Next week is budget time. Housing was a battleground issue at the last federal election – and the Coalition and ALP are likely to go head-to-head on this again soon when each announces housing policies.
At the last election, the ALP committed a Labor government to removing negative gearing on new properties as well as to halving the Capital Gains Tax discounts available to property investors.
The Coalition did not propose any major changes to housing policy and, as result, were accused of doing little to curb then skyrocketing house prices.
Next week the Federal Government unveils its budget and many will be eager to understand what it will do for housing.
But while government policy does have an impact on the properties we can afford or that we should invest in, it is only a bit-part player in the bigger story; there are much bigger influences on property.
The biggest influencer on Australian property prices is demographics – demand for housing is just going to continue. Australia’s population is about to tick over 24.9 million and is growing at an annual pace of 1.6 per cent, according to ABS data.
If that pace of growth is maintained over the next few decades, it will see Australia’s population rise to over 41.4 million by the year 2050, putting pressure on existing infrastructure, including housing.
And while demand will keep prices relatively firm, borrowing costs will keep property relatively affordable. The last time the Reserve Bank (RBA) changed interest rates was in August 2016 and there is little likelihood that the RBA will increase rates until well into 2019.
While the ALP’s policy is fairly radical, it is a far cry from some of its previous policies. Current investors will still be able to negatively gear and the changes to Capital Gains Tax only apply when an investment property is sold – its not like property owners buy and sell frequently.
Next week’s budget will probably have some announcement on tax and government housing policy. But its important not to take your eye of the main game.
If you want to chat more about property and finance, please feel free to contact me on 1300 30 67 67.