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What does a Labor government mean for the property market?

May 26, 2022 10:00 am by Upside

After almost a decade of the Coalition sitting in power, the Labor party will be taking up the mantle, bringing a raft of reforms designed to address the many areas of concern for the property market.

Housing was a defining issue in the Federal election, amidst a backdrop of rising interest rates and housing affordability concerns for those renting and those yet to step foot into the property market. So, aas Anthony Albanese steps up to the helm as the 31st Prime Minister of Australia, what does this mean for the property market?

The ALP has emphasised a major focus on affordable property, with particular attention on buyers, including first-timers. Here are the policies the Labor government has promised to enact:

Help to Buy

Labor’s headline ‘Help to Buy’ scheme aims to provide a more affordable entry point for prospective home buyers into the Australian property market, targeting those on low to mid income levels. Albanese has said that "Help to Buy is part of Labor’s plan to tackle the housing crisis."

This scheme will see the Labor government providing eligible home buyers an equity contribution of up to 40% of the purchase price of a new home, and up to 30% of the purchase price for an existing home.

This scheme, commencing July 2022 will be open to 10,000 Australians every year but eligible buyers must:

  • Earn less than $90,000 a year or if you’re a couple $120,000
  • Have a deposit of at least 2% worth of the property
  • Not own any other property or investment properties
  • Must live in the property they are taking ownership of

Home buyers are also able to buy an additional stake in the property when they are able to, without having to pay rent on the portion of the home that is owned by the government. The government will recover its stake and share of the capital gain when the home is sold.

While only 10,000 Australians can participate in the scheme annually, our new government has forecasted that "This will help a lot of Australians buy a home with a smaller mortgage that they can afford to repay, instead of renting for the rest of their lives."

Slated to be a popular offering for first-time buyers, Tim Lawless, Head of Research at CoreLogic has warned of the risks associated with buying on such a small deposit, stating “With the housing market probably heading into a downturn over the coming year or years, some buyers may find their home is worth less than the debt held against it,”

It’s important to know if the government will share in the downside risk if the property is sold while in a negative equity situation.”

He further indicated the ‘Help to Buy’ scheme may only be addressing the symptoms of housing affordability, much more than fixing the underlying issues, but conceded that the limited 10,000 applicant per year allocation, along with caps on the price of home purchase and income should help alleviate excess demand that could impact overall home prices.

Number and proportion of suburbs meeting the Labor housing price thresholds:

Policy region Price cap No. of suburbs (houses) % of suburbs (houses) No. of suburbs (units) % of suburbs (units)
Sydney and NSW Regional Centres $950,000 214 26.8% 259 67.1%
Regional NSW $600,000 136 37.9% 52 77.6%
Melbourne and Vic Regional Centres $850,000 138 31.1% 237 87.1%
Regional Vic $550,000 81 42.2% 37 94.9%
Brisbane and Qld Regional Centres $650,000 101 21.0% 186 76.2%
Regional Qld $500,000 224 64.9% 68 98.6%
Adelaide $550,000 58 18.7% 102 98.1%
Regional SA $400,000 56 62.9% 2 100.0%
Perth $550,000 113 39.0% 85 89.5%
Regional WA $400,000 60 44.4% 6 100.0%
Hobart $550,000 5 10.6% 4 40.0%
Regional Tas $400,000 10 14.3% 4 50.0%
NT $550,000 25 51.0% 14 100.0%
ACT $600,000 1 1.2% 21 42.0%
TOTAL 1,222 33.1% 1,077 78.8%
Source: CoreLogic

Regional First Home Guarantee

One of the other major programs is the Regional First Home Guarantee, an expansion of the ‘First Home Guarantee’ and similar to the Help to Buy scheme, aimed toward first home buyers but for those in regional areas.

Available to 10,000 Australians living in regional areas, the program will see approved buyers purchase a home with as little as a 5% deposit, without needing to pay lenders’ mortgage insurance.

According to CoreLogic, house prices in regional areas increased by 26% in 2021, an astronomical rise attributed in part to lifestyle buyers who have moved away from the expensive cost of housing in capital cities such as Sydney and Melbourne.

To be eligible for the Regional First Home Guarantee, the applicant must:

  • Be a buyer who has lived in the region in which they apply from for more than 12 months
  • Be living in the house they are taking ownership of
  • Have a taxable income of up to $125,000 per year for singles and $200,000 a year for couples.

Housing Supply and Affordability Council

Labor has promised a National Housing Supply and Affordability Council to ensure the Commonwealth plays a leadership role in increasing the number of new dwellings.

The party will establish a national council which will aim to:

  • Take leadership roles in setting land supply targets in consultation with state and territory governments
  • Establish a housing data warehouse focused on housing supply, demand and affordability
  • Advise on town planning policies and land supply
  • Report on government-owned land releases, rental affordability, homelessness, and the number of new social and affordable homes built annually
  • Advise on appropriate housing measures within all current and future city and regional deals

The council will reportedly be comprised of leading experts from the fields of economics, urban development, residential construction, urban planning and social housing sectors.

Negative gearing

Although Labor had proposed changes to negative gearing in July 2021, they have now made promises to “maintain existing regimes for negative gearing and capital gains tax” for their tenure in power for the time being.

What impact will an Albanese government have on house prices?

The ALP is set to implement a range of initiatives that aim to address the biggest issues facing Australia’s property market, including housing affordability and availability, but the proposed policies will only have a minor impact on Australia’s housing market in comparison to rising interest rates and low supply.

Housing market demand continues to be driven by employment and wage growth, and with job vacancies at record highs, the labour market seems to be in great strength.

Regardless of the election results, interest rates would have also continued to rise, the result of which is highly likely to impact home prices in the coming months.

Thinking of selling? Sellers considering making a move are being urged to list sooner rather than later to take advantage of more favourable conditions before the market changes.

Start with a no-obligation and free property appraisal with your local Upside agent to see how your local suburb market has been performing, and where your property sits in comparison.

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