Plenty of property decisions to accompany the negative gearing election

Plenty of property decisions to accompany the negative gearing election
Plenty of property decisions to accompany the negative gearing election

When we head to the polls, auction property market activity typically slows.

It's a bit like long weekends, Easter and school holidays which are in many markets are generally avoided given the ideal scenario is to choose an uninterrupted four-week sales campaign block. 

This year's election, perhaps as soon as Saturday July 2, will actually be well timed for minimal impact amid the traditional winter slowdown.

But expect a chill to come with it given that negative gearing policy is set to be one of the key election issues.

The seismic Labor Opposition policy, and the Government's seeming abandonment of any change, at least for the time being, will trigger diverse consequences. 

Like the balloon effect: squeeze a balloon in one place, and it inflates elsewhere, some vendors might bring their sales forward while others will bring their purchasing forward. Other owner occupiers and investors will delay.

Overall the electorate - and therefore much of the market - will simply await the outcome of any double dissolution election that will not be about the construction industry bill.

It will be much more about the future value of people’s houses given Labor’s plans and the Government's seeming abandonment of any changes. 

It seeks to restrict the use of negative gearing in the property market to new homes, and to also halve the discount applied to capital gains tax.

This campaign is therefore not likely to be typical when elections tend not to impact on actual home values. 

Elections often have an impact on listing activity.  

So I'd expect prospective vendors to bring forward their sales campaigns to May and June, but then closer to the election date the prospective sellers will postpone their sales campaigns.

CoreLogic RP Data analysis of recent elections showed that there was around a 20 percent drop in the volume of listings, while the clearance rate is usually unaffected. 

Historically when there is no change of government the housing market tends to respond better post-election than when there is a change.

Just how much the auction trends can be attributed to an election is debatable, however federal elections do have an impact on consumer and business confidence.  

Federal budgets too, and we still have to get through it's impact in May.

The debate on negative gearing has now been enlightened by the latest Tax Office statistics that show there were 1,257,301 individual investors in 2013-14 who claimed a total of $10.9 billion worth of rental losses over the year. 

The number of individuals claiming a rental loss was the lowest since 2009-10. Given low interest rates, the average loss claimed was $8,722, the lowest since 2005-06.  

A record 776,672 taxpayers earned a net profit from their investment property in fiscal 2014. 

Although landlord earnings from rents were flat at $38 billion.

More Australians than ever own a rental property at 2.03 million with an indisputable spread across low, middle and high income earners.

This article was first published in the Saturday Daily Telegraph.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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