How will the Coalition Government’s policies Impact Australia’s Commercial & Residential Property Markets?
Assisted by James Duff.
With the federal election now done and dusted, we can all take a step back and breathe a sigh of relief. With this said, and with Saturday's result still fresh in our minds, Coleman Greig has published this Commercial Property blog to outline the impact that the Coalition's victory is likely to have on Australia's property and rental markets.
With Labour's defeat, the highly-publicised promise of negative gearing and Capital Gains Tax (CGT) reform will not materialise - and feedback found scattered throughout the Australian media over the past few days seems to be suggesting that such proposals will be off the political agenda for the foreseeable future.
With this in mind, it is appropriate for us to take a close look at the Coalition Government's current set of policies, and of course - what was promised to occur on their re-election.
Coalition policy and promises
Whilst the Coalition had been highly criticised for its failure to adequately address property affordability in its recent Budget announcement, it hit back at such claims with the announcement of its new First Home Loan Deposit Scheme - which has promised loan guarantees for a select number of first home buyers who are able to save 5% deposits for properties.
Impact of First Home Loan Deposit Scheme
This recently-announced scheme, pitched at Australia's first home buyers (who will undoubtedly be mulling the proposition over very carefully) is predicted to protect the value of housing throughout the property market, whilst at the same time making the dream of home ownership achievable for up to 10,000 first home buyers.
This policy is also aimed at preventing further decreases to average property prices across the country.
What is Negative Gearing?
To properly grasp the Coalition's current property-related policies, it is essential to have at least a rudimentary understanding of the concept of negative gearing.
Essentially, negative gearing occurs when the interest payments on a loan exceed the income gained through the leasing of the property. As it currently stands, the owner of an investment property can deduct this deficit from other sources of income, e.g. a salary or share dividend, resulting in the reduction of the investor's taxable income for that year.
What does it mean for the property and rental market?
It had been speculated that potential reforms to negative gearing and Capital Gains Tax may result in further cuts to Australian property prices - with such cuts likely to add to the already significant hit that the housing market has taken over the past year - particularly on Sydney and Melbourne.
On the other hand, experts had previously predicted that reforms to negative gearing and Capital Gains Tax would have had a limited impact on the rental market, with renters likely to capitalise on decreasing property prices in order to get a foot in the door of the housing market. If this does occur, it will likely result in lower demand for rental property, and a subsequent decrease in the rental stock.
Labor's housing reform policy may have also seen a decline in investors willing to purchase and rent out properties, with the reduction in CGT discount from 50% to 25%.
However, without these reforms hanging over the property market, it is likely that confidence will return for investors and would-be buyers. Whilst these things are always difficult to predict, we are more likely than not to see the bottom of the market coming sooner rather than later - an outcome that may give Australia's property market the boost that many of us working in the industry have been looking for.
The only cautionary note on all of this relates to the still present tight lending conditions that have been in place for some time, and that came about as the result of pressures being put on lenders thanks to APRA requirements and the Banking Royal Commission.
Coleman Greig urges readers to speak with their accountants and financial advisors about what the 2019 federal election outcome will mean for them in both a macro-economic, taxation and financial sense. As is always the case with elections, Saturday's results will present vastly different outcomes for all Australians - so it is important to have a good understanding of what effect the Coalition Government's policies are likely to have on you and your property holdings.
The outcome of the 2019 Federal Election has been highly anticipated by those with vested interests in the Australian property and rental markets. The policies put forward by Labor and the Coalition offered largely differing outcomes. The concern that the property market was set to experience a significant shake-up may not materialise, and we may now see a return of confidence that has been lacking for some time
If you have a query relating to any of the information in this article, or you require legal advice with regard to your own property-related matter, please don't hesitate to get in contact with Coleman Greig's Commercial Property Team today: