The new year is shaping up as one with significant implications for the property industry. What can we expect?
Voters in our most populous state, New South Wales, will go to the polls on 24 March. An early federal budget on 2 April is widely tipped to be followed by a federal election in May.
The release of the final report of the Hayne royal commission into banking sits against a backdrop of a slowing global economy and ongoing trade tensions between some of Australia’s most important trading partners, as well as the UK’s looming departure from the EU. It’s clear the first six months of 2019 will generate plenty of political and media debate around issues that matter for the property industry and the 1.4 million jobs it directly supports.
“This election cycle comes at a challenging time for industry,” says Mike Zorbas, the Property Council’s group executive for policy.
In particular, Zorbas highlights federal Labor’s commitment to scrap negative gearing on established dwellings and halving the capital gains tax discount as the biggest policy risk to confidence in our industry and the wider economy.
“More than two million Australians own an investment property. Through this they play a vital role in supporting the private rental market as well as providing for their own financial well-being in retirement,” Zorbas says. “That includes 1.3 million people who use negative gearing – the vast majority of whom are middle income earners with a single investment property.
“These are everyday Australians who are saving for their future and meeting the housing needs of the one third of Australian households who rent,” Zorbas explains.
While acknowledging that Labor would grandfather existing investment properties, Zorbas says now is not the time to be making big changes to tax policy for property.
“We know that impact on housing confidence from these changes will be the biggest policy unknown and the biggest risk to this part of the economy this year."
Zorbas says the outlook for residential property has changed dramatically since Labor first announced its policy a few years ago as a way of dealing with housing affordability. Even with grandfathering, there is real potential to disrupt the market and impact new and existing investor sentiment, especially at a time when our biggest housing markets in Melbourne and Sydney are cooling rapidly.
“With the potential to damage confidence, reduce housing and rental supply and put building jobs at risk, this feels like the worst time in the housing cycle to be increasing the cost of investment.”
This will be the Property Council’s priority issue in this federal election year. We continue to need national leadership to kick start our build-to-rent sector and competition incentives for efficient planning reform across the country but boosting confidence in the housing market through the right policy choices is first and foremost.