Fog Now Clearing As Housing Fear-Factor Falls

The fog of uncertainty that has impacted home buyers and sellers over the past year is now clearing with confidence set to gradually return to housing markets sooner rather than later.  

The re-election of the Morrison government is clearly a positive for housing markets with concerns over the impact of the radical property tax changes proposed by the Labor Party now clearly off the table.

Labor policies to significantly reduce negative gearing tax benefits and cut the capital gains tax allowance for residential investors would have undoubtedly acted to continue to stifle market confidence through a lengthy introduction process, regardless of their impact on underlying market dynamics.

The Labor Party is now likely to abandon these controversial policies that were clearly of concern to the electorate as evidenced by the Party’s defeat at the general election.

Policies announced by the returning government that provide a deposit boost to some first home buyers, plus confirmation of significant income tax cuts to be delivered will also act to boost housing market activity.      

The prospect of increased home buyer and seller confidence will be significantly enhanced by the overdue announcement by the Reserve Bank that official interest rates are now set to fall in the near-future and provide a major lift to housing affordability.

Recent announcements by numerous banks of cuts to their mortgage rates designed to boost flagging demand for their products will be enhanced by official rate cuts when passed on.

APRA – the financial regulator, has also announced that the highly-questionable interest rate income stress test level has now been lowered and altered to account for different loan types.

The belated reversal of recent dubious lending policies and interest rate settings that have restricted home lending and provided a key catalyst for reduced activity and subdued confidence is inarguably a welcomed positive for housing markets.   

The clear housing market message to banks, regulators, policymakers and political parties is surely “if it aint broke don’t fix it” – at your peril.

Dr Andrew Wilson is Chief Economist for My Housing Market. A high profile property market commentator, he provides comprehensive property market intelligence to industry, investor groups and the wider community.

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