Federal election uncertainty rocks housing market

If there’s one thing that an industry like real estate doesn’t enjoy, it’s political uncertainty. Ours is a sector that is heavily affected by government mandate, with new legislation either pushing property towards new heights or cutting it off at the knee.

As such, the recent results of the Federal election likely have a fair few people tugging at their collars in anxiety. Each major political party has very different ideas about the future of housing, and the fact that it isn’t particularly clear cut as to whom is going to come into power could have severe effects on the market.

What could the current uncertainty mean for real estate?

The question of negative gearing

Firstly, there is the ever-present question of negative gearing. For those not in the know, the Labor party has proposed that negative gearing be scrapped for established properties, limiting it only to new builds.

While any current investment properties that use negative gearing would be grandfathered (i.e. still continue under the old system), there have been a number of campaigns from a slew of bodies describing how this new system would not work as intended, nor affect who it is designed to affect. With a Labor government potentially coming into power, many people who are interested in investing in Melbourne real estate are likely reconsidering their current strategies, just in case the new negative gearing and associated capital gains tax changes come into effect.

The indirect effects

However, there is more at stake than simple legislation as well. Most political events, elections included, tend to have an adverse effect on the financial market as a whole. A good example of this overseas would be the infamous Brexit vote, which saw Britain lose its AAA credit rating as a country and the pound sterling drop to values not seen for decades.

There are reports that a similar situation could happen in Australia too, as a result of the current uncertainty. The Australian dollar is likely to be affected, while the Big Four Banks may have trouble with achieving credit themselves – an issue that would inevitably be passed on to the average consumer.

As a result, should the uncertainty persist, there could be a new batch of higher interest rates on the way for your home loan. Purchasing real estate in Melbourne, as a result, could become harder for those who don’t already have equity to access to smooth the path.

It is still early days, however, and the hung parliament could soon be resolved with the formation of a minority government. Time will tell if that is for the better or for the worse. In the meantime, make sure you get in touch with the team at Nelson Alexander today if you want to make the most of your first home loan, or expand your current investment portfolio.