It’s clear from the results on Saturday that property played a big part in this election.

The first indication was the huge revelation that the top 15 electorates facing rental stress swung towards Liberal/Nationals on Saturday.

In WA, where mortgage stress is quite severe, the prospect of removing negative gearing and changes to the capital gains tax discount would definitely have been in the mind of voters.

The prospect of these policies adding to voters’ mortgage and rental stress was enough to influence their election choices.

In this election, Labor’s polices are being seen as a direct attack – not only those who had property, but any Australian who saw property as a way to progress wealth wise, and whilst less than 8% of Australian’s own a investment property, a much larger number see it as something they would like to work towards and saw the ALP making that harder for them.

Moving Forward

We believe any policies affecting investment property will be off the table for at least two decades now – so at the very least people can continue with their property plans. It means that the demand for property will remain, thus soaking up the excess units quicker than if the ALP made changes to negative gearing. It also means that with more investors in the market, rents will not sky rocket.

It is one thing to give a fair go to young people to get into the market, and it is another to take away equity from people have worked hard and saved for it. This is the challenge. The bottom line is, if you want to get into the property market, you need to have saved for a deposit. In my opinion, dropping house prices from $800k to $700k means at 80% borrowing, a new buyer now only needs to save $140k vs $160k + stamp duty. The issue and barrier to entry is not the $20k – thus its not the $100k price difference in property. The issue is saving and more needs to be done to encourage people to save to be able to enter the market

What will happen now?

Whilst there is some positive sentiment in the market, assisted by some banks having reduced interest rates, the rate of decline decelerating and APRA have reducing limits on what they considered to be mortgage serviceability (huge news), there are other factors to consider.

Not all credit tightening measures have been removed. Also, there is still the challenges of wages and affordability. Scott Morrison’s First Home Buyer Loan scheme, which is set to kick off from 1st Jan, will probably have little impact in reinvigorating the market, due ti the strict eligibility criteria.

The bottom line is, this down-cycle needs to come to full completion before confidence and investors return.

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