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AU No Budget change was a good thing

Property Here - Sunday, May 26, 2013

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WE shouldn't have expected sweeteners for property investors in this month's Federal Budget, considering Treasurer Wayne Swan was really just trying to juggle debt bombs.

And if you didn't expect anything special from his pre-election Budget that was nothing like a pre-election Budget, you weren't disappointed.

Some in the real estate industry were unhappy that there was nothing to help the battered property sector get back on its feet.

However, interest rate cuts over the past year appear to be doing just that, with the latest housing finance data showing growth is picking up.

Plus there's a good argument for governments to leave property alone, because any incentives can distort the market. They can dramatically affect buyers' and sellers' decision making, and in many cases the only real winners are builders or property developers.

An example is the first-home owners' boost that was phased out at the end of 2009. It created a mini boom in the last months of that year as people rushed to grab the extra government cash, and the first-home buyer market has been on the ropes ever since.

More recently, the State Government's $8500 Housing Construction Grants have created a pick-up in activity among buyers in the past year, according to some lenders.

But when these grants end on June 30 we are likely to see another market distortion. The bottom line is that interest rate movements are likely to have a bigger impact on real estate investors than any government incentive or penalty can achieve.

For example, interest rate cuts since late 2011 have wiped $400 a month off the cost of an interest-only $300,000 investment loan. That's $4800 a year and it doesn't include the other positive impact of rising rental incomes.

There are enough variables that property investors have to worry about - interest rates, taxes, rental vacancies and house prices - without having to suffer from the Government chopping and changing which is already sucking the confidence out of Australia's superannuation industry.

Wayne Swan's sixth, and probably last, Budget did nothing for real estate, but that's probably a good thing.

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