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Andrew Bell’s Market Wrap: What To Consider Before Negative Gearing Legislation Changes

ByChelsea Gates

Issue 9 |  April 24th |  What To Consider Before Negative Gearing Legislation Changes

Hi, Andrew Bell here and it is great to be with you. I trust all is well in your world.

A little-discussed facet of the real estate market is that people are not turning over their properties as fast as they used to. It used to be that, on average, people would turn over their properties between 3 – 4 years, which of course meant that some people stayed in their properties forever whilst other people would turn over their properties within a year or two. This was driven by a large pool of people who saw real estate as a money-making mechanism rather than buying homes to live in. There were people who made a living out of buying properties, renovating and selling. That trend has eased back significantly as the cost of doing so has become too significant that it is now also a higher risk proposition, and because there is a diminishing number of properties that are old enough to require major renovations. As such, we are starting to see that people are staying in their properties significantly longer.

In the 12-months to July 2018, we saw a variety of turnover rates throughout Australia, with the regional areas having a higher turnover rate than the capital cities. For example: Sydney saw a turnover rate of 4.1% but outside of Sydney it was 5.6%. Regional Tasmania saw the highest level of turnover for all regions with 6.1%, whilst the lowest turnover levels were in Perth at just 3.3%. Closer to home, we see the Gold Coast with quite a higher turnover rate at 7.2%. In fact, on the Gold Coast, there were 18,206 sales out of 253,045 total dwellings. This is a good healthy turnover which does continue to show the strong interest and demand for Gold Coast properties, but we are likely to continue to see the turnover rate soften, particularly in the current climate where there is greater uncertainty about the direction of the real estate market in the medium term.

I have had a significant increase in questions regarding what is going to happen to the real estate market should there be a change of Federal Government at our upcoming Election, and negative gearing be eliminated for the resale residential market. I will cover more of that in upcoming eNewsletter but there is one clear strategy that should be considered.

Anyone who has negative gearing up until the time the new legislation passes through Parliament will retain those negative gearing rights. This is likely to see a significant jump in the number of people looking to buy their investment properties in the period between the Election and the legislation passing Parliament, which could take 2 or 3 months. This is also a very important window of opportunity for sellers of properties to be able to offer their property to that increased number of investors as undoubtedly there will be a pull forward demand by investor buyers pre the change of legislation, and then a significantly smaller number of investor buyers for resale properties after the legislation passes through.

This means some very careful strategy for both buyers and sellers. Key to that is the decision of which party is elected at the upcoming Election which will be in just over a month. Give it some careful thought. It may well be if you have a property ideal for an investor that you should be selling, and we would love to hear from you so we can give you more information around that. If you are wanting to take advantage of negative gearing and the Labor party is elected, then you need to do so before the new legislation passes through Parliament.

Until I am with you in a fortnights time, stay safe.

Kind regards,

Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group

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