On the federal election and its possible impact on the house prices

In 2019, the Australian federal election was held to elect members of the nation’s Parliament, and with this came the rising in house prices. But this year’s election may see a downturn since mortgage holders are expected to face interest rate increases after the elections on the 21st of May. But not all areas in Australia will see some price corrections. Experts are seeing that affordable regional centres, Brisbane and Adelaide are most likely to hold steady.

What could happen to house prices post-election?

Contrary to what other people expect, experts are saying that post-elections could possibly see the housing market experience the opposite of what had transpired in 2019 which was actually the end of an 18-month downturn. Some say that it was the effect of the re-election of Scott Morrison, which was also considered by some as a “miracle win”.

But more than the re-election of Morrison, property prices soared because of APRA or the Australian Prudential Regulation Authority and its easing of lending rules. APRA had previously tightened due to the Financial Services Royal Commission established in 2017 released reports that some misconduct in the banking sector took place. The recent findings identified issues that needed to be addressed so now that most of these problems were given that much-needed attention, APRA decided to ease rules when it comes to lending, which resulted in a stronger market.

This year’s election is expected to see rises in interest rates as early as a few weeks after the elections. Sellers might put more stock in the market this time – especially those who held back due to the pandemic. This would definitely mean that it’s not going to be as competitive as before so it could possibly cause an increase in prices.

What does this mean?

We all know that once interest rates rise, it’s going to affect housing across the nation. New data from the Reserve Bank of Australia clearly says that if ever interest rates increase by 2 percentage points, the likelihood of house prices decreasing is very high, although not for all markets in the country. According to experts, prices have flatlined in major cities such as Melbourne and Sydney. In areas such as Brisbane and Adelaide, prices are much more affordable, especially during the pandemic. For this reason, people fled to these areas especially last year which was a good decision considering the work-from-home setup.

In 2019, major policy changes for the housing market took a backseat. These changes would have included capital gains tax and negative gearing for investment properties, but due to the current ALP leader’s orders, these changes were axed. The Home Guarantee Scheme which offers an easy payment scheme of just a five percent deposit for homebuyers, allowed them to enter the market much more easily. Although the market’s outcome is not expected to change after the election because this does not necessarily address the issues concerning housing affordability because of the lack of policies to solve this.

Which housing market is seen to be affected after the elections?

Experts are seeing that Canberra might be affected the most because public servants currently employed in the area will be in a wait-and-see situation whether they will be keeping their jobs after the elections. Sydney’s prices could be more eased than properties in Melbourne. As for auctions, there could be fewer during the voting weekend. By the end of 2023, interest rate rises could be expected which could be difficult for those who had huge loans in order to enter the property market, particularly the first-time homebuyers.