Tax cuts point to further fuel on the property price fire
It's a relatively simple but compelling argument to leap into the property market as soon as possible - more cash in the pocket equates to a buoyant property market that refuses to stall.
If you’re looking to buy an investment property now is the time to do it.
Despite what a lot of commentators say, I don’t believe price growth will soften in 2024, in fact I think demand will increase substantially by mid-year and as a result prices will increase.
House prices go up or down based on the laws of supply and demand. More demand than supply, prices go up. More supply than demand, prices go down.
Housing supply is a mess in this country. We’re 100,000 houses short and each month we are building 5,000 homes less than we need to be building just to keep up with our growing population.
Interest rates, inflation and tax cuts
The latest set of Consumer Price Index figures show inflation has come back further than many thought it would, with inflation at 4.3 per cent over the year to November. That is the lowest rate since January 2022.
As a result, most of the leading economists are no longer tipping further rate rises in the coming months, and I tend to agree.
Australians have found their wallets strained in the past two years, and come 1 July, they are set to feel some reprieve, when Stage 3 tax cuts are implemented.
The legislated cuts are set to put more cash in our pockets. It will abolish the 37 per cent tax bracket that applies to those earning an income of $120,000 and $180,000.
Instead, a 30 per cent taxation rate will apply to all earnings between $45,000 and $200,000.
Someone earning $120,000 will have access to $2,000 more disposable income each year.
Someone earning $180,000 will have access to $6,000 more disposable income each year.
Someone earning $250,000 will have access to $9,000 more disposable income each year.
The tax cuts, coupled with promised cost of living relief the Federal Government is planning to announce in the May budget, are sure to help buffer the impacts of the continual interest rates rises of the past two years.
Why invest in property now?
Once people have more cash in their hand through lower interest rates their borrowing capacity will increase.
All these forces will combine to drive more buyers into the market – at higher budgets – whether they be owner-occupiers or investors.
With the critical shortage of supply continuing, more demand will send prices higher. That’s why if you are serious about investing in property, you should be looking now.
Those who hesitate are likely to pay a higher price in six months’ time.