Australia’s property market is set to remain in the spotlight in the lead up to this year’s federal election.
History has shown the market can slow in the countdown to polling day, and almost ‘pause’ in the final stages of campaigning.
Opposing property policies from the major parties and already moderating prices could also add to a slowdown.
The heat is coming off the Sydney and Melbourne markets and, as a result, we are seeing first-time buyers and those who missed out in the peak of the market back at inspections.
Conditions for these buyers improved this month when the RBA cut the cash rate to a historic low of 1.75 per cent.
Agents have reported good turnouts at open homes in recent weeks, Sydney auction clearance rates are high, and we expect sales to track as they have done since the start of autumn.
Typically, the number of homes listed for sale tightens in the lead-up to an election.
And while a portion of buyers will hold off and weigh up the possibility of a change of government, for others, moderating prices and record-low interest rates will continue to be their main motivation. There is always a smart group of counter-cyclical sellers who choose to harness this period for the benefit of their property’s marketing campaign.
The anticipated shortage of stock and number of active buyers could create strong competition, particularly at auction.
Investors are, however, likely to sit tight and assess their options.
If there is a change of government, it is possible investors will become virtually non-existent until a clear policy framework and timelines for changes to negative gearing and the capital gains tax are confirmed.
There are a number of problems with the proposed policy to restrict negative gearing to newly built properties.
The first is setting a fixed date to implement changes, rather than staggering it to reduce impacts. This will cause an unintended ‘sales shock’ in the lead-up to the new policy being introduced.
The fallout from any spike or drop-off in sales prior to implementation has the potential to affect everyone who holds property – not just investors. Those facing a potential loss in value will be retirees, first home buyers and owner-occupiers.
The election will also increase debate about housing affordability, which is a positive and much needed.
In the 2007 election, the median house price in Sydney was $500,000, and now it is $890,000. Meanwhile, Melbourne’s median house price has jumped from $371,000 to $600,004.
To examine the issue properly, we need to look at stamp duty, fees and regulations. We need to examine construction costs and the restriction of the supply of land, both of which make buying a home expensive and beyond the reach of many Australians.
The property market is all about confidence, and if buyers and investors are not confident about what the future holds, they will retreat. And with property now on the nation’s agenda, home owners and investors will keenly watch for the election outcome.