Property Finance Update - April 2024

With the up coming federal election it is a opportune time to ask, does politics affect property prices?

Short answer is definitely yes.

We can see this in all the different policies government controls, from tax, immigration, housing planning, development controls and interest rates.

Below is a paraphrased article about the underreported but very important unrealised capital gains tax. For those with property in your SMSF, remember this is a Labor policy.

The Savers Tax: A Hidden Threat to Everyday Australians

The proposed unrealised capital gains tax by the Albanese government is one of the most concerning tax reforms we’ve seen in recent memory.

Initially framed as a tax targeting high superannuation balances — what I once called “the grandmas and farmers superannuation tax” — it has since evolved into something much broader and more alarming. It is now shaping up to be a “Savers Tax” that could affect thousands more Australians outside the superannuation system.

While the legislation has not yet passed, it remains on the government’s agenda. Treasurer Jim Chalmers has already factored it into the 2025–26 budget projections, indicating a strong intent to push it through should the Albanese government be returned.

How the Tax Works

From 1 July 2025, individuals with super balances above $3 million will be required to report the market value of their total super assets annually. One year later, any paper gains — that is, unrealised increases in the value of those assets — will be taxed at 15%. Importantly, the tax liability sits with the individual, not the fund. This creates the perverse outcome where Australians may be forced to sell assets to pay tax on gains they haven’t realised.

This approach departs from conventional tax policy, where tax is paid on actual income or realised gains. It’s effectively a tax on savings, even when those savings haven’t been accessed or converted to cash.

Real-World Consequences

Many retirees and family business owners have spoken up — including grandmothers concerned about their financial future. When one partner in a couple passes away, the surviving spouse often inherits their superannuation, easily breaching the $3m threshold, particularly given it is not indexed to inflation.

For farmers and small business owners, the problem is compounded. Many hold illiquid assets like farmland or commercial property inside superannuation structures. These assets are hard to value and harder still to sell quickly, yet they would be taxed on paper increases in value as determined by the ATO.

A Broader Tax Looms

While the initial scope is limited to superannuation, the structure of the tax — with the liability falling on individuals — makes it far easier to expand beyond super. This seems likely. A close election could force Labor into a deal with the Greens, who have already called for lowering the super threshold to $2 million and keeping it unindexed.

At that point, this tax may no longer be limited to a few. It could impact a vast swathe of the population — particularly those who have built wealth responsibly over time.

What This Means for Australia

The broader concern is philosophical as well as practical. Taxing unrealised gains fundamentally changes how Australians think about investing and saving. If every paper increase in value is taxable, even without a sale, investing becomes riskier and less attractive. This undermines confidence in the financial system, distorts capital allocation, and penalises prudent financial behaviour.

All of this is happening while larger structural issues remain unaddressed. Budget deficits remain high, defence spending is rising, NDIS costs are expanding, and iron ore revenues — a key pillar of our budget — are under pressure. Yet neither major party has been forthright about the implications.

Incredibly, the only significant tax proposal currently on the table is the Savers Tax — and it’s hidden in plain sight.

Housing has been a key theme of the election, so new policies are likely no matter who wins. Here’s what else is making headlines in finance, property and the economy.

• RBA reveals positive mortgage data

• Inflation keeps trending down

• Investors weathering cash flow storm

• Building cost growth hits 15-year low

Read more below.

The Reserve Bank of Australia (RBA) has found “the vast majority of borrowers would remain able to service their debt under a range of plausible economic scenarios”, according to the central bank's latest Financial Stability Review.

Crucially, about 97% of borrowers have positive cash flow, which means they’re able to meet their mortgage commitments and potentially get ahead on their mortgage.

Furthermore, less than 1% of borrowers are currently in negative equity (i.e. their property is worth less than their outstanding mortgage), which is “a meaningful improvement” from before the pandemic.

“Large liquidity and equity buffers would enable most households to navigate a period of higher-than-expected inflation and interest rates or a significant deterioration in the labour market,” the RBA said.

“Even when faced with a severe 30% decline in housing prices, around 9 in 10 mortgagors would still have positive equity. These borrowers could sell their home – albeit a disruptive and last resort solution – for at least the outstanding balance of their loan if faced with severe stress.”

Everyone has a unique scenario, which is why it's important to talk to an expert about your specific situation. If you're struggling to meet your repayments, your mortgage broker and lender can help.

The latest inflation data, which were recorded before the USA's recent series of tariff announcements, show further progress in the battle against inflation, making future interest rate cuts more likely.

The annual headline inflation rate fell from 2.5% in January to 2.4% in February, according to the Australian Bureau of Statistics, which was the seventh consecutive month it had been within the Reserve Bank of Australia's (RBA) target range of 2-3%.

Also, the annual trimmed mean inflation rate (which the RBA regards as more reliable, because it excludes items with wild price swings from inflation calculations) fell from 2.8% in January to 2.7% in February, which was the third consecutive month it had been within the target range.

The RBA has kept interest rates quite high over the past three years, in order to reduce demand from the economy and put downward pressure on inflation.

If the RBA believes inflation is now under control, it may consider reducing the cash rate at its next monetary policy meeting in May, which would prompt lenders to reduce their mortgage rates. That said, the RBA may place even greater weight on the global instability caused by the tariff issue when deciding whether to change the cash rate.

Surveys of property investors have confirmed that although investing can be a fantastic way to build long-term wealth, investors need to be prepared to weather periods of negative cash flow, especially in the early years.

The Property Investment Professionals of Australia (PIPA) found that 65% of the investors they surveyed were negatively geared in 2024, up from 57% in 2023.

PIPA chair Nicola McDougall said the results confirmed that being a property investor involves both upsides as well as challenges.

“Interest rates remain significantly higher than they were a few years ago and, while rents have risen, they are a drop in the ocean compared to higher lending costs,” she said.

If you're a property investor, here are five tips for managing your financial position:

1. Build a cash buffer to cover periods of negative cash flow

2. Factor in rising interest rates when budgeting future costs

3. Work with an accountant to maximise your tax deductions

4. Review your loan on a regular basis to ensure it's still competitive

5. Speak with a mortgage broker to explore refinancing or restructuring options

If you’re thinking about buying an investment property or ensuring an existing investment loan is structured correctly, I can help.

Residential construction costs rose just 0.4% in the March quarter, which was the lowest quarterly increase since 2010, according to the Cordell Construction Cost Index. As a result, annual cost growth fell from 4.0% in the December quarter to 3.4% in the March quarter.

However, building costs have risen 31.3% since the start of the pandemic in March 2020, so this slowdown in price growth is coming off a high base.

Builders are struggling to cope with higher supply costs and a shortage of skilled tradespeople. That said, there is plenty of homebuilding activity taking place around the country. Multinational construction group RLB reported there were 487 residential construction cranes operating during the first quarter of 2025. While this was 9.8% lower than the 540 residential cranes from the year before, it was still high by historical standards.

Please contact me if you're thinking about building a home. I can help you secure a pre-approval for a construction loan, which will give you clarity around your budget. I can also explain how construction loans work, so you can begin the process with confidence.