What Labor’s Win Means For Our Local Property Market
Does Labor’s win on 21 May have ramifications for our local property market?
Labor’s win on 21 May brings to an end almost a decade of Coalition rule. The result signified a real changing of political alignments, with several inner Sydney seats, including Wentworth, changing from Liberal Party strongholds to independent hands. But can we expect Labor’s victory to change the local property market? We look at some of the ways it could.
A focus on housing affordability
The Albanese-led Labor Party went into the election campaign with a pledge to make housing more affordable, especially for the many people still renting who would like to buy. Labor’s centrepiece policy for achieving this is the ‘Help to Buy’ Scheme, which it says should cut the amount people have to spend on their first homes by up to 40%.
Help to Buy works by having the Commonwealth Government make an ‘equity contribution’ of up to 40% of a new home’s value or 30% for an existing home. This means someone can get into the market with a deposit of just 2% – while paying both a smaller mortgage and avoiding lender’s mortgage insurance (LMI). The new homeowner doesn’t pay any rent on the government-owned portion of the home.
The scheme caps both the value of the property ($950,000 in metropolitan Sydney) and the income of the homeowner ($90,000 for an individual or $120,000 for a couple). If a homeowner’s salary exceeds that threshold for two consecutive years, they must begin to start repaying the government for its portion of the property.
Labor says the scheme should open up the possibility of homeownership to more low and middle-income earners, who have been locked out of inner-city property markets. As a result, we may see more economic diversity in our local area, as well as a greater likelihood that many who work in low-paid but necessary jobs can afford to live closer to where they work.
Importantly, it could also contribute to housing affordability without reducing the value of the property more generally. In fact, it could even help push prices higher, particularly for entry-level properties.
An increased commitment to going green
One of the real themes of the election was the strong performance of environmentally conscious candidates. When the final counting is over, the Australian Greens are likely to pick up as many as four lower house seats, as well as 12 Senate positions – effectively holding the balance of power in the Upper House. Meanwhile, ‘teal’ candidates, including Allegra Spender in Wentworth, gained many traditionally safe Liberal Seats in Sydney and Melbourne, and even in one in Perth.
The Greens have a policy of building “new, affordable, accessible and sustainable new homes”. Meanwhile, our new local member, Allegra Spender, has a stated policy of “support[ing] all Australians to make their homes and businesses more energy-efficient and cheaper to run”.
Given the government may have to rely on these votes to pass legislation, it’s likely we’ll also see an increased commitment to green construction and sustainability more generally.
A general uptick in property market activity?
As we noted in a previous article, the lead up to an election is generally accompanied by a decline in property market activity. But once it’s over and the results are known, both buyers and sellers return.
This was particularly evident three years ago in the 2019 campaign when the then Shorten-led ALP took policies to the election that focused on improving housing affordability by abolishing negative gearing and cutting the CGT discount on the property – measures widely seen as likely to reduce the value of the real estate.
Back then, property market activity all but stalled in the months prior to the election but, after the Coalition was returned, we saw a market boom, with prices lifting 6.2% in the final quarter of the year, according to CoreLogic.
This time around we don’t expect to see a market rise that’s quite as dramatic. However, markets do like certainty, so simply the fact that the result is known means we expect to see a return to greater levels of activity, with more people looking to buy, and more properties listed for sale.
That said, there are still lingering doubts about the economy more generally, especially with inflation so high., interest rates rising and the cost of living becoming more expensive.
These factors will still be present in the market, meaning we’re unlikely to return to the extraordinary boom conditions we saw in 2021.
If you’d like to find out more about buying or selling in Sydney’s Eastern suburbs, get in touch with our team today.
Photo credits: Anthony Albanese: https://en.wikipedia.org/wiki/Anthony_Albanese
Labor Party Logo: https://en.wikipedia.org/wiki/Australian_Labor_Party