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How much will your house go up by?

John McGrath
Thursday, May 23, 2019

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The return of the Federal Liberal Government is highly likely to benefit our property market. Not only do we avoid the significant disruption that Labor’s proposed changes to negative gearing and Capital Gains Tax (CGT) would have caused, we get the stability and continuity of national economic policy.

The Liberals have a track record of good economic management and their return to government will breathe some confidence into the property market. It’s not going to immediately reverse the current downward trajectory of prices, which is being driven by credit restrictions, but it will inject confidence.

The property market always takes a pause in the lead-up to federal elections.  This is because buyers and sellers don’t like uncertainty when they’re making major financial decisions.  Hopefully, the instability within the Liberal party is over and this win will see Scott Morrison running the country for the next three years with the same conservative economic agenda.

This will please most participants in the property market. Whether you support Liberal or Labor or some other party, I think we can all agree that stable management and economic growth is good for home prices. It’s also good for business, which provides the jobs we need to pay off our loans.

Due to the ambitious economic redistribution Labor was proposing, including tax changes for investors, it was likely that a Labor win would have extended the current downturn in home values.

Respected property market analytics company, SQM Research did some modelling in March showing how this might have played out.

If Labor had won and the negative gearing and CGT reforms had got through the Senate, coupled with a 50 basis point rate cut by early 2020, SQM Research predicted a weighted average capital city price drop of -4 to -8% between 2020 and 2022.

Conversely, with no tax changes and a 50 point cash rate drop, SQM predicted price gains of +8% to +14% by 2022. That’s a very significant difference.

Now the election is over, let’s take a look at what SQM Research predicts for your capital city market.  These predictions are based on a 50 basis point rate cut by early 2020, no property tax changes, a stable economy and less restrictive lending.

SQM Predictions (Home values)

  • Perth – Home values up +9% to +17% in 2020-2022
  • Brisbane – Home values up +7% to +13% in 2020-2022
  • Darwin – Home values up +0% to +9% in 2020-2022
  • Melbourne – Home values up +8% to +14% in 2020-2022
  • Sydney – Home values up +8% to +14% in 2020-2022
  • Adelaide – Home values up +9% to +16% in 2020-2022
  • Hobart – Home values up +11% to +19% in 2020-2022
  • Canberra – Home values up +9% to +14% in 2020-2022

SQM Predictions (Rents)

  • Perth – Rents up +8 to +13% in 2020-2022
  • Brisbane – Rents up +8% to +13% in 2020-2022
  • Darwin – Rents change -9% to +2% in 2020-2022
  • Melbourne – Rents up +4% to +10% in 2020-2022
  • Sydney – Rents change -2% to +5% in 2020-2022
  • Adelaide – Rents up +5% to +9% in 2020-2022
  • Hobart – Rents change -2% to +7% in 2020-2022
  • Canberra – Rents change +0% to +6% in 2020-2022

Source: SQM Research

The Liberal win will bring some confidence and certainty back to the property market. That’s the key gain here.  Just as important though, is the relief and opportunity it gives to property investors.

No changes to negative gearing and CGT…the chance to buy at a significantly discounted level (especially in Sydney and Melbourne)…when rents are starting to improve…and interest rates are likely to go even lower very shortly.  Now that’s opportunity – if you can get a loan.

Published: Thursday, May 23, 2019


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