A property group is predicting a “tough couple of years for most, if not all, of the property market in Australia” unless there is intervention from the regulator or governments.
RiskWise Property Research has released its Quarterly Risks and Opportunity Report, basing its findings on major assumptions about the months to come.
CEO Doron Peleg said tighter lending standards, the Royal Commission, the fear of potential changes to negative gearing and capital gains tax, political uncertainty and unit supply, in conjunction with a sharp drop in dwelling commencements could shape the landscape of residential property into 2020.
Some of the major assumptions from the report were that credit standards and restrictions would be tightened further or remain at the current level; that Labor would introduce changes to negative gearing and capital gains tax in the 2020 budget after winning the next Federal election; and that the RBA would not increase interest rates until at least the second half of 2020, or even 2021.
Peleg said changes from APRA to remove the 30% interest-only lending cap was unlikely to have a material impact on the housing market.
He said banks were likely to continue tightening credit standards both due to the Royal Commission’s findings as well as to mitigate the risks associated with interest-only loans.
Peleg added, “Another contributing factor is the fact that many major lenders are no longer approving lending for residential properties against SMSFs.
“This will have a direct impact particularly on new properties as a large proportion of investments are made through advisors and accountants and concentrated in new dwellings, meaning there should be fewer off-the-plan investors, and thus a lower volume of pre-sales and sales.
"In addition, restrictions on foreign investor activity and fund transfers, and crackdowns by the Chinese government means they are less prevalent in the property market.
"Meanwhile, RiskWise has already demonstrated that fears of the proposed changes by the Labor government to limit negative gearing to new rental dwellings and to halve the CGT tax discount from the current 50% to 25% have already impacted the market.
"Price reductions accelerated over the last quarter following the day of the Liberal leadership spill of Malcom Turnbull by Scott Morrison on August 24. In addition, auction clearance rates have dropped below 50% in both Sydney and Melbourne."
He said with the next Federal election likely to take place in May 2019 and the probability that the ALP will win and implement the changes in the 2020 Budget, the impact on the housing market was likely to last well into 2021.