What Does a Labor Federal Government Mean for Our Local Property Market?

While the Liberal Party retained our local seats of Bradfield and Berowra in the recent federal election, the Coalition’s national rule has come to an end.

With political realignments seen across the country – including locally, where there was a 12.3% swing away from the Liberals recorded in Bradfield and a 5.2% swing to the ALP in Berowra at the time of writing – Labor has secured a majority government. The question is, how will having a new federal government affect the Upper North Shore property market?

Help to Buy

With housing and housing affordability a hot button topic going into the election, Labor campaigned on their centrepiece housing policy called Help to Buy. The scheme promises to reduce the cost of buying a home for 10,000 eligible low- and middle-income earners each financial year via an equity contribution from the government. Under Help to Buy, the government will contribute up to 40 per cent of the purchase cost of a new home or up to 30 per cent for an existing home.

Homebuyers using the scheme in Sydney, including here on the Upper North Shore, have a maximum purchase price cap of $950,000. They stand to save up to $380,000 on a new home purchase, or $285,000 on an existing home. Help to Buy will also save homebuyers from taking out potentially costly Lenders Mortgage Insurance (LMI).

How will it work?

To qualify for the scheme, home buyers will need at least a 2 per cent deposit and the ability to service the remainder of the purchase via a regular home loan. They must earn no more than $90,000 a year, or $120,000 for couples, and not own any other land or property. They must live in the purchased property and be responsible for all costs associated with the purchase, like stamp duty, legal and bank fees, as well as all ongoing costs and bills like rates and strata fees. They won’t have to pay rent on the stake of the home owned by the government. If their income exceeds the scheme’s annual threshold for two years running, they will have to repay the government’s contribution. They’ll also have the option to buy an additional stake in the home if and when they can afford it. When the property is sold, the government will take its share of any capital gains made.

What else is the new Labor Government promising for the housing sector?

In addition to introducing Help to Buy, Labor agreed to continue and expand the Home Guarantee Scheme introduced by the Coalition. The party announced their intention to establish the Regional First Home Buyer Support Scheme and to review both metro and regional purchase price caps every six months.

When it comes to property investors, Labor has promised to maintain the status quo for both negative gearing and capital gains tax for the duration of their tenure following the recent election.

Labor also pledged to form the National Housing Supply and Affordability Council to address the twin issues of housing inventory and pricing with a view to increasing supply and improving affordability.

How will these measures impact the real estate market?

Regardless of the election outcome, climbing interest rates are the main factor influencing the Australian property market. Experts and economists from the CBA and AMP Capital agree that Labor’s policies are unlikely to reduce the impact of rising interest rates and the cost of living on Australian households.

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CBA senior economist Gareth Aird says that demand-driven policies like Labor’s Help to Buy and the Coalition’s First Home Guarantee tend to have a more significant impact in a rising property market like that we saw in 2021. Meanwhile, Westpac’s Matthew Hassan notes that any effect from the new policies will take months, if not years, to be felt. NAB chief economist Alan Oster put it bluntly – ‘my long and short of it is that it’s [the new government] not going to make any difference.’

Post-election Upper North Shore property market outlook

While the experts’ forecasts for national property prices for 2022 differ slightly, no one is forecasting substantial price falls. CBA is forecasting prices will hold steady this year, while Westpac predicts a 2 per cent decline and ANZ 3 per cent. NAB, meanwhile, anticipates prices will, in fact, rise by 2 per cent in 2022.

While Sydney property prices have softened by 1.5 per cent since January, according to CoreLogic, homeowners continue to benefit from the huge equity increases gained during the pandemic. Sydney property prices are a massive 22.7 per cent above pre-COVID levels. When we focus on the Upper North Shore, we see that certain suburbs are outperforming even this metric, like West Pymble, for example, where the median house price has risen by 36.7 per cent over the past year, and St Ives Chase, where the median house price has jumped by 31.6 per cent since May 2021. We expect strong buyer demand for property in blue-chip areas like the Upper North Shore to remain unaffected by the federal election result.

If you’re after advice about selling or buying on the Upper North Shore, we’re here to help. Get in touch today.

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