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How will the New Government affect your Investment Property?

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 How will the New Government affect your Investment Property

Given the recent election result, property investors might find themselves asking “will my property be worth more at the end of Tony Abbott’s first term?” To answer this, we asked guest writer Nigel Bowen, for his insights on the new government’s impact on the housing market.

After three years of minority government and political high drama, the Coalition has won a decisive election victory. Many people, especially those who’ve been putting off investment decisions until after September 7, are now wondering exactly how economic circumstances, particularly in relation to buying and selling property, might change.

What won’t change…

Reflecting their constituencies, Labor governments tend to be more sympathetic to renters and Coalition ones more sympathetic to landlords, but the major parties have long agreed on the fundamentals when it comes to property investment. A change in government isn’t going to make any difference to those fundamentals, such as negative gearing arrangements.

As oppositions – both Conservative and Labor – typically do, the Coalition expressed a concern with housing affordability prior to the election and an intention to work with state and territory governments to release more land and reduce the red tape involved in building approvals, though no specifics were offered.

What might change…

So if the policy settings stay the same no matter who wins or loses, does that mean a Coalition victory won’t have much impact on your existing or potential property investments? Well, possibly, but the following changes are likely to shake things up.

Dramatically improved business and consumer confidence

Despite their nation’s AAA-rated economy, Aussies have been in a funk ever since the GFC hit in 2007. Consumers have been reluctant to spend and businesses cautious about investing and employing. The election has acted as a circuit breaker and it is expected that a lot of pent-up demand may now be released, which will likely reinvigorate the property market.

Property price-impacting policies

Though they presumably weren’t constructed with the interests of homeowners or investors in mind, there are nonetheless a range of Coalition policies that seem likely to have significant impacts on the property market.

By abolishing the carbon tax and postponing the move to increase the proportion of workers’ incomes going into compulsory superannuation, the Coalition has freed up more capital that can be used by, for example, would-be first-home buyers to get into the market, thus driving up demand (and prices).

Likewise, in the medium term the Coalition’s commitment to investing in major roadways to the outer suburbs of capital cities may significantly drive up demand for and hence the prices of properties in those areas. And once the Paid Parental Leave scheme – ensuring most women will get full pay for six months of maternity leave – is introduced, double-income couples looking to start a family will presumably be a lot more relaxed about committing to buying a first home, once again pushing up demand and prices.

While incoming governments often make policy changes they haven’t previously flagged, there’s little reason to suspect the tax and other policy settings around property investment will change over the next three years. And given a greater sense of confidence, improved transport systems and more money in people’s pockets is likely to perk up a long-sluggish market, now might be a good time to consider investing in property.

Note: The views expressed in this article are those of the author and are not necessarily those of the Rabobank Group.