Australian house prices could collapse dramatically if Labor wins next year’s election, a cabinet minister has warned.
Sydney property prices are continuing to plunge, with real estate data group Core Logic revealing a 7.6 per cent drop in just one year in Australia’s biggest city.
On the back of poor results for September, Australians are being warned about the consequence of scrapping negative gearing for housing investors.
Australian house prices could collapse dramatically if a certain event happens next year. Pictured is Brigton Le Sands on Sydney’s Botany Bay
Opinion polls show the Labor Opposition is on track to win a landslide election victory over Prime Minister Scott Morrison’s Coalition government, despite vowing to scrap tax breaks for future landlords who rent out an existing property.
Population Minister Alan Tudge is so worried about the consequence of this policy he has sounded a warning about what could happen were Labor to win the 2019 federal election.
‘One of our great concerns is if the Labor Party gets in at the next election and they get rid of negative gearing, then it could have catastrophic impacts on house prices,’ he told Sydney radio 2GB star Ray Hadley on Tuesday.
‘Certainly in Melbourne and Sydney the house prices have come off pretty dramatically.’
Population Minister Alan Tudge is so worried about the scrapping of negative gearing he has sounded a warning about what could happen were Labor to win the 2019 federal election
He warned came a day after Core Logic revealed Sydney’s median house price fell to $976,365 in September. Canberra (pictured) held up better with a 3.1 per cent rise in house prices
His warning about voting Labor came a day after Core Logic revealed Sydney’s median house price fell to $976,365 in September, the lowest level since 2015 and the third straight month they have been below the $1million mark.
Detached property values plunged by 7.6 per cent in just one year, after peaking in mid-2017.
Melbourne also fared badly. Median house prices within Victoria’s capital fell by an annual pace of 4.5 per cent to $799,657, after hitting a peak in November last year.
Last month, property strategist Bushy Martin, the founder of Know How Property Finance, said the Opposition’s plan to scrap the negative gearing tax break for housing investors was a recipe for a recession and a 30 per cent plunge in property prices.
‘Something of the magnitude of these taxation changes has the potential to trigger an economic catastrophe,’ he told Daily Mail Australia today from Germany.
‘It’s got the potential to trigger the recession that we didn’t need to have.’
Sydney and Melbourne house prices could plummet by up to 30 per cent if Labor wins the next election, a mortgage broking group says
Mr Martin predicted house prices could fall by close to a third in Sydney and Melbourne, from last year’s peak, if Opposition Leader Bill Shorten won the next federal election, due by May.
‘If you trigger a cataclysmic change like the tax revolution Labor are looking to institute, then you’re more likely to see in the vicinity of 20 to 30 per cent,’ he said.
Labor is promising to scrap negative gearing for future purchases of existing properties, which would stop investors from claiming losses from rental income as a tax deduction.
The Opposition is also proposing to halve the capital gains tax discount from selling an investment property from 50 per cent to 25 per cent.
Swiss bank UBS economists George Tharenou, Carlos Cacho and Jim Xu last month said more credit tightening and a reluctance on the part of the Reserve Bank of Australia to cut rates from a record low of 1.5 per cent would see ‘the longest house price downturn in decades’.
They predicted house price falls of 10 per cent from their peak.
Bushy Martin is worried about Sydney house prices if negative gearing is scrapped
The UBS economists based in Australia pointed out that investor home loans slid by more than 30 per cent during the mid-1980s when Bob Hawke’s Labor government abolished negative gearing for all future rental property investors.
The policy was scrapped in 1987, even though rental vacancies were only affected in Sydney and Perth.
A Newspoll out in September showed the Opposition leading the government 54 to 46 per cent after preferences.
It was also the 41st consecutive loss for the Coalition.
The Sydney and Melbourne property markets peaked last year after the Australian Prudential Regulation Authority tightened lending rules for investors.
The downturn continued in September after the Commonwealth Bank, ANZ and Westpac raised standard variable lending rates even though the RBA left the cash rate on hold.