How the election results will affect the new development market

The Coalition’s unexpected victory last month came as a welcome surprise for developers, who are already seeing a positive future for new and off-the-plan housing projects.  

They say the election has reversed negative sentiment that had crippled the new development market over the past few years.

“It’s been very difficult to achieve sales in the past 12 months,” says Matt Malseed, managing director of Hamton Property Group. “The mood is definitely positive since the election.

“You only have to read the papers to see a substantial change in rhetoric, and a lot of commentators are suggesting that the election result and the removal of uncertainty should reduce the size and duration of the downturn.”

Chief among developer concerns was Labor’s pledge to limit property tax concessions such as negative gearing and capital gains tax. Labor advocates have argued that such proposals would improve housing affordability and reduce entrenched inequalities in the market.

But property investors won out.

The Coalition has promised to keep negative gearing and capital gains tax policies that help investors.

“With negative gearing and capital gains tasks remaining unchanged, that provides the certainty that should support investment in property,” says Malseed.

Domain economist Trent Wiltshire says the Coalition’s victory may indeed result in an earlier-than-expected recovery for the market.  

“This is because Labor’s proposed changes to negative gearing had weighed on prices and were expected to push down prices a bit further. So this might be unwinding a bit, seeing prices stabilise,” Wiltshire says. “When prices stabilise, investors will be more likely to come back into the off-the-plan market.”

Though it’s too early for any concrete data on the financial impact of the election, CBRE director Ben Stewart says he has already seen a 50 per cent uptick in inquiries across all their Sydney projects.

“Inquiries are really back,” he says. “I suppose people were sitting on the fence and are quite surprised by the election results.”

Anthony Bray, managing director of Tomorrow Agency/Media Plus. agrees that the sentiment following the federal election has been positive.

“Following the election we have seen an increased level of activity from our developer clients, both in land and the apartment space,” he says.

“On the consumer side, we have noticed an increased level of inquiry [up 6 per cent within two weeks] and our developers and project marketer clients have been reporting on increased sales volumes. It would appear that the election result, coupled with the recent APRA news, has brought new buyers back into the market”.

Another Coalition policy to attract attention before the election was its plan to help a select group of 10,000 first-home buyers purchase a house with a 5 per cent deposit (the idea was eventually matched by Labor).

Critics have argued that the scheme would only benefit a small number of first-home buyers, and could push up the cost of homes in their price bracket.

Stewart says the plan is likely to draw in first-home buyers, who will also benefit from more relaxed lending criteria. The Australian Prudential Regulation Authority (APRA) has also suggested that banks should ease up on mortgage lending restrictions, while the Reserve Bank of Australia cut interest rates on Tuesday. 

“The criteria are getting easier, which will give us a wider spread of buyers,” says Stewart. “I think first-home buyers will be a strong part of the market in the coming 12 months, and people who are already owner-occupiers will have more confidence moving into a downsizer, empty-nester market.”

Malseed says much of the market’s response to the election is likely to depend more on attitude than actual policy.

“It may be that the first-home buyer policy does more in terms of sentiment than it does in terms of actually helping individual first-home buyers,” he says. “A big part of the way the market works is driven by sentiment. So all the negativity in the last few years seems to have turned.”