Despite a real estate market that has been stuck in its longest period of negative growth in more than a century, the federal election campaign is not a tipping point for the Australian property market. This is because it will take years to understand the full impact of any changes the next government will make. The proposed changes Labor wants to impose on the property sector include a tax on foreign buyers; the reintroduction of land taxes in some states; national property listing rules; and a review of Australia’s foreign investment rules.
While Labor says that each of these measures will raise about more than $3.6 billion, at least half of this is likely to be offset by the cost of making the changes. However, the level of these offsetting measures remains unknown, which means there is no guarantee that this will be enough to make the policies financially viable. There are also other risks to the financial soundness of the property market. These risks include rising interest rates, slow or stagnant wage growth, policy uncertainty, and slowing population growth.
Higher Interest Rates – Top Concern of Investors
Higher interest rates are likely to be a top concern for investors who already own properties and who will see the value of their investments decline if rates go up. One way to avoid the reduction in the capital gain would be to sell, but there is not much time left until the next election is called, and to sell now before the capital gains tax discount on assets is increased for certain investors.
While there is a general fear that house prices may fall, current market conditions don’t suggest a downturn is due any time soon. For now, house prices are continuing to grow, though there are signs of slowing. The labor win is most likely to have a positive impact on first-home buyers and owner-occupiers, who are more likely to benefit from any increased competition in the housing market from new build properties.
As long as there is demand for properties and a strong global economy, the steady supply of new housing units is likely to continue in the property market of Australia.
Coalition’s Emissions Reduction Fund and Future Manifesto
Labor has also promised to repeal the Coalition’s Emissions Reduction Fund – a scheme that reimbursed big polluters for cutting emissions. The repeal will take another two years to happen and another two years for the government to decide on whether it will allocate the money to another fund. Labor says the move will bring an end to the “current Commonwealth approach to climate policy and will ensure Australia returns to a clean energy future.”
Labor has also proposed national territory listing laws that would apply in WA, NT, the ACT, and parts of the mainland, including parts of Tasmania. This would not include rural and regional landholders or Aboriginal communities. Instead, regional councils would be the key decision-makers on national parks. Labor will likely have to compromise on this after saying they are looking to pursue a decentralized model.
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