How The Federal Election Is Impacting The Property Market
The upcoming election is being closely fought, especially here in Sydney’s eastern suburbs.
So how is it impacting the property market?
The federal election is being closely fought – and nowhere more so than here in Sydney’s eastern suburbs, with the seat of Wentworth seemingly becoming one of the tightest in the country. But what impact is it having on the property market? And what can we expect once the election is over?
How elections tend to impact the property market
Generally, the lead up to a federal election is accompanied by a decline in property market activity, with buyers and sellers holding off and taking a ‘wait and see’ approach. But this isn’t always the case.
In 2007, when Labor swept to victory (Remember Kevin 07?), Australia was in the midst of an economic boom, with inflation also rising rapidly. In a move eerily similar to today, the RBA was forced to lift the official cash rate just over two weeks before the election. Although, the RBA’s 0.25% rise took the official cash rate to 7% – a long way from the 0.35% where it stands right now. The rise had very little impact on the property market, with Sydney prices continuing to rise. It wasn’t until the GFC struck in late 2008 that we saw prices begin to fall.
Our last federal election in 2019 was the exact opposite with prices falling and property market activity stalling in the lead up to election day, in part because the Shorten-led Labor Party, as opposition at that time, was favoured to win the election. The ALP had stated policies of improving housing affordability by abolishing negative gearing and removing the CGT discount on investment properties. This led many to worry about prices tumbling once the election was over.
Instead, when the Morrison-led Liberal Party won, we saw an incredible release, with buyers coming into the market in big numbers and the property market reversing the losses from earlier in the year.
Other factors at play right now
In 2022, Labor is once again the bookmakers’ favourite but this time around the election isn’t having quite the same impact on property market activity. The ALP has dropped its negative gearing and CGT policies and there simply isn’t the same fear among property owners and investors.
While we’re seeing some buyers and sellers holding off still, it isn’t on the same scale. Instead, there are other factors at play.
Unlike 2019, we’ve come off a period of exceptionally strong growth in property values. Between mid-2020 and the start of 2022, the median Sydney house price rose almost 25%. And, in parts of Sydney’s eastern suburbs, values have grown more than 50%. Instead of low activity like in 2019, we’ve actually been seeing more properties come to market, with SQM reporting a month-on-month growth in listings each month so far this year.
Combined with this, the RBA’s decision to lift interest rates seems to be having an effect – not necessarily because people can’t afford an extra 0.25% on their home loans but more because they are concerned it will be the first of several rate rises. A lot of people have factored this into what they’re prepared to borrow, and lenders have also factored it into what they’re prepared to lend.
People are now also concerned about the economy more generally, especially when it comes to the impact inflation is likely to have.
What to expect for the rest of 2022
With this in mind, we expect that we’ll see more buyers come into the market once the election is over but it’s unlikely that we’ll see a dramatic change in conditions like we did in 2019.
While some may feel that they’ve missed the boat by not listing their property during 2021’s rising market, these are, in fact, much better conditions in which to buy and sell, regardless of whether you’re upgrading or downsizing.
After all, you’ll have locked in the gains over the past couple of years and, with the heat taken out of the market, you’ll have more time to find the right property for your next step – something that’s just as important as getting the best price for the home you’re selling.
If you’d like to find out more about the property market in Sydney’s eastern suburbs, get in touch with our team today.