So the Morrison government won. But what now for ASX real estate small caps?
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The last time we checked in with the real estate sector was in February. Australia was in the middle of significant housing slump and no end was in sight.
We predicted the only winners would be property developers.
Also, the royal commission was drawing to a close and Justice Hayne recommended mortgage broking switch to a user-pays model. Mortgage brokers panicked.
But four and a half months later, the landscape has changed. The mortgage broker fuse was quickly extinguished when both the government and the opposition promised existing commission structures would remain.
The Morrison government was re-elected and one commonly attributed reason is Labor’s proposed changes to property taxation. Real estate lobbyists and analysts declared this was the uptick the market needed.
On top of this, the Reserve Bank cut interest rates to record lows at its recent meeting and indications suggest they will go lower before they go higher.
Even with the purported upswing in the property market the broad picture is the same. There are few winners and the majority of them are in property development.
Of course these are not all of the property businesses in Australia. But it begs the question as to whether whether the talk about the property market rebounding after Morrison’s win was hype.
Stockhead spoke with LJ Hooker’s head of research Mat Tiller and he said LJ Hooker was noticing interest in the market and conditions were now ideal for buyers. However, he suggested we should wait until the traditional spring vending season to see if the election result has really boosted the market.
“We’ve definitely seen an increase in buyer inquiries since the election. And the changes to APRA’s regulations of banking and interest rate cuts lifts buyers’ confidence,” he said.
“But one thing that is limiting transaction is a lack of listings on the market for sale. While inquiries have lifted, I think vendors just want to see whether it’s a trend or a short term thing and they’re more preparing their homes to list in the spring-selling periods.”
While negative tax changes going off the table is good thing and future interest rate cuts could be, some industry leaders have suggested not only should the government avoid harm but take proactive steps to help the industry. Damian Collin, the president of Perth-based advocacy group REIWA, is one of them.
“The WA property market is crying out for some definitive leadership to help aid recovery and improve our local economy. Regardless of whether the responsibility for this change comes at a state or federal level, we need action now,” he said.
One suggestion Collins made was including Perth in the Regional Migration Scheme so the city could attract skilled workers.
Mat Tiller agreed this could be a potential solution to relieve prices on the major capital cities and boost property markets in struggling regions. However, this could not happen unconditionally.
“Definitely decentralisation policy helps relieve pressures on capital city markets,” he said.
“But what needs to happen is an increase in infrastructure spending, not just transport but health, education and social infrastructure as well.”