Australia has gone 27 years without a recession, and in that time the policies of the Liberal and Labor parties have stimulated the housing sector to make it one of the most dynamic investment magnets.
But with this year’s Federal election fast approaching, the big factor all landlords in Australia are looking at – aside from which major party will win – is how will the property sector react?
Is it best to buy before the election?
Australia’s housing sector is seeing a widespread fall in prices, especially in Sydney and Melbourne, leading to speculation that the sector is sliding.
It’s impossible to predict with certainty just how Labor’s policy or the Liberals stance will affect the sector – the government is just one factor that can influence the market.
But if you’re considering buying a property before the election, it’s vital that you consider the possible change in the political landscape and shape your investment strategy accordingly.
How Labor’s policies could affect landlords
If Bill Shorten wins, he’s promised to limit negative gearing to new housing from 1 January 2020 – arrangements made before that still stand – meaning net losses, including interest, can be offset against an investors’ total taxable income.
However, this tax will be payable on 75% rather than 50% of a property’s capital gain as it stands now.
The thinking behind Labor’s move is that by restricting negative gearing to new investment properties and tweaking the tax regime, there will be a boost in housing supply, which will create jobs.
The Housing Industry Association has slammed Labor’s policy, saying it will discourage investment in property and drive up rental prices for tenants.
For landlords, a rise in rent could be welcome, but it may come at the cost of discouraging expansion of property portfolios, especially with established homes, which won’t qualify for negative gearing.
However, it could boost investment in new build properties, and allow landlords to get a foothold in new markets.
How the Liberals property policies could affect landlords
In contrast, the Liberals are vowing to keep Australia’s negative gearing regime as it stands – open to investment for new and established properties.
While the Liberals haven’t outlined a specific policy on the property sector to campaign for re-election with, the party is vowing to lower taxes so that 94% of taxpayers will pay no more than 30 cents in the dollar.
This is part of an effort to reduce the cost of living and make investment in the housing sector more widely available.
This could boost the ability of more people to afford rent and increase the demand for rental properties.
Change is never guaranteed
Overall, both parties have different stances on Australia’s property sector, so landlords do have a choice when it comes to picking a path that suits their investment strategy.
But election promises are just that – promises.
Since the election of 2007, neither party has enjoyed a strong majority in government, and independent parties and politicians are increasingly able to twist the arm of the government of the day.
So while a Labor or Liberal victory could signal that changes are coming to the property sector, they are not certain until the ink is dried on the legislation.