In 1981 the chart smash hit ‘Physical’ was released by Australia’s favourite daughter Olivia Newton-John (aka Sandy from Grease). *Fun fact, that song was also offered to Tina Turner and Rod Stewart who turned it down (an offer I’m sure they regretted turning down…ahh the parallels in real estate!).
What does that have to do with this week’s newsletter I hear you ask? Well nothing, except that I kind of liked the play on words ‘let’s get political’.
For anyone watching the world of property in Australia under the current Labor government you may have noticed that the winds of change are blowing, because they are.
In recent years, legislation changes have made owning an investment property just too much of a headache for many. I’ll stay neutral in this space but it’s irrefutable that the pendulum has well and truly swung in favour of tenants.
These ownership headaches have been accompanied by rising land tax, increased density promoting development and now clear messaging that capital gains tax discounts are being reviewed. It’s pretty obvious that the government is hell-bent on making property investment far less attractive than it has been in recent decades.
Unsurprisingly the market is starting to take notice and some investors are already tapping out. I’ll press pause here and say the whinge I will make is that I think it’s unfair to change capital gains without grandfathering existing positions. Sure, as an investor myself it’s self-serving but changing the playing field would seem pretty harsh to me.
The point is that the government is making it very clear that they are committed to making structural changes to the Australian market, what impact this will have is impossible to know.
The government is well behind on its new dwelling targets so they are pushing for more supply to enter the marketplace. Will it work? Could the prospect of higher capital gains tax exposure encourage many investors to NOT liquidate their assets? I’m smart enough to know that I don’t know, of course rising interest rates are another factor.
As I’ve been feverishly writing this on my phone I received a notification for a news headline saying ‘Chalmers isn’t feeling positive about negative gearing’. Boy oh boy, last time I heard that a pretty unpopular Liberal leader (Scomo) went on to clean up in the polls…interesting times.
Until next week,
David Murphy