Grandma taught us never to discuss politics at the dinner table. Rightly so. It can be one of the most controversial and antagonistic topics.
Whichever side of politics you subscribe to, or even if you are a-political, historically, elections and disruptions in our governing bodies can cause some disruption in the property transaction cycle.
Local or State
Whenever a local council, or state election, occurs, it is quite common for buyers to delay their purchases until after the outcome.
When it is a swift result, there is very little impact on the market, but when it takes a couple of weeks to reach a final decision, the market often shows a significant pause in transactions.
We are not political analysts, so we are not going to speculate the rationale behind this, but rather, discuss the impact on buyers, sellers and property developers if it does occur.
Federal
The Australian government Dual Citizenship debacle has resulted in some significant by-elections recently and is expected to require some more early in the new year.
On a large scale, this doesn’t generally impact the property industry a great deal, however in those electorates, the market can be affected dramatically for the duration of the process.
Impact
The economic principle of supply and demand becomes applicable. Of course, property transactions still occur during this time. Some people have a necessity to buy or sell and can negotiate a price acceptable to both parties. Some however are in the position to wait, and choose to do so.
For the time that there are less buyers in the market, or willing to make a purchase, a surplus of properties become available. This can have an impact on the perceived sale value, with savvy buyers realising that they hold the power with less demand, and may even go as far as putting in “cheeky” low offers, in the hope of finding a seller who is highly motivated.
Once the decision is announced and the commercial environment becomes more settled as a whole, buyers become more willing to continue their property transactions. The pendulum swings to a more balanced market, or even a higher demand in a busy property market. This allows sellers to be more confident that there will be additional buyers and put them in a stronger position to negotiate a more favourable sale price.
Decisions made by Council or Parliament can significantly impact the Property market also. When stamp duty savings for investors was abolished in Victoria, it impacted the number of purchasers in this market. The APRA changes, which we discussed in a recent article, also had a substantial impact. We had a huge influx of investors prior but it has impacted the market, along with the APRA changes. When government introduce decisions meaning land owners no longer receive stamp duty savings for off the plan purchases, this also has a significant impact for developers.
The political landscape can definitely influence the property market. Property Developers who are able to take advantage of waiting or avoid too much effect from governmental changes, can often reap the rewards in profitability. Like everything, however, there will always be exceptions to this as well. Business owners don’t close up shop during the quiet times. Similarly, property developers should continue to trade, irrespective of the political climate, and accept transactions that are suitable in price and terms.
FURTHER READING
https://www.facebook.com/topic/Tim-Nicholls/107583112605014
https://www.facebook.com/australianwelfarenews/posts/2030703840532973
http://www.abc.net.au/news/2017-12-06/fact-file-the-dual-citizenship-scandal/9147418
https://theurbandeveloper.com/articles/stamp-duty-what-does-this-mean-off-plan-industry-victoria
DISCLAIMER – Alleura recommends each individual seek the services of a qualified service provider before undertaking any financial investment. The information provided here is for general information purposes only. It is not intended as financial or investment advice.
