The potential impact of the election on the property market

The election is happening this weekend and, as usual, it’s tricky to predict what the outcome will be. However, if you have property on your mind, the results of Australia’s trip to the polls could seriously affect you.

One thing I have noticed is the lack of talk about negative gearing for investors; it seems neither of the major parties wants to make changes to this policy.

However, there are other potential shifts on the horizon. Take a look at what the election results may bring for Australians.

LNP promises

The Coalition has a swag of incentives on the table for homeowners and home buyers across the age spectrum.

The initial list of promises aimed to attract the votes of lower income earners, with low deposit guarantees in regional areas and for first home buyers/single parents proposed as a way of overcoming the housing affordability issue.

An eleventh-hour call by the Liberal party has everyone talking. Scott Morrison announced first home buyers will be allowed to invest 40 per cent of their superannuation (up to $50,000) to buy a house. This move is tipped to lift house prices because it will see buyers able to immediately up their spending limits. Critics have called it ‘gambling’ to allow people to tap into their super this way, but the Prime Minister responded by saying he doesn’t think it’s a gamble to buy your own home.

If you’re at the other end of the spectrum and looking to downsize, the proposed scheme which will interest you is set to allow people over the age of 55 to contribute up to $1.6 million into superannuation. Only primary residences qualify for this but it is a huge jump from the previous policy, which was restricted to people over the age of 65 and capped the superannuation contribution amount to $300,000.

I can see why this carrot might make the difference between deciding to sell the family home asap and holding onto it for a few more months until the policy kicks in.

ALP Promises

Labor’s focus is also on lower income earners, with the party’s ‘Help to Buy’ program offering to take a 40% equity stake in the purchase price for up to 10,000 eligible buyers.

Price caps and income thresholds will apply but Labor is hoping the policy will “help Australians buy a home with a smaller deposit, a smaller mortgage and smaller mortgage repayments.”

Interest rates, the economy and stamp duty

This is something I’ll be talking more about soon, but economic conditions will influence house prices in addition to election results.

Inflation has put pressure on the Reserve Bank of Australia to raise interest rates and it did so in May, with further increases expected between now and Christmas.

Unless something unexpected happens after the election (and let’s face it, after the last two years we would be foolish to rule anything out), we can expect to see rising interest rates putting an end to the stratospheric rise in house prices.

In terms of stamp duty, this is controlled by the states so there won’t be any change after this election. However, the outcome could potentially influence a change of leadership in Queensland in 2024.

House prices after the election

It’s possible the Coalition’s downsizer incentive will see more family homes coming onto the market, while putting pressure on the cost of the townhouses and quality apartments retirees tend to seek out.

The super schemes will also be interesting; they may result in prices continuing to climb because buyers have access to larger deposits.

One more area to watch

This is something else on the horizon which will be worth keeping an eye on; it’s not necessarily election related but right now the ATO is busy issuing notices to building companies which have fallen behind with tax debt.

As reported in late April, around a third of the 50,000 or so of the Director Penalty Notices issued to company owners went to construction businesses. If we see these businesses going under there will be further squeezes on the construction industry, which will push up the demand for existing homes.

Whatever happens, it’s worth remembering many Brisbane suburbs experienced phenomenal growth in 2021. New Farm is a prime example, seeing more than 18% growth in 2021. Even a slight slowdown caused by interest rate rises won’t strip away this incredible increase in value.

No matter what’s going on with politics or the economy, when it’s time to sell it’s time to sell. For my team and I, it comes down to strategy and knowing how the market is performing right now, rather than attempting to pinpoint the moment when things will change.

I hope you enjoy the read.

Matt Lancashire