I reckon I had about six different conversations about the federal budget just last weekend. With friends, family, clients, even standing around at the local coffee shop.
Trying to read the federal budget feels a bit like looking at your grocery receipt lately. It's really long, everything costs more than you expected, and somehow you still end up with less money left over at the end.
From what I can see, a big part of these proposed changes is really about trying to push investors towards new housing instead of existing homes.
The idea behind it seems fairly simple. If investors compete less for already established homes, it could ease some pressure on prices and help first home buyers get into the market. In theory, that all makes sense. At least on paper anyway.
But hang on a minute. Aren't most of the first home buyer incentives already heavily focused around new builds as well? So now we're pushing first home buyers towards new housing, while also trying to push investors towards new housing. Which kind of feels like we're just encouraging everyone to compete in the same space.
But from what we're seeing on the ground, the problem has never really been a lack of demand for new builds. New estates, house and land packages, and new developments generally sell pretty well already. The bigger issue still seems to be supply. We simply don't have enough housing being built fast enough to keep up with population growth. Supply and demand. Economics 101.
Another interesting part is that most of these proposed changes seem likely to affect new investment decisions moving forward, rather than changing the rules on properties people already own. If that's the case, existing investors who already hold negatively geared properties are probably less likely to sell, because they're already operating under the current system.
So really, it could end up meaning that future investors are simply playing under a new set of rules that are less generous than what previous generations had access to.
And in reality, the people most affected probably aren't the big end of town or full time property investors buying through companies. It's usually everyday Australians with one investment property, trying to build a bit of long term security, help fund retirement, or maybe help their kids out one day.
While these changes are designed to improve affordability for buyers, if fewer investors enter the market, or existing investors hold tighter, it could reduce rental supply and place even more pressure on rents. And higher rents don't exactly make it easier for first home buyers to save a deposit either.
So while these proposed changes sound big on paper, I'm still not completely sold on how much really changes outside of a few headlines, some political points being scored, and probably a few votes moving around by the next election. I think supply and affordability are still going to be the bigger issue Australia needs to solve.
One thing I've always said is that getting into the property market today often looks different to what it did 20 years ago, or what it will look like in 20 years' time.
You can still buy property for $300k to $400k in parts of Australia, just not necessarily around here anymore. Sometimes a smart strategy is renting where you want to live and buying where you can afford to get started. Those more affordable areas can still see strong long term growth over time as well.
Personally, I've always believed the best investment properties are the ones that actually put money in your pocket each week, not just relying on tax benefits to make the numbers work. Sure, you pay tax on positive income, but unfortunately that's also part of living in Australia.
Wow. Didn't expect this month's email to turn into a political rant. On the bright side, we are all apparently getting around $250 back. At the rate the economy's going, that should cover milk and bread for at least a week.
P.S. If anyone actually reads the full federal budget cover to cover, please let me know. I'd like to check whether you're okay.