What now for the property market post-election?
Against all odds, Scott Morrison has retained his leadership. I think we can all rejoice that the gruelling, uncertain election campaign and the ‘hard-hitting’ Clive Palmer adds are now behind us. Let’s hope that we can keep our elected leader this term and avoid any unwanted leadership overhauls. After all, I think we’re all after some much-needed stability!
The lead-up brought so much uncertainty around property and what Labor’s proposed changes may have meant for investors and the overall market.
So, with the fears of the removal of negative gearing now behind us, we look towards a Liberal leadership with a focus on improving the nation’s economy. For the property market, government stability along with the unchanged negative gearing and capital gains tax policies will restore confidence in the market.
In the last 24 months the property market has been stifled by many external factors. These factors to an extent, led to the correction of the Sydney market but have also held back the potential in the Brisbane market. These include:
- APRA’s cap on investor lending growth: capping the percentage of investor loans led to a reduction in investor lending
- Banking Royal Commission: This investigation into the unethical banking practices led to a more scrutinised lending process and a tightening of lending criteria
- Negative media: Outlandish predictions of a widespread market crash caused negative sentiment for investors and homeowner purchasers
- Federal Election: Labor’s negative gearing proposal caused uncertainty and angst in the market slowing property demand, especially with potential investors
Apart from the constantly negative media machine (let’s face it negativity sells), the above factors are now in our rear-vision mirror and we can look forward to a more positive and stable property market in the months to come.
If you’re a prospective investor who watched on in anticipation this should serve as a warning. The changes to negative gearing could have reduced demand for investor type properties. These are the types of properties which you need to avoid, they also the properties you’re most often exposed to so understanding what to look out for is vital. Some common characteristics of an ‘investor type property’ are:
- Properties that are in buildings or estates which are predominantly sold to investors. This is a big one, if you want to minimise your risks buy what the local owner occupier market is buying
- High density dwellings, particularly those lacking a point of difference or any unique attributes
- Properties with small and inefficient floor plans, that lack natural light and are poorly finished
- Projects delivered for student accommodation – these often achieve high yields but minimal capital appreciation and only appeal to a niche market
- Properties which are advertised as dual occupancy – generally offer high yields but are in investor heavy locations and are unlikely to attract future owner occupier demand, particularly as most owner occupiers have little demand for two attached properties
If you’re looking to invest, its critical you’re identifying owner occupier type properties that appeal to the widest possible portion of the market.