journey.

Investors

The ALP’s proposal to change negative gearing would be generally bad news for “mum and dad” investors, particularly those looking for their first investment property. Although existing negatively geared properties can remain so, from 1 January, the ALP would allow only new properties to be negatively geared.

The challenge for many investors is that they rely heavily on negative gearing to make a low yielding investment attractive. Many investors are also not keen on new homes, preferring to invest in existing properties.

For investors who already own large portfolios, the ALP changes could be good news, provided they are not wanting to use negative gearing to expand their portfolios further. With rental levels rising, they could make higher returns on their investment. The challenge is if they want to sell – the pool of potential buyers for second hand properties will be smaller under the ALP.

Renters

With fewer people investing in property, the number of rental properties will drop under the ALP. Although some people will be able to move from being a renter to buyer due to a drop in prices, most will not. This means rents will increase. And, given renters tend to be younger, poorer and more likely in housing stress, even small increases can be problematic.

The other challenge for renters is that over time they will be pushed to areas where a lot of new housing is being developed. This is because the ALP policy encourages investors to buy new. Most new housing in Australia is either apartments in the inner city or new homes on the urban fringe. Finding a rental in middle ring suburbs will become more difficult.

Renters could experience challenges if investment activity dropped under negative gearing reforms.

First home buyers

First home buyers will be the main beneficiaries of an ALP government, whose proposed policy is reflective of the challenges this market was having at the time it was announced. First home buyers and investors tend to target similar sorts of properties in similar locations. A slow market also appears to make them more active, perhaps because it gives them more time to make decisions.

We have already seen how much first home buyers have benefited from investors pulling back – they are now at their most active level in more than six years. The ALP changes will continue to help them.

Upgraders and downsizers

Contrary to what is often reported, price falls aren’t particularly bad for upgraders and downsizers. Price falls mean they often achieve a lower price for their existing home, but they similarly buy at a lower price. As such, an ALP or Coalition government are pretty similar for people in this category.

Developers

One of the aims of the ALP policy changes is to stimulate development of new houses. If investors do switch from buying existing homes to buying new, then it will be good news for developers.

Build-to-rent apartment complexes provide a lot of rental housing overseas but barely exists in Australia. A proposed cut by the ALP in the managed investment trust tax rate from 30% to 15% would assist more developers, and large property companies, in developing rental housing.

There will be winners and losers from either the ALP or the Coalition policies on housing. A Coalition win will largely mean it is business as usual, but an ALP victory will lead to significant changes in our housing markets.

(Source: https://www.realestate.com.au/news/which-party-wins-the-property-election/ )

There are certainly some interesting points in the article and it gives food for thought when it comes to deciding who to vote for on Saturday.

It’s important to note that the views expressed are one organisation’s views only and that many other factors outside of the proposed legislation can affect each real estate market in positive and negative ways and all property owners and prospective owners should do their own research.

How will this Affect the Orange Market?

The Orange region has continued to enjoy expansion in industries such as health, government, education, mining and tourism and this has been reflected in steady capital growth despite decades of changing governments and policy and has generally avoided significant ups and downs.

We will be watching with interest to see the outcome of the election and will be looking forward to seeing what follows, particularly in the Orange market.

We’ll keep you updated ….

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The Election & The Property Market