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Election a win for the property market

With another election done and largely dusted, and with property matters high on the parties’ agendas, it’s a good time to take a look at its ramifications for buyers, sellers and investors.

Overall, the Liberal National party’s unexpected win over the weekend is good news for property, its stance on allowing negative gearing and the capital gains tax to remain unchanged removing a great deal of uncertainty from the market.

Markets don’t like uncertainty, yet with a good degree of investor caution now quelled, greater certainty is expected to translate into greater confidence and spending, especially given a promised $500m boost for first home buyers and probable further interest rate cuts, the latter perhaps as early as June or July.

With investor incentives remaining in place, and buyers at all price points likely to benefit from imminent initiatives and incentives, the age-old supply and demand equation could well see the property cycle spiralling upwards sooner than expected, which is certainly welcome news for home owners and sellers.

First Home Buyer Loan Deposit Scheme

The Coalition government has promised to underwrite any shortfall in home loan deposits for first-home buyers who can’t reach the 20% deposit that most banks require. The scheme, adopted from New Zealand, will be available to first-home buyers who have been able to save at least 5% of the deposit, and is expected to reduce the time taken to save for a deposit by at least half. Some economists are also tipping this may later translate into a first home buyers’ grant.

Negative Gearing

Briefly speaking, negative gearing is a form of financial leverage whereby an investor borrows money to acquire an income-producing investment, such as property, and the gross income generated by the investment, at least in the short term, is less than the cost of owning and managing the investment. Essentially, this ‘loss’ reduces taxable income, is ideally offset with a capital gain in the future, and usually requires another source of income in the meantime.

For further information on both negative and positive gearing, please see ASIC’s MoneySmart website.

As always, and especially in light of what look to be some positive new direction for the property market, our team of expert consultants across our 10 Noel Jones offices are at your service to assist with all property-related matters.

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