The recent federal election result could have a major impact on the North Shore real estate market.
After all, when it comes to real estate, the Labor Opposition and the Liberal government took very different policies into the election.
With that in mind, here’s what we think a Coalition win means for our local property market.
More activity in the North Shore real estate market
So far in 2019, levels of buyer and seller activity have been down on where they were a year ago. We think this has partly been attributable to the federal election (and, to a lesser extent the March State election). People are often more hesitant to make a decision when there is uncertainty about who will govern and the rules they will introduce.
We also believe that the drop in activity was more pronounced this time around because of the very real differences between the two major political parties. Buyers were even more tentative than normal prior to an election, taking a “wait and see” approach.
Now that the election is out of the way and the current government will continue, we expect to see both buyers and sellers acting more decisively.
Greater investor confidence
Labor’s proposed changes to negative gearing and the Capital Gains Tax (CGT) discount were designed to make residential real estate a less attractive asset for investors. These policies were causing anxiety among some would-be investors who were uncertain about what they meant for both short- and long-term prospects for capital growth. With Labor’s defeat, neither reform is now likely to happen.
This alone should lead to greater confidence to investors and could encourage them to return to the market in greater numbers – especially when combined with APRA’s recent easing of restrictions on interest-only lending.
The potential return of first home buyers into the market
In the late stages of the election campaign, Prime Minister Scott Morrison announced an ambitious new policy, the First Home Loan Deposit Scheme.
Aimed at helping first home buyers into the market when they haven’t saved a 20% deposit, the scheme could see the government essentially going partial guarantor on some home loans.
Although some critics argue this policy may encourage young buyers to borrow too much, it could mean more enter the market, driving up competition in the entry-level market.
A quicker recovery for property prices
For Sydney’s entire property market, the past 12 months have been characterised by falling property prices. Sydney’s median dwelling price dropped -10.9% in the year to April 2019 and the North Shore property market has not been immune to these falls.
Over the past three months, the rate of decline has slowed considerably. In April 2019, prices fell just -0.7% across Sydney compared with -1.8% in December 2018.
However, we believe the re-election of the Morrison government and the continuation of existing government policies on negative gearing and CGT, rather than changes, should mean market confidence grows.
Although not directly related to the federal election, two other factors also need mentioning, especially as they could lead to a stronger market in the second half of 2019.
The first is the likelihood of an interest rate, or even cuts. While some economists argue these are needed to help kickstart a flagging economy, they will also reduce the cost of servicing a mortgage and therefore encourage people to buy property.
The second is a potential change in the “serviceability test” APRA requires lenders to use when assessing someone’s capacity to repay a loan.
As it stands right now, lenders are required to assess someone’s borrowing capacity based on their ability to comfortably service an interest rate of wither seven per cent or two per cent over the actual interest rate of the loan they’re applying for. APRA has flagged its intention to change this so that banks can set their own minimum rate floor, with the effect that people may be able to borrow more.
As lending restrictions have also been one of the major factors in recent property price declines, this too could help kickstart the property market once again.
Want to know more?
With more positives in the market than for some time, we believe the second half of 2019 has been the best time in a while for property owners to list their home for sale.
If you’d like to know more about your own property, get in touch.