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Developers welcome return of NSW government stability

ByJeff Moxham

In these uncertain political times, it’s not surprising that we’ve seen heightened hesitation in Australia’s commercial and residential property markets. Buyers and investors are waiting it out to ‘pick the bottom of the market’, and sensationalist media reports only adding to their lack of confidence.

That’s why every developer I’ve spoken to this week has been overwhelmingly positive about the re-election of Gladys Berejiklian’s Liberal party in NSW.

Australia’s property market has gone from riding high through a perfect storm to almost the opposite and this year three major contributing events have been the Banking Royal Commission, the NSW state election, and the federal election.

With two events down and just one to go, there is already a sense of relief in the air.

For many developers who have already invested significant time and money in major re-zoning proposals, that relief comes in the form of knowing they won’t have to start again or worse still be shut down all together. When Labor leader Michael Daley announced he’d halt ‘rampant’ development in parts of Sydney, it was a signal that many planned developments could be at risk. Plans that had already been five or more years in the making, based on rezoning, transport and infrastructure investment assumptions.

For investors in general, there’s renewed confidence that NSW’s infrastructure boom will continue to be delivered.

I believe this significant investment in metro and light rail transport, as well as connecting road infrastructure, has done much to buffer the impact of Sydney’s real estate market downturn.

NSW has the biggest infrastructure pipeline in the nation, and within the next five years its most significant projects will be completed. These include the Westconnex and Northconnex road links, Sydney CBD and South East Light Rail, Sydney Metro City and South West and Sydney Metro Northwest.

Every one of these will impact the value of nearby commercial and residential property. Faster, more efficient public transport and road systems will benefit the people living and working in these areas – removing congestion, and ensuring Sydney is ready to absorb a predicted extra million residents by 2029.

Meanwhile, there’s no doubt that off-the-plan unit pre-sales have slowed. Overseas investors have been curbed by new restraints, and APRA’s tightening of credit requirements has played its part.

While there is still hope local investors will return to the residential market, fear of Labor’s proposed changes to negative gearing is likely to hold them back until after the federal election.

With the number of people buying homes as investments falling to the lowest levels we’ve ever seen – around 20%, compared with 35% in 2011-13 – I believe this could now be a major risk to Australia’s property market recovery.

If Labor’s policy becomes a reality, it seems we can expect property prices to fall further and faster in an already weakened market.

SQM research suggests the best case scenario would be a 4% to 8% price drop over three years – and that’s assuming a 50 basis point cut in interest rates as well. The report’s analysis indicates mum and dad investors, homeowners, renters, builders and the economy all stand to lose. Meanwhile, Labor’s potential changes to capital gains tax discounts is also fueling further investor unease.

So that’s two down, one to go – and this last major event of 2019 could make all the difference.

Too much uncertainty can be a dangerous thing in this market. Now that we have one election result in, let’s hope for a more positive outlook by the end of the year.

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