It is an age-old question that rears its head every three years: what impact will the looming Federal Election have on the property market, including the commercial sector?
The prospect of the government changing hands and a new government implementing new policies regarding the property sector can be a worrying one and rightly so.
Government policies have a huge impact on the property sector, particularly on market confidence.
That’s why it’s important to reflect on what happened during past elections as well as the current one to determine what lessons can be taken away.
Past elections
In the 2019 election, Labor’s key policies regarding the property market were removing negative gearing for people who buy existing properties and cutting the capital gains discount.
The Coalition promised not to touch either negative gearing or the capital gains discount.
Labor’s policies were widely criticised by the Property Council of Australia and other bodies for creating uncertainty in the marketplace, which negatively impacted property values.
House prices lifted after Labor lost with the Coalition returned for a third term.
2022 Liberal and Labor policies
The result of two defeats in 2016 and 2019 is Labor ditched both the negative gearing and capital gains discount policies.
Instead, Labor has turned its focus to housing affordability, announcing its Help to Buy scheme under which a Labor Government would contribute up to 40 per cent of the purchase price of a new home and up to 30 per cent of the purchase price for an existing home.
The Coalition has also focused on housing affordability with a plan to expand its first-home buyers and Family Home Guarantee schemes where people only need to have a 5 per cent or 2 per cent deposit through a government guarantee, thereby avoiding lender’s mortgage insurance (LMI).
Although this applies to the residential housing market, it is still important to commercial property, as confidence in the residential sector flows through to the commercial market.
The upshot for commercial property is there is nothing in either party’s policies that will dent confidence either in the lead-up to, or following, the election.
Interest rates
Turning to interest rates, Labor has used the Reserve Bank of Australia’s decision to raise the cash rate (the rate at which banks borrow from the RBA) from 0.1 per cent to 0.35 per cent in May as an opportunity to lash the government on its economic credibility.
However, the Reserve Bank is independent of the government and governor Philip Lowe clearly stated the reasons behind the rate rise were increasing inflation and evidence of wages growth.
He also said the bank was beginning the process of “normalising monetary conditions” after historic lows.
This means rising interest rates is an issue regardless of who is in government.
Confidence and price growth
Turning to the Gold Coast market, we have seen significant price growth, particularly in the industrial market in the past two years, along with tenanted retail assets and development sites.
That growth is baked in, and we don’t see any pushback on the horizon.
At a recent auction we held for a commercial building and development site at 782 Pacific Parade, Currumbin, seven bidders competed for the property, which sold under the hammer for $5.11 million.
Demand remains strong in the marketplace primarily because supply is so low.
Herron Todd White’s April Month In Review points to the resilience of the Gold Coast commercial property sector.
Ryan Kohler wrote: “The industrial sector was the star performer of the Gold Coast commercial property market in 2021 and we expect this positivity to carry through into 2022. In the central Gold Coast industrial precincts, demand for industrial stock is still outstripping supply and there is a paucity of industrial stock available for either purchase or lease.”
Our assessment is the upcoming Federal Election will have little to no impact on the commercial property market before or after the election.
That is because the major party’s policies are largely aligned and the strong fundamentals of the Gold Coast market support strong growth regardless of who is prime minister.
