In MB’s 2018 Christmas special report, entitled “The Great Australian Housing Crash”, we anticipated a “strong probability” of a housing “crash” for Sydney and Melbourne, loosely defined as a peak-to-trough decline in values equal to or greater than 20%.
However, we noted that this outcome would “hinge on Labor following through with its commitment to limit negative gearing to newly constructed dwellings and halving the capital gains tax discount, as well as the response (or lack thereof) from the federal government and Reserve Bank“.
With the 2019 Federal Election done and dusted, and the Coalition re-elected in a shock result, the outlook has changed. Labor’s negative gearing and capital gains tax (CGT) reforms are dead. First home buyer (FHB) deposit subsidies have been announced. The Australian Prudential Regulatory Authority (APRA) has announced cuts to both its interest-rate buffer and smaller bank mortgage capital requirements. And the Reserve Bank of Australia (RBA) has begun cutting interest rates, with further cuts to come.