Capacity cuts for investors
Interesting anecdote via the LinkedIn:
It's obviously difficult to know the specific circumstances related to this case, where borrowing capacity appears to have been cut by 40 per cent (it could be due to postcode risk, or the individual's personal circumstances).
More broadly, analysts think that the borrowing capacity reduction for most investors in established properties will be more like 10 to 20 per cent.
Clearly investment into established housing is going to drop precipitously in the short-term.
Lenders will as always be looking for other ways to write loans, of course, and there have been some noises about more lending within self-managed super funds, for example.
The government may also look to expand its incentive schemes for first homebuyers to offset the likely fall in housing turnover and stamp duty take.
Still, major bank share prices trading down by about 5 to 10 per cent this week suggests that this may not be enough to offset lower lending volumes going forward as housing sentiment takes a hit.
Electoral woes
Speaking of sentiment, the government will now face an uphill battle to regain the trust of the electorate having now broken more pledges.
The first post-election poll was pretty ordinary for both of the 'major' parties, with the ALP primary vote still plumbing the depths at just 28½ per cent, and the LNP primary polling at just 16½ per cent.
The sampling error could admittedly be quite large here (2.2 per cent), but the implication appears to be that One Nation could become the dominant partner in a coalition with the LNP.
The Coalition has explicitly stated that it will oppose the reforms to negative gearing and the capital gains tax, and will abolish them if re-elected.
Therefore once the new legislation is presumably passed by the Senate - likely in late 2026 or early 2027 - we're on a countdown clock to the next Federal election as a potential referendum on tax and immigration settings, among other things.
In the Budget reply, opposition leader Angus Taylor outlined his plans to cut migration to under 200,000 per annum, scrap net zero, lift the ban on nuclear energy, and reduce income tax.
Labor has taken capital gains tax and negative gearing reforms to election campaigns previously and lost, and on this evidence they may face something of an uphill battle at the next Federal election.
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