The feeding frenzy furphy

Many commentators are predicting that investors will rush to buy established properties before the negative gearing and capital gains tax rules are changed if Labor wins the Federal election. They claim this could cause a mini boom, but the stats show that the opposite may actually occur.

This is because many owners are holding off listing their properties in expectation of the buyer feeding frenzy later this year. This could result in a sudden surge of properties for sale, rather than a surge in buyers.

 

The numbers are revealing this steady decline of new listings in both Sydney and Melbourne – that is, the number of properties for sale on the market is falling, even though the number of sales isn’t rising. The graph clearly shows this downward trend, which is much greater than the seasonal variations that occur each year.

The only possible reason that fewer owners are listing their properties for sale is that they think investors will rush to buy established properties if Labor wins and they’ll get a better price by holding off for a while, so owners are waiting until after the election for the feeding frenzy to start.

But, will sales rise after the election if Labor wins? Investors form only a small percentage of buyers and there’s no evidence that they are putting off buying properties until after the election. There’s no point in their waiting, because if the Liberals win nothing changes, and if Labor wins, the time window to avoid the new tax rules is already open. Property purchases are being held back because of tighter lending rules, and the new tax rules won’t directly affect owner occupiers anyway.

 

On the other hand, it looks like we will see a massive lift in listings later this year from owners keen to secure the anticipated higher prices. This rise in supply is unlikely to be matched by a similar rise in demand from investors. Relying on hypotheticals is never a good reason to put off buying or selling, because the right time to buy or sell should be determined by how such actions help you meet your aims from investment, such as securing long term growth, doing renovations, developments or obtaining positive cash flow.