We now have a new Federal Government and with that comes change in leadership, policies and the way the country is run. The changing of the guard also comes at an interesting time for our economy and our property markets with significant change in both since the start of the year.
With what we know so far about the new Labor Government’s policies, what does it mean for the property market?
Complicated economic outlook and a slower moving property market
We are currently in a complicated economic environment. Inflation is very high and a lot of the forces driving it up are out of our control. Off the back of this, interest rates are on the move with increases expected to continue for the rest of the year. More positively, we are seeing strong economic growth and low unemployment. Our international borders have reopened which means international migration is starting up again. The balance between keeping the economy in growth mode while ensuring inflation doesn’t get out of hand is a complicated one.
After the red hot price increases last year, house prices have calmed. We are still seeing growth in most places but that growth is more sustainable and an easier market for people to transact in. Affordability is unlikely to improve significantly this year. While house price growth is calming, rents are on the rise and construction costs continue to accelerate. However, rents and housing supply will need to be a focus of the new government.
Greater focus on sustainability
Sustainability is a major focus of the new government and some called the win a “green slide”. Climate change was a focus in the election and many of the first policies coming out relate to reducing emission targets, reviewing environmental legislation, establishing a national Environmental Protection Authority (EPA) and heightened disclosure for businesses.
There are potentially a lot of implications for property. Getting to new zero will require changes to the way power is generated and the way that households will use it. Electric vehicle use is being encouraged which will increase demand for suitable power supplies, new builds could be required to have more solar, battery or water recycling features and owners of existing homes may be encouraged to retrofit to make them more sustainable.
First home buyers are a focus
Home ownership is important in Australia as being a renter at retirement means you are more likely to be in an adverse financial situation. It is therefore important that first home buyers remain a focus of the government. There is no easy solution to get first home buyers into the market, although we did see almost record levels of activity in 2021 off the back of a slower moving market and lots of government incentives.
The Labor Government has plans to implement a shared equity scheme where the government would own a 30 to 40 per cent share of a home purchased by a middle or low income first home buyer. Although the scheme will inflate prices, it will allow people to get into the market who would otherwise find it difficult.
More social housing
Shelter is a basic human need and if there is any part of the housing market that the government should intervene in, it is to provide housing for people who would otherwise not be able to afford it. Australia does not have enough social housing – although population growth has risen by a third over the past 20 years, the stock of social housing has barely moved.
A key election policy by the new government was to create a $10 billion Housing Australia Future Fund which will build 30,000 new social and affordable housing properties in its first five years. This will go some way to addressing the challenges of those at risk of homelessness but also for key workers who can’t live close to where they work because of affordability challenges.