With the NSW State election out of the way and a federal election looming, we look at the impact the result of the State election is likely to have on Sydney’s property market.
For Sydneysiders 2019 is a year of two elections. The first, the NSW State election held on 23 March, saw the Berejiklian government returned to office.
We explore what the election result means for Sydney’s real estate market, especially in light of a federal election also set to take place later on this year.
How The NSW State Election Could Affect The Property Market
The NSW Liberal Party did not have any major election policies specifically relating to property. However, it has no plans to drop its current first home owner incentives any time soon.
These include a $10,000 grant for first home buyers purchasing new properties valued at less than $600,000 or building a new home where the house and land are valued at less than $700,000. They also include a stamp duty exemption for first home buyers purchasing property valued up to $650,000 and then a concessional rate for homes worth up to $800,000.
These grants should encourage some first-time buyers to enter the market at the entry level, encouraging competition with investors. However, even with property prices down on where they were 12 months ago, the thresholds mean they’re unlikely to be a factor beyond the market in one-bedroom apartments in many established parts of Sydney.
Perhaps of more importance to investors, is te Liberal government’s extensive infrastructure policies. If, and when, these come to fruition, they should create potential areas of capital growth and opportunity.
The NSW Government’s Infrastructure Plans
The NSW government’s 10-year infrastructure pipeline includes major upgrades and increased spend on arterial roads and infrastructure, particularly in Sydney’s West and South-West.
The government has pledged $6.4 billion towards a new Sydney Metro West rail line between Parramatta and Sydney city, as well as a Metro South West extension to connect Bankstown and Liverpool. It will also continue work on existing projects such as the Sydney CBD and East light rail line, which is now set to open in December.
As new transport options open up, it can often cause a lift in the value of nearby properties because they suddenly become more commutable and more connected to the rest of the city. For that reason, we think Eastern Suburbs properties close to the light rail have solid long-term potential despite any falls in the current market.
However, investors need to be cautious, as announced plans don’t always guarantee outcomes and such promised plans can fail to eventuate, as they have done in the past.
Waiting For The Federal Election
Even where real estate doesn’t feature in the policies of either main party, State elections can have a positive effect on the market. This is because many buyers and sellers hold off on buying or selling activity pre-election to see what the outcome will be and how it might affect future market conditions. After all, like almost any market, the property market benefits from certainty.
That said, the effect of this election will likely not be fully felt until after the upcoming federal election, where property prices will be a major focus, especially for the Australian Labor Party.
The Bill Shorten-led ALP has committed to abolishing negative gearing for investors buying existing properties, restricting it to newly built properties. It has also said it will reduce the Capital Gains Tax (CGT) discount on assets held for more than 12 months by half - from 50 per cent to 25 per cent. Labor claims these policies will stimulate investment in new dwellings and help first home buyers enter the market.
However, critics say these changes could worsen an already softening market, given that tighter lending conditions have caused a drop in the national average.
If the Liberal Party wins the election it has said it will leave current CGT and negative gearing arrangements in place, maintaining the status quo.
Either way, many investors are likely to be taking a wait and see approach until after the Federal election results are in.
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