PROPERTY

Should you buy a property before the election?

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Only if you're playing the long game! Buying property as an investment based entirely on an election outcome is nothing more than speculating - not investing - as true property investors typically consider short term to be 10 years to get maximum benefit and, irrespective of the election outcome, they purchase as a considered part of their overall strategy for the long term rather than responding to any short term "noise".

However, what is becoming evident is that investors are in fact rushing to snap up properties before the upcoming federal election on July 2 in an attempt to beat a possible Bill Shorten led crackdown on negative gearing entitlements and act whilst the investment framework is still certain.

But here's the key question: what if there is no change to the current government after the election and a Malcolm Turnbull lead government returns to office?

property election

Under the Turnbull policy, there will be no changes to the existing negative gearing entitlements to property investors nor the capital gains tax regime and all the anxiety and pent up demand would have been for nothing. In fact, you may end up paying more for property in the lead up to the election if everyone was to adopt the same idea and bring forward their investing decisions as the pent up demand would likely fuel a mini-boom in prices.

Alternatively, if there WAS a change in government after the election, you will still have 12 months to buy established properties as the Labor party changes won't come in to effect until July 1 2017. Under its plan, investors who purchase a property in the lead up to this date will still be able to keep their negative gearing entitlements (also known as 'grandfathering'), whilst investment purchases made after this date will only receive the entitlements if they purchase brand new property.

Perhaps even more sobering is that if the Labor party policy does come into effect, this untested tinkering has led many of the nation's sharpest property commentators to conclude that prices would fall up to 20% across the country and with the associated withdrawal of private investors in the market and a lack of supply of suitable accommodation provided by the government to fill the void, then an increase in rents is highly likely.

Therefore, I don't think that you should buy a property before the election UNLESS it was already part of your overall strategy to buy. If you feel the need to speculate, simply try red or black on the roulette table as this is exactly what you'd be doing if you made a decision to invest in a property purely based on the upcoming federal election outcome.

Bryce Holdaway is partner of specialist property investment advisory firm Empower Wealth, Co-Host of The Property Couch podcast, Co-Author of The Armchair Guide to Property Investing and Co-Host of Location Location Location Australia which is on Foxtel's The Lifestyle Channel.

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Bryce Holdaway is partner of specialist property investment advisory firm Empower Wealth and co-author of The Armchair Guide to Property Investing. He co-hosts The Property Couch podcast, and Location Location Location Australia on Foxtel.
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