How the upcoming federal election will impact the housing market

Brisbane, Financial Planning, Home buying & selling, Investing, Melbourne, Sydney
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It’s time to vote, Australia – this May 21st we go to the polling booths to decide on our country’s leadership for the next election term, and in a year like 2022, there are no shortage of hot button issues influencing our decision. House prices and housing affordability in general, as well as interest rates and mortgages have all been front of mind for young people looking to take the leap and become first home buyers, as well as those from older generations looking to enter the property market, buy and sell, or expand their property portfolio. The question on everyone’s minds is, of course, will the federal election mean an interest rate increase? In fact, what does the federal election result mean for the property market at all?

Before we dive in, some context – major issues surrounding housing pricing were central in the previous election, with Scott Morrison winning the seat as Prime Minister in 2019. With the ALP (Australian Labour Party) taking a stance on wanting to remove negative gearing, the Capital Gains Tax discount for asset sales and the dividend franking credits super and pensions receive, many denote this position as a major reason for the Liberal victory. This time around, the ALP aren’t taking the same position and even saying they won’t turn their attention to these issues at all, though there remains some uncertainty and hesitation around the conversation of negative gearing. In the basic sense, however, there are no particularly discernible differences between the Liberals and the Labour party on housing policies for the upcoming election.

Outside of the two major parties, what else is happening? The United Australia Party is running on a platform majorly deemed as improbable, with the party stating in ads that they will mandate to keep all mortgage rates either at or below 3% for the next five years. As charismatic as Clive Palmer is on our screens, this does not necessarily translate to something that is actually feasible in our economy.

So what should we be paying attention to? Interest rates. This is one subject beyond either party’s control and will be the bigger impact to the housing and mortgage market. We’ve seen record lows at 0.10% for the Reserve Bank of Australia’s cash rate, and economists are saying that the only way from here is up. Gareth Aird, senior economist for the Commonwealth Bank, said “It’s pretty clear to us that the bottom [of the market] is just around the corner. We had a 15% [peak-to-trough price forecast] and we’re almost there now.”

When it comes to grants there is the First Home Loan Deposit Scheme (FHLDS), an initiative existing to assist young Australians in getting a leg up into the property market, which enables eligible first home buyers a grant of an approximate $10,000 – $20,000 depending on their circumstances. The current Liberal government expanded the amount of places available in the program, adding an extra 35,000 placements, and the Labour government has agreed to honour this also if they are elected.

This leaves us with housing affordability and house prices remaining hot topic issues. These issues have not been approached as of yet, and it’s likely that the markets will slow once interest rates begin to rise. What will our elected officials do in response to this?

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Andrew Mirams