With the new budget reforms, it seems that investors are not as willing to participate at auctions, due to not being able to negatively gear newly bought properties past next year.
However, it not just the new budget reforms that contributed to the decline of auction clearance rates, other factors also include rising interest rates, strained household budgets, and an ever-growing negative outlook on the global economy.
Regardless, Labor’s new capital gains discount and negative gearing chances have caused a shift in investor behaviour.
Instead of focusing on how much they could gain from their tax returns, investors now much evaluate how much properties will be worth based on factors such as rent and growth potential.
This last weekend, the clearance rate for properties that have been successfully sold across the country has fallen below 55%, the lowest since April 2020.
With the housing market now in cooldown, buyers and sellers now debate on what properties are worth.
These reforms have been placed under great scrutiny by both sides.
Those who are arguing for these changes noted that there was a great inequity in Australia regarding the housing market, as the proportion of property were owned by investors, rather than homebuyers.
In addition, they argue that in order to improve the affordability of houses, prices do not need to fall but rather increase at a slower rate. In turn, these changes should theoretically lead to less turnovers and create a more stable market.
How those that are against these changes argue that it would have a great effect on first homebuyers. As they would now have to worry about ending up in negative equity and force them to cut back on the budget.
They have also argued that these changes, regardless of the positives, would take take too long for it to have an impact.
The housing market is still facing losses, and the even if prices were to correct (at least 10%), home ownership would remain out of reach for many Australians, regardless of whether they have a well-paying job.
As of now, it would seem that these changes have only caused more worries with the Australian population, but only time will tell whether these new tax reforms will help alleviate the affordability crisis.
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