The 2022 federal election is going to be called any day now, an event that will always have some effect on the Australian housing market.
But just what will the impact be for those ready to sell? And how could the outcome of the election affect things moving forward?
As we did with our budget analysis, we spoke to BuyersBuyers co-founder and all-around property and macroeconomics expert Pete Wargent to understand what’s in store.
How does an election typically affect the housing market?
The five-odd weeks between the calling of a federal election and polling day is generally a time marked by caution and a wait-and-see attitude.
“Typically it does cause people to have pause before making a commitment. Historically it has related to a slowing in activity,” Mr Wargent said.
This was especially the case during the 2019 election campaign when Labor was proposing some major changes to the tax system, particularly policies around negative gearing and capital gains, which would have had big implications for the property market.
As a result, Mr Wargent said there was a huge drop in market activity in the lead up to that election, although things rebounded quickly soon after the conclusion.
What’s in store for the 2022 election?
It seems clear that we’re not in for a repeat of 2019 thanks to both parties going into the election with a more similar approach.
“With the Coalition, you know what you’re getting. They’ve been in power for a long time now, so I don’t think there will be too many surprises there,” Mr Wargent explained.
“This time around, Labor have said they’ll keep negative gearing laws as is, and also they’ve also gone with a regional first home buyer policy.”
Neither party seems to be willing to rock the boat too much when it comes to the housing market, so buyers and sellers should be able to go about their business with more confidence, feeling that there won’t be any major shake-up regardless of the election result.
“The impacts will certainly be less than in 2019, but even then there is some caution around usually in the election run-up. It might just see a bit of a slowing in terms of transactions in May.”
How is the market looking beyond May 2022?
If the outcome of the election is unlikely to shift things in the property market too much in one direction or another, it’s important to look at what other factors are predicted to have an impact later this year.
“The bigger question will be how patient the Reserve Bank is prepared to be on interest rates—and when they do hike interest rates, how far do they get? That will have a far bigger impact on the market than who’s in government,” Mr Wargent said.
Westpac is now expecting the RBA to begin raising interest rates in June, with a peak of 2.0 per cent forecast in 2023.
With the cash rate currently set at 0.1 per cent, that’s going to have a very substantial effect on how much buyers can borrow and, in turn, property prices.
Predictions go as far as a -14 per cent fall in home values by 2024, and while that seems to be a worst-case scenario, the conditions that have been so favourable to sellers over the past 15 months do look to be ready to shift towards a more balanced or pro-buyer market.
So, while there may be some lull in activity while the election campaign gets underway, the implication of interest rate hikes means whatever unfolds in the second half of this year could be far more significant.
If you’re thinking of selling this year, speaking to a top local agent about the changing market dynamics in your area is a great way to understand when and how to move forward.
Article Source: www.openagent.com.au