30 May What Effect Will the New Government Have on House Prices?
It’s been a stunning election result here in Australia, with Anthony Albanese and his Labor party clinching a decisive victory. As we farewell Scott Morrison and say hello to a new era of politics, what does this mean for Australian real estate prices?
It’s no secret housing affordability was one of the driving topics of the election, with both parties trying to sway voters with their own brands of policies and promises. Will Labor’s policies really have an effect on the current trend of housing prices? Not really, according to CBA senior economist Gareth Aird.
“Regardless of who won the election, rising interest rates will be the one thing that shapes economic outcomes and the future of the housing market,” Aird said.
Let’s not forget Australia is coming out of a couple of bumper years when real estate prices increased exponentially. With returning residents escaping the pandemic helping drive prices up, ‘Fear of Missing Out’ (FOMO) kicked in and prices went on an upward trajectory.
A perfect storm like that isn’t sustainable, and there was bound to be a softening of prices. This was even more inevitable considering recent world events, such as the Russia/Ukraine crisis, influencing global logistics and causing prices of basic commodities to go up.
With this inflation causing interest rates in Australia to go up, servicing loans will become trickier for many property owners or potential buyers. So the softening of prices will be around for a couple of years. According to NAB chief economist Alan Olster, “My long and short of it is that it’s [the new government] is not going to make any difference.
Labor Government Real Estate Policies
Let’s take a look at some of the policies the Albanese’s government has promised to put into place.
Help to Buy: This scheme is designed to help eligible Australians get into a home by cutting the mortgage by up to $380,000. A government equity contribution of up to 40% plus the ability to purchase a home with as little as a 2% deposit are two of the benefits offered. Mr Albanese has estimated the program will help 10,000 Australians a year who do not have a current stake in a property to purchase a home.
National Housing Supply and Affordability Council: Comprised of experts from the finance, economics, urban development, residential construction, urban planning and social housing sectors, this is promised following calls from housing advocates around Australia. It will help set targets for land supply and develop the National Housing and Homelessness plan.
Regional First Home Guarantee: This is designed to assist 10,000 regional home buyers er year purchase their first home. They will only need to have a 5% deposit, and will also avoid Lenders Mortgage Insurance. To be eligible the buyer must have been living in the regional area for at least 12 months.
As we know, the Labor party decided against any changes they had in mind to negative gearing in July 2021, promising the current status quo will stay in place during their tenure. This was probably in response to their poor showing at the last election, which was due to large changes to capital gains tax and negative gearing that hopeful Bill Shorten had intended to implement.
While the government policies to be implemented will improve housing affordability for a small number of Australians, they aren’t likely to be grand enough to affect the housing prices across the country. The current trajectory will continue regardless of Labor’s efforts.
The advice of The Henry Wong Team®, as always, is to make your real estate decisions based on your needs and priorities at the current time in your life. IF you have any questions about Brisbane real estate, or would like to chat about your own real estate future, please get in touch. Henry would love to chat.