Melbourne prices could fall by 9 percent under Labor policies

Melbourne prices could fall by 9 percent under Labor policies
Melbourne prices could fall by 9 percent under Labor policies

Sydney and Melbourne's house prices could slide by another 9 per cent in the event of Labor's planned property tax changes, according to property consultants.

RiskWise Property Research and Wargent Advisory suggest the impacts would vary around the country, hitting the most vulnerable areas including Darwin, Mackay, inner-city Perth and Townsville, which could suffer falls of up to 12 per cent.

Labor's long planned initiative would see negative gearing limited to new rental dwellings as well as a halving of the capital gains tax discount from 50 per cent to 25 per cent. 
It took the measures to the last election amid concerns about housing affordability.

The RiskWise paper utilised Corelogic data to take local factors into account, including rates of unit development, construction, and the recent price falls.

The shadow treasurer Chris Bowen recently shrugged off suggestions the changes be scrapped because prices are now falling making homes more affordable.
Bowen said that the changes are about making long-term structural adjustments rather than addressing the short-term property cycle.
Brisbane-based analyst Pete Wargent, who helped write the report, noted the slide by another nine per cent under Labor's planned property tax changes which would be the equivalent of borrowing costs rising by more than 20 per cent in the Sydney market.

"It would be a defacto tightening of financial conditions for households, with potential knock-on effects from that," he told The Australian Financial Review.

"While the stated intention of the policy was to cool housing markets – at the time in 2016 that was a hot political issue as in Sydney and Melbourne markets were running away – if you were to introduce it today, it would impact markets that are already struggling."

Modelling by the firms suggest the changes would be equivalent to a sudden 1.15 percentage point hike in interest rates.

Prices in NSW and Victoria for houses would drop by 9 per cent, followed by WA and the Northern Territory with 7 per cent declines, and 6 per cent in South Australia and the ACT. Tasmania's impact would be the least, falling 3 per cent. Unit prices would drop between 10 per cent and 2 per cent.

"The report concludes that while there would be some positive initial impacts on housing affordability, these would only be sustained in the largest capital cities if appropriate policies are implemented to encourage the supply of owner-occupier suitable housing in addition to investment units," the authors say.

Wargent noted that Sydney and Melbourne's markets would likely find a new equilibrium within two years of the changes.

"Rental yields will come up and one way or another, investors will come back to the market," he said.

"So while prices would decline, it probably wouldn't be catastrophic because demand for housing is high."


Melbourne Labor Party

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