It’s been 27 years since Australia had a recession, and this strong economic ground has been the foundation for widespread investment in the housing sector, valued at AUD$7 trillion by the Australian Bureau of Statistics.
But there are signs of a slowdown, with prices falling in major cities like Melbourne and Sydney, and increasing frustration from first time buyers and long time renters who feel locked out of the market.
That’s why housing affordability and investment have become a big issue on the campaign trail. The result of the election could play a big role in shaping the future of Australia’s housing sector.
What happens to housing if Labor wins the election?
Labor is the only major party to take a specific property policy to voters in the election campaign.
If elected, Labor has promised to restrict negative gearing to new housing from 1st January 2020. Properties that have negative gearing already in place before that date will be grandfathered in.
In essence, negative gearing means net losses, including interest, get offset against an investors’ total taxable income. But Labor is also flagging that it will change the tax rate to 75% rather than 50% of a property’s capital gain as it stands now.
Labor says its policy will stimulate more investment in new build properties, creating jobs while allowing more people to get on the property ladder.
But industry groups like the Housing Industry Association warn it will drive up rental prices for tenants and could even discourage investment in housing, especially established properties.
What happens to housing if the Liberals stay in government?
The Liberals haven’t taken a specific property policy to the electorate.
Instead, the party is trumping its budget surplus – called “first surplus in 12 years” by Treasurer Josh Frydenberg – as evidence of Australia’s strong economy, which will support the property sector.
The Liberals are attacking Labor’s negative gearing policy, saying they’ll leave it as it is and focus on cutting taxes, so that people have more money to live on and invest in property if they want.
Under this arrangement, the Liberals say 94% of taxpayers will pay no more than 30 cents in the dollar.
What happens after the election?
Regardless of which major party wins the upcoming federal election, Australia’s property sector remains a key area of investment for the nation.
It will have its ups and it will have its downs. And while government policy will influence these peaks and troughs, there are no guarantees.
Even if it wins, Labor faces a fight to get its negative gearing policy turned into legislation, and it may even be put into place with tweaks.
If the Liberals stay in office, they still have to deal with any downturn in the property market, and create policies to stimulate it further.
Change is certain for Australia’s housing sector – but it’s uncertain exactly what form it will be in and when it will take hold.
HouseSettled can help
If you want to discuss the future of Australia’s housing sector in more depth, the team of zero commission agents at HouseSettled have their fingers on the pulse of the election and what it could mean to property down under.
Our flat fees and online real estate expertise can cut the costs of selling your home, widening your property portfolio or getting on the property ladder.