The 2019 Federal Election could turn the property market around or be detrimental.

Between Labor and Liberal, there has been a series of policies announced set to impact the property market today.

Anna Porter, Suburbanite Principal, valuer, author and property commentator explains what your vote means for the property market.

The Liberal Party, was first to tackle the struggling first-home buyers with a 5 per cent deposit loan scheme to reduce the time it would take first-home buyers to save up for the current standard 20% deposit. But will this have a positive impact on the property market?

“Essentially, first home buyers will be putting themselves into highly leveraged positions by getting into property they can’t afford,” says Porter.

“Interest rates are at the lowest they have ever been in Australia but yet people will not only have a mortgage to the bank but also a mortgage to the government,”

“Whilst this will not have a major impact on the property market as the number of first-home buyers eligible for the scheme is capped, this will do no favours for the market overall,” concludes Porter.

Under the Liberal Government, the Banking Royal Commission wrapped up in early 2019. The impact of the findings is already being felt across the property market.

The recommendations under the Commission will likely be implemented in the next term of Government.

“If Liberal implements the recommendations we will potentially see the credit squeeze prolonged,” says Porter.

“This will particularly be painful should vertical integration and ‘cross selling’ be outlawed,”

“Many Australians only get this type of advice because they walked into their bank and if not for this vertical integration they will not get any quality advice in their lifetime on financial services and wealth. Yes, some banks have done it poorly and not had the clients best interest in the process, but it seems that they are throwing the baby out with the bath water here,” says Porter.

“This will result in the wealthy staying wealthy through good advisers being on their team, but everyone else will lack quality advice for buying property, getting loans structured and setting up their retirement and their super,” says Porter.

Additionally, by removing fees for planners placing people into insurance products people will be lead to being underinsured, another form of collateral damage from the Commission.

“The issues around underinsurance of life and trauma and disability cover will lead to more people being underinsured and when a family is impacted by trauma, like illness, death or injury this puts financial stress on a family that does not have appropriate insurance. Often leading to distressed sales of housing assets, so in years to come that in itself will impact the market in various scenarios,” explains Porter.

Alternatively, The Australian Labor Party’s main property scheme is the proposal of significant negative gearing reforms, suggesting property investors who hold existing stock should not be able to claim the negative gearing as a deductible expense come tax time. The twist is, they are looking at still offering negative gearing on new properties but this is another danger on its own.

The negative gearing reform will essentially result in increased net holding costs for investors who own property and some property commentators are suggesting this will have a negative impact on the market.

Anna Porter of Suburbanite says: “negative gearing is simply icing on the cake for investors, it is not the whole cake. Before even worrying about the tax treatment, which is really all negative gearing is, investors need to really understand why they are investing. This is usually not about tax at a fundamental level but rather about wealth building.”

“Only 26% of the market in Australia is made up of investors, around 63% home owners and the remainder in government and community housing. Many of these investors are not the top end of town and are really just Mum and Dad investors with only one property they are relying on to be a major part of the retirement plan or debt reduction strategy prior to retiring,

“At just 26% of the market, it is unlikely the proposed reforms will have a sweeping negative impact on the market as the majority of the property market is driven by people needing somewhere to live which is a tax-free asset. So, tax reform will not change the decisions of 63% of the property owners and buyers,” continues Porter.

Labor is also proposing to kill borrowings within the SMSF space.

“Australians often borrow money within their SMSF to invest in property. This has already been almost entirely affected by most lenders withdrawing from the SMSF lending market,” says Porter.

“We can expect to see less properties bought under this scheme,” concludes Porter.