Election Outcome Brings Stability to Residential Property Market

Category: Invest | News
election outcome brings stability to property market

Australian real estate specialist, and ParkTrent Properties Group’s CEO, Ron Cross says the coalition’s reinstatement is a welcome boost to the property market and investors.

Mr Cross believes the proposed changes to negative gearing were a short-sighted move by the Labour party.

“Labour’s proposal to lower the discount on the capital gains tax from 50% to 25% would have caused many to consider alternative future investment strategies.”

“Now that these gearing changes won’t be implemented the market should return to normal relatively quickly.”

Related article: Changes to negative gearing impacts voting decision

Undersupply of housing stock still concerning

“Whilst we expect the market to improve, the Government still needs to be doing more to address the undersupply of housing that will continue to affect the Sydney market,” Mr Cross said.

“We face an ongoing problem in Sydney; a chronic underinvestment in housing product over many years, combined with a growing population, has created a shortage of housing stock in the market. Whilst this has contributed to some enormous price growth seen over 2014 and 2015, it has also severely affected rental accommodation costs.”

“Changes to negative gearing would not have addressed the central supply and demand imbalance facing the Sydney property market. By effectively penalising property investors by changing negative gearing, Labour provided a disincentive to invest in property thereby exacerbating the pre-existing undersupply of housing stock.”

Related article: “Change depreciation, not negative gearing,” says parktrent CEO Ron Cross

Infrastructure investment helps long-term property market stability

Although there is currently a stock shortage across Sydney more broadly, Western Sydney is seeing new estate and land releases due to the announcement of major infrastructure projects such as the Western Sydney Airport, North West Rail Link, North Connex and the Sydney Metro Rail link.

“The reinstatement of the coalition should mean the security of these new infrastructure projects, which creates jobs which results in housing demand. However, this pushes housing prices up which means there is no price relief in the market. Prices will continue to rise which is perfect for investors.”

Mr Cross believes investing in property for the long term is a critical way in which the supply constraint facing the Sydney property market can be reduced.

Investment properties in Sydney and surrounding suburbs

Now is the time to buy with confidence

“Now that all the nervousness around negative gearing will subside, and considering relevant factors including low interest rates, a shortage of properties, and bank lending, the market should improve relatively quickly – so now is the time to buy with confidence,” said Mr Cross.

“The Reserve Bank of Australia left the official interest rates on hold during June and bank interest rates continue at record lows.”

“However, long term capital growth and cash flow are the main advantages of property investment.”

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