All Topics / General Property / Seismic Shift in Property Market Just took Place

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  • Profile photo of TheBishTheBish
    Participant
    @thebish
    Join Date: 2007
    Post Count: 59

    Today the labor party just announced a very clear policy position on real estate investing. If you missed it a quick summary:

    Effective 1st July 2017 and not effecting properties owned prior to that date
    – No borrowing by SMSFs on existing properties
    – Negative gearing on new properties purchased only
    – Capital gains tax relief of 25% on those new properties (down from 50%)

    Irrespective of whether you are labor or liberal to the boot straps there is a very good chance labor will come in to power at the next election so these policies will probably come into effect.

    So this must have a big impact on the property market effective TODAY.

    If your thinking about buying an investment property – will those people rush in and settle before 1st July. Its clearly not as favourable if buying after 30th June – in 2 months folks!!

    The market for existing homes will settle/deflate in Sydney or Melbourne.

    Markets like Perth – wow – they didn’t need this!

    Renters – bad news. Rents within easy commute to the city in places like Sydney and Melbourne must go up at a higher trajectory – less supply, increased rents.

    This on top of states taxing properties left dormant and increases taxes on foreign buyers. Banks having a field day on interest rate rises proudly backed by APRA.

    Profile photo of Nigel KibelNigel Kibel
    Participant
    @nigel-kibel
    Join Date: 2005
    Post Count: 1,425

    Since there is no election due for two years how do you think these policies can come into effect by the 17 July 2017.

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    Profile photo of TheBishTheBish
    Participant
    @thebish
    Join Date: 2007
    Post Count: 59

    Good question Nigel but that’s not what I think, that’s what the Labor policy clearly states. How they do that – I’m not sure but I’m assuming they know a bit about when they can and can’t make the policy effective from.

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    Hi Bish,
    Terrific title – seismic it would be, indeed – but when exactly? That’s the question….

    Good question Nigel but that’s not what I think, that’s what the Labor policy clearly states. How they do that – I’m not sure but I’m assuming they know a bit about when they can and can’t make the policy effective from.

    Labor aren’t in power yet – but then, the LNP are hanging on by their fingernails (what was their majority again?) Doesn’t take too many by-elections to tip this whole apple-cart upside down. THEN watch out !!

    I wonder though if this is more a “Look WE have policies, not like that other lot!” from Labor, and they are getting in ahead of the budget.

    Unfortunately, this appears to be yet another knee-jerk policy that Labor are famous for, with lots of unintended consequences lining up at stage left, ready to come marching in once implemented.

    Still, it is good to have our situations all thought out in advance. Could still be a couple of years away, or it could be 2018 (too soon for 2017 methinks).

    Benny

    Profile photo of BennyteeBennytee
    Participant
    @ten_burner
    Join Date: 2006
    Post Count: 243

    Like all Political Parties, Labor will talk tough (easy to do in opposition) and tell the people what they want to hear to get their votes. Once in Office its a different story, policies get watered down etc. From memory the Labor Party brings up abolishing negative gearing about every 12 months.

    Profile photo of TheBishTheBish
    Participant
    @thebish
    Join Date: 2007
    Post Count: 59

    From memory the labor party went to the last election with negative gearing changes in their policy mix and that didn’t appear to hurt them much votes wise. That’s why I’m thinking this is a high probability chance of coming to fruition.

    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    Hi TheBish,

    A quick search brought up this thread:-
    https://www.propertyinvesting.com/topic/4404134-anyone-else-spooked-by-this-talk-of-removing-negative-gearing/

    Look at the dates, and you will see that Labor was in power (the Gillard Govt.) and yet, with all of the clanging and rhetoric, that Govt. made no changes to the laws around negative gearing that existed at that time (and still now). Probably for many of the reasons outlined in some of the replies to the thread.

    An interesting read…..

    Benny

    Profile photo of TheBishTheBish
    Participant
    @thebish
    Join Date: 2007
    Post Count: 59

    Good refresher Benny. Yep lets hope the pollies act with some logic and don’t do anything too stupid.

    Profile photo of BuyersAgentBuyersAgent
    Participant
    @knightm
    Join Date: 2005
    Post Count: 338

    If those changes did come in and a herd of not so committed property investors left, this will reduce supply. Serious investors will win from any short term corrections in overpriced locations, other locations will just stagnate for a yr or two but rents will rise due to the structural changes in the market metrics. Yields will go up and property owners will win eventually (the owners of the assets usually do in the long run). Make sure you don’t overstretch your debt on low yields. Make sure you have some buffers. Buy for value and profit not tax. These things have always been and will remain true.

    As a side note there are also still many markets in this country and I am seeing a number of them just getting started after 10+ yrs of zero growth. The ripple of capital out of Melbourne and Sydney into lifestyle destinations for baby boomers to spend $ in is an established trend and doesn’t rely on debt or tax rules. It will continue as long as boomers are at the correct age to make a decision to relocate their lives and their money. Younger families are becoming more mobile thanks to the internet (and improvements such as NBN) and are often no longer tied to CBD jobs. This trend will also continue as long as internet based commerce continues.

    • This reply was modified 4 years, 7 months ago by Profile photo of BuyersAgent BuyersAgent.

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