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Negative gearing binned in May. What buyers need to know!
Over May’s first three weekends the Real Estate Institute of Victoria (REIV) recorded more than 2,118 auctions. 1,276 properties sold, 890 at auction, with 515 passed in. 386 properties were sold before auction with 0 properties selling after auction. The clearance rate averaged 72.33%. 1,574 homes were bought by private sale.
This May it feels like the property market is changing week by week with shifting economic conditions and government policy. May started with a rate rise of 25 points, to 4.35%.
Why the government acted on negative gearing
The May 12 Budget decision to restrict most negative gearing is supposedly aimed at increasing the supply of new entry level homes. But It’s a familiar scenario – a Sydney-centric Prime Minister preoccupied with local issues. In this case the inflated Sydney property market, where homes are now costing nearly twice as much as everywhere else in Australia. Speculation dominates the market there and new housing supply is abysmal. The Sydney median house price is now $1.76m. So first home buyers there are truly being locked out. Melbourne houses are far more accessible with a $1.08m median. Sydney units average $975k, double the Melbourne median of $460k. So how does the government address Sydney’s affordability problem? Slug the whole country with more taxation of course!
What will investors be targeting now?
The investor base is not only people or groups with multiple property portfolios. It includes young marrieds, tradespeople, mum and dads, professionals and small business owners. It’s all kinds of people. All these highly motivated investors wanting to secure their future, are now being channeled into investing in new homes in city fringe developments, or new units and townhouses. These can still be negatively geared. With established mid-range homes now ruled out for negative gearing, investors will turn to properties that fit the bill for the revised (down) mortgage budgets. With all the new attention on the entry level sector, values for those homes will inflate accordingly, making it harder for first home buyers to compete.
If you intend to buy in this category it would be a good idea to get moving before the rush!
Rents certain to jump
Another roll-on effect of restricting negative gearing (and also increasing capital gains tax) is that rent rises will follow. Fewer investor properties will come to market as rentals. Competition for those rentals will increase and rents will keep escalating, making it harder for first home buyers to save for a deposit. This problem has been pointed out by many in the Real Estate industry but the government has ignored it. The government is set on helping with one hand and hindering with the other. In order to raise taxes.
Protect yourself by buying well!
The last thing people want is to buy a home that could lose value in the short term. The antidote is to buy extremely well and Buyer Marketing is your best bet. With our experience on your side you will buy quality, without overpaying.
How we do it
We start by locating the best homes for you, which are often found off-market. We assess build quality and soundness of investment. We give you a more accurate valuation. Despite industry regulation, homes going to auction are often underquoted by agents by up to 10%. We also advise on which properties are most likely to appreciate more in value in the property cycles ahead.
The Buyer Marketing path to success
Buyer Marketing guides you through every step of the process, protecting your interests at every point. We take the pressure off you by negotiating the purchase whether off market or by bidding at auction. It makes the process less stressful for you, and most importantly gets a better outcome for you, the buyer!
Peter Fox
Principal Advisor &
Licensed Estate Agent
Buyer Marketing

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