A BRIEF RUNDOWN OF THE POLITICAL WONDERLAND OF POLICY RELATING TO PROPERTY AND WHAT IT MIGHT MEAN FOR YOU
– by Caroline Symington
“Why, sometimes I’ve believed as many as six impossible things before breakfast,” says the Queen of Hearts to Alice whilst in Wonderland. Surely a thought or feeling (perhaps on reflection) that many of us have whilst reading the newspaper in the morning (or whichever iteration of a ‘news-service that we find is our ‘go to’ first thing). Surely there is no doubt that we could be (if not have been) swayed to believe six or more ‘things before breakfast’ that are likely, in fact, impossible.
When applying the Queen of Hearts generosity and broadness of thought to the plethora of policies and promises provided to us in the current political climate, it is not unreasonable that we struggle to ‘believe’ in even but one of the many impossible ‘things’ apparently being presented to us before breakfast (best to turn ones’ mind to the world of the pre-election after breakfast to ensure one still has an appetite after digesting the plethora of political fodder reported to us each day).
Here we hope to help you out of the proverbial rabbit warren, away from the absurdities that are illustrated in the political world, which we herein liken to those to be found in ‘Wonderland’.
Unless you have been off the grid for the last few months (or have fallen down the hole of the White Rabbit and found yourself lost in Wonderland with Alice and the Queen – both equally plausible means by which to have avoided any input of a political nature at this time), the impending Federal election in and of itself has been (nigh on) impossible to ignore. Fervent and robust political campaigning has indeed, it seems, brought with it it’s very own Wonderland rabbit warren of sorts with numerous twists and turns and riddled with ‘political jibber jabber and jargon, mumbo-jumbo and hocus-pocus’ (you get the point).
We can surely all do without the inundation of political marketing material, the ‘standard’ undermining of one another (be it at a political or nonsensical/incomprehensible personal level)’, the faces of politicians on billboards seemingly on every corner or down every street. What we cannot do without, is a clear understanding as to what it is that each party is actually proposing as policy should they win the election and to have this explained to us in plain language, without the riddles and smoke and mirrors. Alice has been known to ask the Cheshire Cat in Wonderland “What road do I take?”, the cat asks “Where do you want to go?” to which Alice responds, “I don’t know”. “Then,” says the cat, “it really doesn’t matter, does it?”. The point that we make in this election period, contrary to the commentary of ‘the cat’ is that where you ‘want to go’ (and be) really does matter and ‘not knowing’ (or a lack of knowledge and understanding) does not mean that it ‘does not matter’.
As with Alice’s Adventures in Wonderland, the land of Politics is intricate, complex and at times complicated.
Here we look to simplify and reduce to ‘bare bones’ the political proposals insofar as they relate to ‘property’ and the ‘property related market’ (and in our property focussed world, what we are therefore being asked to vote for and ‘which road to take to get us to where we want to be’).
We do not profess to be political experts or correspondents (and by no stretch of the imagination are we masterminds in this arena). We have however been keeping an eagle eye on property related policies and aim herein to provide a simple breakdown of what each party is currently proposing to implement that will no doubt impact upon property by way of related taxes and ‘incentives’ should they be elected.
Prior to the election:
In short (not to be confused with in ‘shorten’ …)
- No change to negative gearing or capital gains taxation.
What does this mean?
On the face of it this indicates no significant change to the current climate. Herein the coalition appears to be heavily reliant upon an ‘off with their heads’ mentality (wherein Labor will ensure their own demise by way of the loss of their own proverbial ‘heads’ by virtue of their own policy: that of increased taxation and decreased benefits). The literal meaning of the phrase ‘off with his head’ (as espoused by the Queen of Hearts), is apparently now commonly used as a ‘humorous’ and ‘mild reproach’… we will leave it at that.
The Labor Party has put forth reforms to negative gearing as well as the current capital gains taxation discount incorporating:
- Abolition of negative gearing incentives for investors who purchase existing residential
property (from January 2020);
- Reducing the capital gains taxation discount for investment properties purchased from
January 2020 from 50% to 25%.
If introduced, neither the abolition of negative gearing nor the reduction of capital gains discounts (as we are told) will be retrospective.
What does this mean?
Under a Labor Government, current commentary says that property prices in this arena are likely to fall by between 5 and 12% by the year 2022 (as opposed to the estimated rise of property prices of between 8 and 14% in the event of the Reserve Bank reducing the interest rate by a further 0.5% and without any change to current policy). To counteract investor loss, rental prices are expected to rise which surely leads to a likely drop in property value, an increase in rental and a system making investment in property less enticing.
In turn, the Greens campaign in the property related arena appears to be founded upon the following:
- Removal of all negative gearing and capital gains taxation concession for property investors.
What does this mean?
Does this not speak for itself? (No, not a Wonderland riddle or rhyme – this seems to be ‘what it is’).
Less than one week prior to the election, Prime Minister Scott Morrison put forth a further Liberal plan created to aid some Australians to enter in to the property market and purchase their first homes.
Within hours, the Labor Party responded with an assurance that they would ‘match’ the Liberal Policy. Perhaps an effort by the Labor party to avoid any (further) political debate as to housing affordability (or ‘in’-affordability as the case may be), some may see this as an acknowledgement (of sorts) as to the Liberal Party proposal being a (perhaps) ‘better’ way to assist those entering the market than the scaling back of concessions on negative gearing alone proffered by other parties, perhaps or perhaps not (a thought starter for the next Mad Hatters Tea Party nonetheless)…. (Stay tuned).
TEA PARTY CONVERSATION:
We are by no means initiating any conversation of the ‘Boston Tea Party’ variety (although any conversation aroused by our commentary would welcome being the source of such a significant event!).
We keep our commentary to the theme of the Wonderland Mad Hatters Tea Party. The history of the tale of ‘Alice’ finds that the ‘Hatter’ and the ‘Hare’ were always having tea to ‘save time’ because when the Hatter tried to ‘sing for the Queen of Hearts’ she sentenced the Hatter to death for apparently ‘murdering or killing THE time’ – hence, the Hatter and the Hare were stuck at 6pm forever.
By no means do we want to be ‘stuck in time like the Hatter and the Hare’ (perhaps when the market was on the up … not now that it appears to be aligning or perhaps depressing).
We ask, does it perhaps not follow that, whilst the proposed changes may indeed foster lower property prices for first home buyers, one would properly point out that this is likely at the direct expense (no pun intended) of the affordability of rental where an increase to median rentals will most likely/certainly result.
The Liberal government appears to be strongly reliant upon financial regulation to manage the market of residential property, Labor upon firm Taxation Policy. Both not without risk, one with aversion to risk on the basis of a current structure.
We do not live or operate in a bubble (or indeed in the fantastical world of Wonderland), the fact remains that in every action there exists a reaction and what has been a cooling housing market for some time now appears to be evidently key to this election.
Do we ensure that we are informed or are we complacent and jump into the Rabbit Hole and face the Cheshire Cat and the Queen of Hearts and have tea with the Hatter and the Hare?