With the latest Federal Election now over and to the surprise of many, Scott Morrison has remained as Prime Minister. Now, many of our clients are asking what this means for them as property owners and investors. So here are the key things you can expect under the Coalition Government that influence the property market.
1. No changes to negative gearing and capital gains tax
Labour’s talk of negative gearing and capital gains tax reforms created uncertainty for investors. These policy changes are now off the table and investors have certainty around their future investment strategies. This is good news for property investors.
2. Tax cuts for personal income earners
The Coalition government’s proposed personal income tax cuts will put more money in workers’ pockets each year and ultimately “support consumption growth and ease cost of living pressures” (https://www.liberal.org.au/budget#taxrelief) – which is good for the housing market.
3. Company tax rates to be reduced and instant asset write-off to be increased and expanded
The company tax rate for small and medium-sized companies with an annual turnover of less than $50 million will be lowered to 25% by 2021-22 and the instant asset write-off threshold will be increased to $30,000 and access expanded to medium-sized businesses with an annual turnover of less than $50 million (https://www.liberal.org.au/budget#taxrelief). These policies will stimulate small to medium business growth, jobs and the economy – which is good for the housing market.
4. First home buyers can purchase a home with only 5% deposit without having to pay for mortgage insurance
This policy came into play a week before the election as Labour supported it. It reduces mortgage costs for first home buyers as they no longer have to cover mortgage insurance when they have less than 20% deposit. Instead the Government will provide security. For more information click here.
5. Franking credits will remain in place
Labour’s proposal to return the dividend imputation system back to what it was prior to 2001, will not be implemented. This means that the $5 billion+ per year will continue to be provided as cash refunds by the government to share holders who have not used their franking credits to offset tax. If you’d like more information have a read of this post.
6. No change to payment structure for mortgage brokers for at least 3 years
Labour proposed to make immediate changes to the payment structure for mortgage brokers, which could have resulted in a lot of mortgage brokers shutting up shop, decreased competition for the big banks. See this article for more info. The Coalition Government indicated, after the Hayne Royal Commission, that they would review the payment system in 3 years time, so at this stage it is business as usual.
What this means for property investors?
With the Liberal government staying on board and negative gearing changes off the table, confidence for investors is returning. A softening of assessment rates is also looking likely in the early part of July, which will also help investors, as it should lead to higher lending amounts being approved.
What this means for home owners?
With confidence around government policy we are already seeing immediate rate reductions, particularly in the fixed rate space, with as low as 2.99% currently being offered. Many lenders are offering highly competitive rates. It is also likely that the RBA cash rate will be reduced to 1.25% next week, which should see the banks pass on further rate reductions.
What this means for the housing market?
We agree with Micheal’s statement:
“The results will bring a level of certainty and this means our housing markets are likely to pick up by the end of the year or early next year.” (Micheal Yardney and Dr Andrew Wilson).
Have you got a dream that we can help you with? Whether you want to save money on your current mortgage, consolidate debts, access extra cash or get your first home loan, we can help.