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With the Liberal government winning the recent Federal election in May, many Australians have been asking what the result means for the housing market. The Labor party was vowing to introduce restrictions for investors, which now won’t happen, and the Reserve Bank of Australia also cut interest rates to a record low in June, which has a big impact on mortgages. How does this affect you? We’ve got a breakdown of what all these factors mean.
Before the election, investors were being cautious. With Labor’s election promise to reduce negative gearing and increase capital gains taxes, less properties were being purchased, which had a knock-on effect of lowering house prices. Sydney and Melbourne alone have seen a decrease in house prices of 14.5 per cent and 10.9 per cent respectively in the last eighteen months as people held off on purchasing investment properties. Now that investors can purchase with the confidence that their portfolios can be negatively geared and continue to reap all the tax benefits they’ve previously enjoyed, industry experts predict house prices will begin to rise in the coming months as investors re-enter the market.
While the decrease in capital gains tax and stability of negative gearing won’t impact first home buyers, the effect this has on housing prices will to some degree. With investors holding off on purchasing property before the election because many predicted a Labor party win, the decrease in house prices meant it was a good time for first home buyers to enter the property market. Now that investors can still reap the benefits of negative gearing on multiple properties, house prices are set to rise as people start to purchase investment properties again, meaning first home buyers are competing against investors with more borrowing power when trying to purchase their first home.
Those wanting to invest in property are the big winners of the election. The ability to negatively gear property portfolios means investors can continue to purchase homes with the confidence that they can increase their capital growth over a long period of time. This is because they’re now able to buy in a stable housing market during a time when prices haven’t increased dramatically. This also has tax benefits because investors can claim any expenses incurred, reducing their taxable income and creating an investment that will benefit them in their retirement years.
Just a few weeks after the May election, the RBA cut interest rates to a record low of 1.25 percent, with many banks and credit unions passing on rate cuts of their own. This is a win for existing home owners, and investors alike as people see their existing mortgage repayments decrease slightly thanks to the rate reduction. For first home buyers, it’s a great time to get finance pre-approval and lock in a low interest rate on their first mortgage when they’re ready to purchase their first home. For investors and home owners, these rate cuts are also the perfect opportunity to get in touch with a mortgage broker to shop around for the best interest rate possible – often loan exit fees are outweighed by the benefit of moving a mortgage to a new lender with lower interest rates.
Our network of builders can help you find the right home solution, whether you’re looking for your first home, hoping to upsize for your growing family, or find an investment property to create a nest egg for your family’s future. Visit the Hotondo Homes website to find a builder local to you and start your home building journey today.
Hotondo Homes is not an authorised financial institution and we recommend home buyers always seek the advice of a registered financial professional before purchasing property.