Just days following Labor’s shock election loss, some of Sydney’s leading real estate agents are already reporting an uptick in inquiry from investors relieved that proposed changes to negative gearing and capital gains tax are off the table.
Tom Tuxworth, director of NSW metropolitan and regional sales at Savills, said that he had been talking with 150 clients by the telephone since Saturday’s election, and that most were “more upbeat about future values” following the result.
Changes to negative gearing and the rate of CGT, proposed as part of Labor’s election platform, had been a drag on market participation in the first half of 2019, Mr Tuxworth said.
“It’s a huge positive that those reforms are not coming into place,” he said.
Labor had proposed ending the use of negative gearing for existing properties from 2020 as well as halving the current CGT discount from 50 per cent 25 per cent.
Mr Tuxworth said while owners who had held commercial assets long-term likely had less exposure to negative gearing, owing to huge increases in industrial and office rents in markets such as Sydney’s, Labor’s proposed changes to negative gearing were driving away new buyers, more so than changes to the CGT discount.
Nicholas Heaton, head of private clients at CBRE NSW, said that the uptick in investor sentiment was already on display on Monday, pointing to the launch of the sales campaign of 27-33 Goulburn Street, Haymarket.
“We have had a record amount of inquiry for [that] office building today. In the first 24 hours of the campaign we have received 362 inquiries and believe it’s in direct correlation to the Coalition regaining a majority,” he said.
Mr Heaton’s colleague, CBRE associate director Gemma Isgro, said without buyers being wary of looming tax changes, the commercial market would be “sharply shifting from a buyers’ market to a sellers’ market”.
“With the risk of taxation policy changes removed, the property markets in general are expected to continue working through their adjustment cycle. These proposed policies would have been detrimental to the property market, seeing rents rise and capital values fall,” Ms Isgro said.
Harry Bui, national director of metro sales at Colliers International, said smaller investors had been particularly affected by Labor’s proposed changes.
“Smaller mum-and-dad investors are now at ease. The proposed changes to negative gearing [and] capital gains tax had been perceived by the market as detrimental,” he said.
“The re-election of the Coalition is a real change from what the property market was preparing for, which will provide steady confidence for property investors for period to come.”
Anticipation of Labor win a drag on participation
All four agents said that anticipation of what was seen as a guaranteed win for Labor had been a drag on buyer sentiment in the first half of 2019.
“Buyer sentiment and confidence has not been as strong in the anticipation of a Labor government,” said Ms Isgro, adding that “buyers have been more nervous to transact with the recent volatility in the political leadership”.
Mr Tuxworth said this sentiment had “absolutely impacted inquiry and participation”.
“Two years ago you would have seen six or seven potential bidders and we’ve seen that halve,” he said.
Beyond the key issues of CGT and negative gearing, Mr Tuxworth believed that buyer sentiment would now improve.
“Without political bias, the Coalition win I believe is a sensible result for the Australian economy. It will have a positive impact on the property market with the continuity and stability of sound economic management and confidence without the threat of increased taxes,” he said, adding that “rates remain low and there’s still money from overseas markets”.
Mr Heaton said the fact that the commercial sector had been able to weather a barrage of negative events in recent months meant it was in good standing to capitalise on an uptick in buyer sentiment.
his was primarily due to the small volume of assets available for sale.
reference: