Australia’s housing market under Labour - what will happen to prices?

The Labor Party campaigned on a ticket of addressing the rising cost of living, which included a housing policy that proposed the federal government sharing up to 40 percent of a property's purchase price with first home buyers.

Designed to assist first home buyers, single parents, and low-income earners in getting a foot on the property ladder, the 'Help to Buy' scheme, aims to stimulate activity and help Australia's housing market return to its previous strength.

Albanese announced that his government would be moving forward with the policy in the aftermath of the election. However, critics say that the policy, capped at a maximum of 10,000 places, is not high enough to have any material impact on the market. Tim Lawless, Research Director at property data firm CoreLogic, points out that Labour's scheme only addresses the symptom of housing affordability, not the underlying cause. Australia's high property prices are partly due to years of population growth and low-interest rates, which have made it difficult for many would-be buyers to save for a deposit. The scheme will help some people get their foot in the door, but it's unlikely to solve Australia's housing affordability crisis.

The Labor Party will have to deal with the fundamental supply and demand variables of the Australian property market. Compounding the supply and demand issue is the current state of Australia's rental vacancy rates, which have plummeted to 1 percent as employment has surged to a record high. Australia is undoubtedly facing a rental crisis, with rents rising by 10 to 20 percent in the past year. Labour has pledged to tackle this issue, but it is not yet clear what measures they will take. One option that has been floated is a vacancy tax, which would discourage landlords from leaving properties empty. While this could be an effective way to increase the availability of rental properties, it is a radical measure that may be difficult for the new government to implement.

Shane Oliver, Chief Economist at AMP Capital, has said that the major impact on Australian home prices in the wake of the Federal election will likely come from rising interest rates (which would have happened whichever party won the 2022 election). He expects house prices to fall by 10 to 15 percent over the next 18 months and sees this as a potential headwind for prices beyond that time frame. However, he also notes that interest rate rises will be gradual as the impact on prices is unlikely to be immediate.  

Only time will tell how impactful Labour's housing policies will be; however, the long-term outlook for the property market remains buoyant and at Concise Finance, we believe Australia will remain an attractive market for property investors, whether under the Labour or Coalition governments.