We’re sure you’ll already be aware that the 2022 Australian Federal election brought a change of government in Australia with the Liberal/National coalition ousted, and a majority Labor government sworn in for the first time since 2007. 

This changing of the guard comes during an escalating war in Ukraine, China’s increasing presence in the South Pacific, an urgent need to tackle climate change and the tail end of a global pandemic. All of which will continue to challenge the Australian economy.

So, what does the change of government mean for the Australian property market? In this blog post, our Capital Properties investment experts explain what the change of government means for property investors with this property update.

To discuss how the change of government affects your property investment potential, book a discovery call with Capital Properties today. 

On the go? Here’s 30 seconds of take outs:

  • The new Labor Government has promised to get more Australians into their own homes.
  • The National Housing Finance & Investment Corporation (NHFIC), has been renamed ‘Housing Australia’ and now incorporates the ‘National Housing Supply & Affordability Council’ and the ‘National Housing & Homelessness Plan’.
  • Housing Australia key programs include:
  • – Housing Australia Future Fund
  • – Help to Buy
  • – First home guarantee/ 5% deposit scheme
  • – Regional First Home Buyer Support Scheme
  • – Restoring Funding for Homeland & Improving Remote Housing
  • A “greenslide” of Greens & independent seats makes sustainability a major focus. The “Rewire the Nation” campaign aims to make Australia a “renewable energy superpower”.
  • No changes to capital gains taxes and/or negative gearing, though earlier contribution to superannuation is allowed.

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Property update – current outlook

Globally, it’s been a tough couple of years. In response to this, the Reserve Bank of Australia (RBA) is raising cash rates to help Australia’s recovery from the Covid-19 pandemic emergency borrowing settings. We’ve discussed this in more depth here: Cash flow property – Counter interest rate raises.”

With inflation predicted to reach approx. 7% by December 2022, some homeowners and first home buyers are understandably nervous about their ability to attain a mortgage and their capacity to service the loan. However, with an unemployment rate at a 50-year low and steady economic growth, economists remain hopeful for a strong financial recovery. 

The government building stimulus packages and the Great Interstate Migrate were both partly responsible for phenomenal increases in house prices across most markets in the last year. As we predicted, these markets have started to calm down, so we’re seeing a more gradual and sustainable growth. 

Although property prices are stabilising, construction costs continue to increase, and demand for housing is still at an all time high. Now, with the re-opening of international borders, both students and skilled migrant workers are once again returning to our shores, thus driving up rental demand in urban areas. 

Change of government – Labor property update

Australia’s new Prime Minister Anthony Albanese won over many voters with his promise to get more Australians into their own homes. And to do so, the Labor Government has committed to expanding the role of the National Housing Finance and Investment Corporation (NHFIC), renaming it ‘Housing Australia’. This incorporates the National Housing Supply and Affordability Council and the National Housing and Homelessness Plan.

Under the National Housing Supply and Affordability Council, the Federal Government will work with state governments to set targets for land supply and collect national data on housing affordability as well as supply and demand.

The National Housing and Homelessness Plan

Developed with key stakeholders including States, Territories, local governments, not for profit and civil society organisations, Real Estate Institute of Australia, Master Builders Australia, and many, many more key organisations, the National Housing and Homelessness Plan will set out key reforms to make it easier for Australians to buy a home, rent, and house homeless Australians.

Housing Australia key programs include:

– Housing Australia Future Fund

With the establishment of a National Housing Supply & Affordability Council, the new government aims to increase housing supply and improve housing affordability. A $10 billion fund will help to build 30,000 new social and affordable housing properties in its first five years, creating thousands of jobs for tradespeople.

The annual investment returns will be transferred to the National Housing Finance and Investment Corporation (NHFIC) to further fund:

  • 20,000 social housing properties, with an allocation of 4,000 ($100 million) for women & children fleeing domestic & family violence and older women on low incomes who are at risk of homelessness. 
  • $200 million for repair, maintenance & improvements of housing in remote Indigenous communities.
  • $30 million to build more housing & fund specialist services for veterans who are experiencing homelessness or at-risk homelessness.
  • Creating 10,000 affordable homes for frontline workers.
  • Resulting in 21,500 full-time jobs across the construction industry with incentives for training new apprentices.

While this additional funding is necessary and long overdue, a report published in November 2021 from Brendan Coates at the Grattan Institute suggests it’s still falling well behind what’s needed. More than two thirds of low-income Australians are still struggling in a private rental market with rents rising at around 9% per year nationally.

– Help to Buy Scheme

The change of government fulfils Labor’s “Help to Buy Scheme” and a promise to cut the cost of buying a home by up to 40% for some lucky Aussies. This means that each year up to 10,000 eligible candidates will require a smaller deposit, a smaller mortgage and will have smaller mortgage repayments. The scheme is restricted to owner-occupiers who don’t currently own a property, providing an affordable entry point to the Australian housing market and allowing better access for key workers to live in more central areas.

Buyers will only need a minimum deposit of 2%, with the Federal Government providing an equity contribution up to 40% of the purchase price of a new home and up 30% of the price of an existing home. For example, a homebuyer in Sydney, buying at the area price cap of $950,000 with 40% equity, would save over $1,600 on their monthly mortgage repayments. In regional Queensland, home buyers purchasing at the price cap of $500,000 with 40% equity, can save $850 on their monthly mortgage repayments. 

Under the scheme, homebuyers can also avoid paying Lenders Mortgage Insurance, potentially saving more than $30,000. It’s also possible to top up with an additional 5% stake in the home, however if their income exceeds the annual income cap ($90k for individuals / $120k for couples) for 2 consecutive years, they’ll have to repay the government’s financial contribution. Also, buyers will still need to pay transactional costs, including bank fees, stamp duty and legal costs. Visit the ALP website for eligibility and further details.

– First Home Guarantee/ 5% Deposit Scheme

Labor has expanded the Coalition’s ‘First Home Loan Deposit Scheme’, renaming it the ‘First Home Guarantee’ and generously adding another 10,000 places annually to allow for 60,000 guarantees per year. We’ve covered this 5% deposit scheme before here.

– Regional First Home Buyer Support Scheme

To address the regional housing crisis, Labor has extended the ‘First Home Guarantee’ to include some rural areas, calling it the ‘Regional Home Guarantee’. This allows buyers to purchase a new home in an eligible regional area with a 5% deposit without the need for lenders mortgage insurance. 

The aim is to enable 10,000 first home buyers a year to buy a home in regional Australia, thus tripling the number of people in these areas that can access a government guarantee scheme. You can read more about the scheme and see full eligibility criteria in our blog post Regional Home Guarantee – 5% Deposit Scheme

– Restoring Funding for Homeland and Improving Remote Housing

In an effort to Close the Gap, Labor intends to deliver an immediate boost of $100 million for housing and essential infrastructure on Northern Territory homelands. This includes improvements to water, power and community facilities, housing upgrades, extensions, as well as new builds. This is in addition to the 30,000 social and affordable homes available through the Housing Australia Future Fund.

Change of government = a new focus on sustainability

As the Greens party and independents won more seats than ever before in the recent election, this “green slide” means that sustainability will also be a major focus of the new government. With its “Rewire the Nation” campaign, the Australian Labor party has made a commitment to developing Australia as a “renewable energy superpower”.

And their initial policies reflect this goal with plans to reduce emission targets, review environmental legislation, implement new sustainable guidelines for businesses as well as establishing a national Environmental Protection Authority (EPA).

Each of these policies will have a knock-on effect on the property market. It’s likely that we’ll see additional sustainable recommendations for new builds and existing properties. We expect to see further incentives for solar and battery power use to allow for electric vehicles and new ways of managing water recycling and use of sustainable materials in new builds.

What the change of government means for property investors

Labor has not indicated any change to laws regarding capital gains taxes and/or negative gearing. With vacancy rates below 1% in some markets in Adelaide, Brisbane, and Perth, and rental yields steadily increasing, it’s a win-win for many investors.

For investors looking to downsize their portfolio, it’s now possible to contribute up to $300,000 from a property sale into superannuation at the age of 55years, a decade earlier than was previously allowed.

It’s important to remember that although these Federal laws will have a national impact, each state and territory may have individual implementation guidelines. And the property market is quite different in each of these regions. 

That’s why we recommend working with Property Investment experts at Capital Properties to evaluate what this change of government means for you. Our expertly researched Australian property updates will help you develop a strategy for successful property investment.

Book your free Discovery Session today to kick off your future financial security.