What the federal election could spell for the property market

History shows us that with rising uncertainty comes an increase in investors making conservative choices – one such driver of uncertainty is an upcoming federal election. As has been seen with previous elections, when major policy changes are announced there can be impacts on the housing market. Many investors and home-buyers may opt not to buy property in an election and instead wait until a more secure time. So what can we expect from the property market now that an election has been announced?

What to expect from policies

In the past, prior to elections, parties have suggested changes to negative gearing and capital gains taxes which could mean potentially significant impacts to those invested in property. Because of this, a dip in investing was seen in the build up in those campaigns. 

However, at this stage, there have been no significant policies brought to the table by either party that are likely to negatively impact those buying properties pre- or post-election in 2022. In fact, both parties have committed to support first homeowners in entering the market with different policies: the Coalition’s Super Home Buying Scheme or Opposition’s Help to Buy Scheme. As such, you would think that the election itself would have very little impact on decision making for property investors.

Time to hit pause

Regardless of whether or not political parties announce any new policies that may impact the housing market, it’s natural for property investors to take a more cautious approach when it comes to buying property at election time. The president of the Real Estate Institute of Australia Hayden Groves states that before an election “people tend to put their cue in the rack so to speak and not progress their property pursuits”. It’s an uncertain time in many industries so many choose to wait it out and make significant decisions after the election has passed and the new government is settled into office. For others though, buying pre-election may represent an opportunity to secure the right property with less buyer competition in the market.

What’s next in the property market?

In addition to the federal election, are a number of significant factors that will likely impact property investment decisions in the coming 12 months. The first being the interest rate rise announced at the beginning of May. After a number of years that saw high performing housing markets across the country, it’s anticipated that the rise in interest rates will continue over the next few months and lead to lowering borrowing potential for those looking to purchase their first home, driving stronger demand at the affordable end of the market. 

For investors, rising interest rates will be partially mitigated by the current rental boom or ‘landlord’s market’. Now that both domestic and international borders have reopened and migrants and students have returned to Australian shores, rental supply is dwindling and rents are expected to increase significantly. Even with rising interest rates, given that interest on a loan is tax deductible for investors, coupled with potential rental growth, cashflow will be a key trend or ‘buzzword’ for investors in 2022.

“While we typically see investors take a wait and see approach during an election campaign, there are no major housing-related policy changes in 2022 indicating the election result is unlikely to shake up the property market substantially,” said Ironfish Head of Property William Mitchell. 

“Both major political parties, however, are committed to helping first home buyers which will increase demand at the affordable end of the market. Investors in the market are more likely to be watching the impact of rising interest rates and cost of living coupled with a nation-wide rental boom and strong rental growth; which is why it’s critical to be well informed and investing strategically in the post-election market. This is how we will be supporting our investors in the upcoming months.” 

To find out more about how the election will impact the property market in 2022, join our upcoming webinar.