18 Apr Cash in on property with the election?

You may have read my post about the Labour government’s proposed changes to the property sector or you’ve probably heard about them lately in the media. Most people I’ve spoken to are on tender hooks waiting on the results of May 18 before they make any decisions about property.

Proposed changes from Labour:-

1. Limit negative gearing to new housing from 1 Jan, 2020 (All investments made prior to this date will not be effected by the changes and will be fully grandfathered.)
2. Halve the capital gains tax discount for all assets purchased after 1 Jan, 2020  (This will reduce the capital gains tax discount from assets held longer than 12 months from 50 per cent to 25 per cent. All investments made prior to the 1 Jan, 2020 will be fully grandfathered.)

Let’s be mindful that the property market was hot when the proposed changes were announced and people were over spending, but since then we have seen quite a considerable drop in property values. As I’ve said before, the biggest concern for the government would be that if they slow the property market any further by implementing these changes, what impact will it have on our economy?

Until a few months ago, it seemed as though Labour was at the same odds as Winx to win the election, however, recent polls have shown that the race is closer than many think. If Labour were to take the win, the proposed changes would likely take effect from 1 Jan, 2020 providing they pass it as law. These laws will cause a ‘mini-boom’ as people rush to take advantage of current laws before they change, or take advantage of the new laws. An example of this would be there would be a rush to buy existing properties until 31 Dec, 2019 with nobody interested in buying brand new property. Then from 1 Jan, 2020, there will be a rush to buy a brand new property, taking advantage of the negative gearing benefits.

I purchased my last property when people weren’t really buying, I had the sales agent chasing me to put down a deposit on a piece of land, compared to lining up in front of the sales office to secure an opportunity to speak a sales agent about the latest land release.

I look to invest in property or shares when everybody is full of fear and rushing to sell or get out of the market. All my property purchases have been when the market has been slow or interest rates were high, but they’ve paid off as they’re before a boom. When you take a long-term approach to investing, little peaks and troughs are not a concern.

Top 3 things to look for if you’re considering buying an investment property before 1 Jan, 2020.

1. The length of time it takes to obtain a pre-approval from the bank.
2. Will the demand to buy an existing property before 1 Jan, 2020 largely inflate property prices creating a false economy?
3. Does the current capital gains tax discount reflect a big saving and can you lock in a property before 1 Jan, 2020 so your investment property can be grandfathered?

“Leadership is not about the next election, it’s about the next generation.” – Simon Sinek

Thank you for reading,