The Commonwealth and NSW Government’s 2018 Budgets did not target property investors directly, but some of the measures the government announced may have an impact on them.
The big news in real estate about the recent federal and NSW Budget announcements were that neither of them really addressed real estate, or property investors. That was a little surprising given how prominent issues such as housing affordability and population growth have become.
However, we believe some state and federal budget measures will affect investors, even if it’s indirectly. So here’s everything you need to know about the recent budgets if you’re a property investor or landlord in Sydney’s East.
NSW State Government
Housing affordability was front and centre of last year’s state Budget and it remains firmly on the NSW state government’s written agenda. However, the NSW Budget for 2018-19 didn’t give it much attention at all, except for the expected news that NSW stamp duty revenues have fallen, due to a cooling market.
In fact, it was no news at all for investors, renters or buyers more generally.
While investors could interpret this as 'no news is good news', first home owners hoping for more assistance to get on the property ladder could be disappointed that this Budget doesn’t build on initiatives from last year, such stamp duty concessions and restrictions for investors and foreign buyers. In short, it’s business as usual in NSW.
Just like the NSW State budget, the Federal Government made little explicit mention of housing or real estate in its recent Budget. But some measures could affect investors indirectly, over the longer term in four key ways:
1. Will Tax Cuts Make Negative Gearing Less Attractive?
The government has no plans to change negative gearing. But the big news from the federal budget included proposed changes to personal income tax, which - if the Coalition continues to win elections - will lead to a complete overhaul the tax system by 2024.
Should this eventuate, the proposed lower rates of income tax could potentially make negative gearing - and property overall - less attractive to investors, as there will be less incentive to reduce personal income tax. But a lot could happen before 2024, so we’ll have to wait and see how it plays out.
2. Flow On Effects From Infrastructure Investment For Investors
One thing which will affect property investors indirectly is the federal government’s infrastructure spending. All up, the government is set to spend $75 billion on upgrading infrastructure on key projects across the country. It used the Budget to announce another $25 billion in new infrastructure spending.
Infrastructure investment is typically great thing for property investors, as buyers and renters look to take advantage of better services and amenities, such as new rail or public transport upgrades.
Projects announced in the Budget that are most likely to affect Sydney’s East include the Port Botany line duplication and the first stage of the North South Rail Link. Outside of this Budget, Eastern Suburbs investors already set to gain from new transport infrastructure that is almost complete - the light rail and Westconnex.
3. Reverse Mortgages For Pensioners Over 65 Years Old
Another Budget measure allows Australians over 65 who draw a pension to access the equity in their home through a reverse mortgage. This, the government rationalises, could help asset rich but cash poor retirees better meet their living expenses. Under the scheme, pensioners could take a loan against the value of their home for up to $11,799 a year for singles or $17,787 for couples, while still receiving their pension.
This measure could have the flow on effect of deterring some downsizers from making a property move and thereby reducing overall stock at a time when it is often already in low supply. The result could be that it will become even harder for first home buyers to get onto the property ladder, particularly in Sydney’s already competitive Eastern Suburbs. For investors, this could help keep prices high and place rental properties in greater demand.
4. Land Banking Could Become Less Appealing
The federal Budget also revealed that council rates and maintenance rates will no longer be able to be deducted where the property is vacant land. This shouldn’t affect developers, as it won’t apply where there is an operating business on the land.
With vacant land a very scarce commodity in Sydney’s East, it’s unlikely to affect many investors in this area.
Talk To Us For More Info
These are some of the ways the state and federal government’s Budget 2018 could impact property investors. If you’re interested in finding out more or investing in Sydney’s East contact our team of specialists today.