2019 Federal Election Review
Now the dust has settled following the surprise results of the 2019 federal election, what can property investors expect for the foreseeable future?
Many in the property investment space are rejoicing as Labor’s proposed changes to Capital Gains Tax (CTG) and negative gearing won’t come to fruition. The stable government and continuation of ‘tax perks’ are sure to encourage investors in the property space, which in turn will strengthen the market.
Negative gearing and Capital Gains Tax recap
In the lead up to the election we covered what to expect from both major parties in relation to property investment. Two of the hottest topics were potential changes to negative gearing and CTG. The Liberal government are leaving the current structure in place, meaning Australians are able to deduct losses on their investment property from their annual taxable income. They will also still be able to claim a 50 percent tax discount on profits made from the sale of an asset that’s been owned for 12 months or more.
The rise of the build-to-rent model
Labor’s proposal to halve the withholding taxes on managed investment trusts, where income is coming from build-to-rent assets, will not be going ahead. Even so, the much anticipated build-to-rent model is still expected to make a more secure mark on the Australian market with both negative gearing and CGT policies remaining intact. Build-to-rent sees developers building large scale apartment buildings with the express purpose of renting them out rather than making a profit from the sale.
"Australians are able to deduct losses on their investment property from their annual taxable income"
The cut to interest rates
On Wednesday 5th of June, the Reserve Bank of Australia announced that it had cut the interest rate to a historic low of 1.25 per cent. Whilst it may seem like good news for all Australians, there are still winners and losers that will come out of this move.
Property owners are the big winners out of the interest rate drop as it means people can borrow more and house prices should improve or at the very least we should see some stabilisation in the market.
On the flip side, this could mean bad news for first home buyers as house prices may continue to rise and they may find it harder to save for a deposit as banks will likely cut their interest rates on savings accounts.
Having said that, with lower interest rates, we should see more property buyers in the market, which in turn should pick the Australian property market back up by the end of 2019.
The Morrison Government has guaranteed no new taxes on housing and has promised to cut income tax. This will ultimately mean more money in the average Australian’s pocket and is great news for property investors in a number of ways:
- Renters will have more disposable income to spend on rental properties and may be looking to upgrade.
- The property market is expected to strengthen as investors feel secure.
- Property owners will have more disposable income to upgrade their investment properties and make them even more attractive to tenants.
First home buyers
The First Home Loan Deposit Scheme is promising to give first home buyers better access to financing, which will impact property investors in a number of ways.
Firstly, it may drive the lower end of the market up. So if you’re thinking of expanding your portfolio at the lower end of the property market, you may have increased competition and will likely be paying top dollar.
Secondly, this may see more high-end property renters buy their own home, thus decreasing demand in the high-end of the rental market.
How transport is shifting property trends
Rural and outer city properties will soon become a much more attractive option as the federal government has pledged $100 billion into ‘congestion busting’ transport.
With projects like the fast train from Geelong to Melbourne going full steam ahead, properties further from major cities will become a viable rental option for many Australians.
Additionally the Liberal government has promised $25 million to the National Housing Finance and Investment Corporation (NHFIC), an organisation tasked with conducting comprehensive research into the Australian property market, improving housing affordability and supporting first home buyers.
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The views, information, or opinions expressed in this blog post are for general information purposes only and should not be relied upon. We have not taken into account specific situations, facts or circumstances, and no part of this blog post constitutes personal financial, legal, or tax advice to you. You should seek tax advice from your accountant, specific to your situation.