As we head to the polls this weekend, it’s been hard to escape the coverage of the 2016 Federal election. Like you, I’m tired of the seemingly endless campaign and the constant political advertising!
It’s also clear that real estate has been a hot topic in the 2016 campaign; namely housing affordability and negative gearing. Given many Australian’s have structured their wealth creation around property, its not surprising. In fact overall I think it’s a good thing that real estate is a part of the debate. It’s a crucial sector for the economy as well as an indicator for other issues/challenges.
But what about all the claims and counter claims we’ve seen from both sides? It can be difficult to decipher the different positions, but here’s a few points I’ve been thinking about.
The true impact of a change to negative gearing is unknown
Housing affordability has seen plenty of press in 2016. It’s a topic that resonates across the country: Sydney in particular is now one of the least affordable cities in the world to live. As property prices rise and real growth in wages stagnates, this trend looks set to continue.
So what will be the impact of Labor’s proposed negative gearing changes if they take office? Like my real estate colleagues, I agree that tinkering with a system that has served Australia well over a long period of time is not a great idea. It can only have a negative impact.
In terms of a percentage decrease in prices: in my view none of the existing economic models have a true handle on what will happen. I’ve seen varying figures from a 4% market correction to over 16%. It’s safe to say there will be a decrease, it’s just too early to say by how much. Many other factors contribute to real estate market pricing, so my approach would be to wait and see.
Investor confidence and the property market
Investor confidence is a key indicator in what the impact to the property market could be. In my view, there are a number of factors that could influence that, for example, look at the Brexit impact we’ve seen in the past week. Stock markets have been volatile and the banks in particular have taken a hit. Overall, there’s always a little market turbulence around election time.
In my view there has been a general market slowdown pre-election. Property prices have seen growth but the bigger issue is supply; there’s fewer properties available for sale. I’ve heard this mentioned across the market and I’ve certainly noticed it on the upper north shore.
My prediction: post election, the property market will stabilise and we’ll see more properties come on the market. If you’re thinking of selling, see my recent post on winter selling as a guide on how to maximise this period.
I think we’d all agree that this election has been dominated by negativity and fear. This has rubbed off on the real estate debate, making it somewhat of a political football. My concern as a voter is that neither party is really addressing the issues that concern most Australian’s such as, growth in the economy and the level of debt we’re accumulating. For me, I hope that whoever wins will take the bit between the teeth and make the changes necessary for Australia to continue to prosper.
My tip? While I’m not a betting man, a friend who is reckons the Coalition by a nose, so I’ll stick with that. See you all post election!