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Depending on what comes out of the yearly budget, investors could see sweeping changes, or they might not be affected at all. Here’s what some experts are expecting to see, and what they want to see.
Last year, the 2017–18 budget removed tax depreciation on established properties as well as travel deductions and introduced measures to combat housing affordability, the former shocking investors, and the latter being viewed as a “sledgehammer approach” when the related legislation was released.
What some experts are currently saying is that we can expect to see no changes targeting investors at all, with some indirect changes that can work in the investors’ favour.
Peter Koulizos, chairman of the Property Investment Professionals of Australia, was one of the experts who claimed investors would not be targeted, with housing affordability largely falling out of headlines.
“I would expect that there would be nothing for property investors, because the Sydney property market was at its peak at around the first half of the year, so there was a lot of talk about housing and affordability and investors were muscling in on first home owners but now that the Sydney market has cooled, that's not in the headlines anymore, so not even the opposition is talking about changes to negative gearing, so I would expect … no nasty surprises in relation to property investment in tomorrow night’s budget,” Mr Koulizos said to Smart Property Investment.
Tryon Hyde of Washington Brown agreed with Mr Koulizos’ sentiments.
“I think the government will leave the status quo for now, I think they've made one sweeping change, which is impacted and made investors weary, so I can't see them making any greater change,” Mr Hyde said to Smart Property Investment.
“I think one of the reasons they made some changes was in relation to housing affordability, and the latest numbers show that Sydney and Melbourne have started to trend down anyway, so I don't think there's any need for any further changes, more importantly.”
With federal election around the corner next year, it is not likely that anything else will be taken away from investors again lest they fall on the public’s bad side; there is a larger chance that investors will see new incentives introduced instead.
“The budget prior to an election; [there] tends to be … more hand-outs rather than taking from tax payers,” Mr Hyde said.
“I think they did their taking last election, last budget, and let's hope they leave property investors alone in this budget.”
Speaking to Smart Property Investment, Simon Pressley of Propertyology was hopeful, like all investors, that there will not be any new taxes introduce that target investors themselves.
“We really have had a tough few years; we've already spoken about the depreciation stuff, but the APRA stuff, it's not worded as a tax, but anything that means more cost on a defined segment is really another form of a tax, and every investor is paying at least half a per cent more than owner-occupiers, and there's a period of time where that was one per cent more than owner-occupiers,” Mr Pressley said.
“If it wasn't property, if it was any other goods or services in this country, it'd be defined as discrimination, that when some sort of penalty's passed down with a property investors, a big segment of the population goes, ‘Oh well, fair enough!’ Crazy, but yes, let's hope there's no more taxes in there.”
What investors can expect to see however is a targeted focus on infrastructure, and improved infrastructure can result in house prices improving overall.
Mr Pressley said he has been led to believe that the Northern Australia Infrastructure Fund, currently at $5 billion, a fund for companies to receive financial support from the federal government for infrastructure projects, could see its funding being expanded.
“I'm led to believe that tomorrow night's budget, and I don't know exactly how, but they'll be increasing that, or they want to spend more money on Northern Australia's infrastructure,” Mr Pressley said.
“[This] is a really exciting thing for property investors, because infrastructure projects do a few things. The initial whatever they build, where they construct creates jobs, which has a direct impact on wages and general confidence and flows through to property markets.
“[It] also depends on what they built once it's finished that opens up enormous new economies for other businesses to come in and create longer term jobs.”
With the importance being placed on infrastructure, Mr Pressley said he would like to see additional funding for regional airports.
“Get some money freed up to help them expand because that's already benefiting regional locations all around Australia where there's airport infrastructure in place, but they've increased the runway, or they've just done something to enable more planes to come in, that enables regional tourism locations to get more … tourists to visit those places, which all the local businesses benefit from,” he said.
“It enables access of, say, agricultural products [that] have always been in parts of regional Australia, if you've got better airport infrastructure, it opens up new markets, so I don't know whether they've got new plans for doing that, but if they did do that, that could create some good opportunities for property investors, [and] we'll certainly be keeping an eye out on that.”
Mr Pressley would also like to see more spending used to improve the level of financial literacy across the country, which he claims would, as a result, help future budgets with Australians being financially responsible.
“This is wishful thinking, because sadly this isn't going to happen, but I'd love to see them set aside some money into financial literacy being a key pillar within Australia's education system,” Mr Pressley said.
“There's just absolutely nothing there, and there never has been since Captain Cook came here, and the consequences of that, this country has to fork out $45 billion every single year on aged pensions. That's not a criticism of pensioners, that's a financial outcome of not teaching people that when you've got 45 years in the workforce ...
“If you've previously been given the tools when you're getting educated, how to put a little bit aside, 45 years in the workforce is a long, long period of time, and when [people] reach retirement age, 82 per cent can't afford to self-fund their retirement, that's an appalling reflection on our financial literacy.”
Mr Koulizos, meanwhile, would like to see more funding being introduced to improve property investment advice regulation.
“That would be fantastic. There might be some money set aside so as to facilitate that through ASIC or whoever it needs to be, but that would be a fantastic Christmas present for us,” Mr Koulizos said.
Budget is defined as the estimation of expenses made over a specified time for the purchase of goods or services.
Depreciation is defined as the decline in the value of an asset.