The recent Morrison government win could mean many things for property investors in Sydney’s Eastern Suburbs. We explore how it’s likely to impact on the market.
On 18 May 2019, the Morrison government had a surprising win in the federal election. But what does a Liberal win mean for real estate investing, especially in Sydney’s Eastern Suburbs?
Negative Gearing Here To Stay
One of the most striking differences between the Liberal and Labor Party platforms through the 2019 election campaign was their approach to negative gearing. Under Bill Shorten, Labor pledged to make housing more affordable by denying investors the chance to apply negative gearing to any property purchased after 1 January 2020. Properties purchased before that date were to be exempt. The rationale for this was that it would discourage people from buying property as an investment and create a more level playing field for first home buyers.
On the other hand, the Liberal Party supported the status quo, arguing that Labor’s policy would see a reduction in home prices, at a time when the property market had also slowed.
Many investors negatively gear bluechip properties, such as those in the Eastern Suburbs. So the chance to continue to use this tax-minimisation strategy is likely to be welcome news.
The Continuation Of The Capital Gains Tax (CGT) Discount
Another Labor policy aimed at tackling property prices was their promise to halve the CGT discount. Any property investor who owns an asset for more than 12 months can currently discount the capital gain on their sale for tax purposes by 50 per cent. This was to be cut to 25 per cent. Again, the Liberal Party supported the continuation of the current regime.
This is also likely to be welcome news for property investors.
First Home Buyers To Re-Enter The Market
In the final days of the election campaign, Scott Morrison announced his intention to establish the First Home Loan Deposit scheme. The scheme, which replicates an existing arrangement in New Zealand, will see the government effectively act as a partial guarantor on the loans of some first home buyers who don’t have a 20 per cent deposit.
This is likely to encourage greater competition for entry-level properties and could lead to price increases in that section of the market, especially if lenders come to the party and provide the finance that buyers need.
Greater Confidence In The Property Market
In an election year, buyers and sellers tend to become a little more tentative, as they wait to see which side is elected. Once the result is known, they then tend to re-enter the market in greater numbers.
In our experience, this year that tentativeness was even more pronounced than usual, given the real differences between the parties when it came to real estate. With the winner now known and the current negative gearing regime and CGT discount continuing, we expect to see much greater confidence in the market over the remainder of 2019.
This is likely to mean more properties hitting the market, and more buyers returning too. The effect could well be a lift in property prices, especially here in the Eastern Suburbs.
Like To Know More?
If you’d like to know more about how the election result affects the property market, contact our team of specialists.