The Federal Budget has now been released and in it came plenty of handouts but not many new housing policies as such.
Now, with the Federal Election still a few weeks away that could change, but as I see it investors are perfectly placed to buy now.
Before you say, “Daniel, of course you would think that”, just hear me out.
Let’s consider the major policies of the two main political parties.
Economic stimulation
As was sung from the roof-tops last night, the Federal Budget will soon be back in black for the first time in more than a decade.
It appears the LNP has done its job, like it often does, and got our nation’s accounts back in order, which is no mean feat given the GFC was only a little over a decade ago.
Now that there is seemingly some extra cash floating around, they have announced $100 billion in major infrastructure projects over the next decade, which will stimulate the economy generally.
The federal budget also revealed tax cuts for middle income earners, who usually miss out on anything much, will result in a kickstart in our retail sector after 1 July.
Creating more job opportunities – such as the promise of 80,000 new apprenticeships – generally will also see our economy start to strengthen over the short- to medium-term.
Another solid economic policy from the federal budget is the reduction in the small business company tax rate to 25 per cent, which enables business owners to expand and hire more staff.
Ditto, with the increase to the small business asset write-off to $30,000, which will incentivize businesses to spend money on a variety of products.
All in all, the LNP is heading to the election with an economy that is in good shape as well as a number of policies to stimulate growth, both of which work to strengthen property markets.
Negative gearing to go
On the other hand, the ALP maybe pinning its hopes on the fact that it is ahead in the polls and therefore probably already have one foot in The Lodge.
However, most of its policies also aim to stimulate the economy and fund essential services such as health and aged care, however, its point of difference is when it comes to housing.
As I written about before, the ALP has announced a policy that will restrict negative gearing to new properties as well as slash the Capital Gains Tax discount from 50 per cent to 25 per cent.
Last week, they announced that, should they win office, they will implement the policy from 1 January 2020.
They have previously indicated that the policy will be grandfathered, meaning current investors will not be impacted.
In fact, given we have a start date of 1 January next year, that means that investors who buy before that date will not affected.
Now that we have the proposed start date, savvy investors are acting now to ensure they are included in the grandfathering provision before the start of next year.
What is helping them do so is the renewed push for investment loans from lenders now that the banking royal commission is over and done with.
While sophisticated investors understand that negative gearing is not a strategy but a moment in time, it is still worth their while to utilise tax deductions if they can.
They know that after a few years their properties will be neutrally or positively geared, however, if they have the ability to offset some of the costs during the first few years of ownership they might as well.
From 1 January next year, unless investors buy new properties – and most smart ones don’t – then that taxation benefit will no longer be around.
So, regardless of your political persuasion, that is why I believe now is the hour to invest.
The economy looks set to strengthen under LNP, while negative gearing will also be axed under the ALP.
Either way, investors currently have the opportunity to make the most of the market, and the most of beneficial taxation policies.
