With the 2025 Federal Budget unveiled and the upcoming Federal election locked in for the 3 May 2025, we are watching carefully to see how these events will impact Australia’s residential property sector. While elections introduce uncertainty, federal budgets often introduce concrete policy measures that shape market performance. So, which has the bigger impact, and how can you best position yourself in the months ahead?
Key Budget Measures Affecting the Property Market
1. Tax Reforms and Disposable Income
The 2025 Federal Budget introduces tax cuts aimed at increasing disposable income. From July 1, 2026, the tax rate for incomes between $18,201 and $45,000 will decrease from 16% to 15%, with a further reduction to 14% in 2027. These changes are expected to boost real household disposable income by approximately 9% by 2026–27, enhancing borrowing capacity and further stimulating housing demand.
Verdict: Winners — Purchasers (Short Term)
2. First-Home Buyer Assistance
An $800 million expansion of the “Help to Buy” scheme raises income and property price caps to assist more first-home buyers. This initiative aims to make homeownership more attainable for young Australians and families, potentially increasing demand for entry-level housing.
Verdict: Winners — First Home Purchasers
3. Foreign Investment Restrictions
A two-year ban on foreign investors purchasing existing homes has been implemented to alleviate housing market pressures. While this move is intended to increase housing availability for local buyers, concerns remain that it may impact developers reliant on foreign capital, potentially exacerbating the housing shortage.
Verdict: Winners — Purchasers (Short Term); Losers — Developers
4. Build-to-Rent Incentives
The government has refined tax concessions for the Build-to-Rent sector to increase rental housing supply, including affordable tenancies. Industry estimates suggest this will support the construction of around 80,000 new rental homes over the next decade, including 8,000 affordable homes.
Verdict: Winners — Tenants and Landlords in Build-to Rent Sector
Impact of the Upcoming Federal Election on the Market
Federal elections can introduce short-term uncertainty in the property market, often leading to a temporary slowdown as buyers and sellers adopt a “wait and see” approach. However, historical data suggests elections do not drastically alter long-term property market trends.
Looking at recent election cycles:
- 2019 Federal Election: The Coalition government, led by Scott Morrison, was re-elected, maintaining existing property policies. The opposition had proposed changes to negative gearing and capital gains tax, causing investor hesitation before the election. Following the Coalition’s victory, market confidence returned, and property prices surged.
Across this period 2019 to 2021, ending December, the Residential Property Price Index (RPPI) for Sydney surged 26.1%. marking the strongest annual growth since the index commenced in 2003.
- 2022 Federal Election: The Australian Labor Party, led by Anthony Albanese, won government, resulting in a leadership change. Since neither major party had proposed significant property policy shifts, the election had minimal immediate impact on the housing market. However, subsequent interest rate hikes by the Reserve Bank of Australia led to nationwide property price declines.
Across this period 2022 to 2024, ending December, the RPPI declined by 8.0%.
Really, that type of impact?
It is important to note between 2019 and 2024, Australia’s interest rates experienced significant fluctuations. In 2019 the Reserve Bank of Australia (RBA) reduced the cash rate from 1.5% to 0.75% to stimulate economic growth. Over 2020 to 2021 it was further reduced to an historic low of 0.1% to 2021 to stimulate economic growth. As inflationary pressure emerged the RBA increase rates to 4.1% by the end of 2024.
The government’s fiscal and monetary policies play a crucial role in shaping economic performance, particularly in the property sector. Budgets that prioritise tax cuts, housing incentives, and infrastructure spending tend to stimulate property investment and growth, while restrictive policies or economic mismanagement can lead to uncertainty and market downturns. Interest rate policies set by the Reserve Bank also interact with government strategies, influencing affordability and investor confidence. Over the past five years, interest rate fluctuations and government policy shifts have created both opportunities and challenges for property investors, highlighting the importance of proactive property planning.
Which Has a Bigger Impact — The Budget or the Election?
While federal elections can cause temporary market hesitation, federal budgets introduce direct measures that immediately affect the housing market. The 2025 Budget’s tax cuts, homebuyer incentives, and rental market interventions are expected to have a more pronounced and immediate impact than the broader uncertainties associated with the election.
Historically, property performance 12 months after an election has been shaped more by economic conditions and government policy implementation than by the election itself. For instance, while the 2019 election outcome led to a rebound in confidence, the 2022 election had little effect compared to the powerful influence of rising interest rates.
Checklist for Property Investors During This Period
To navigate the evolving market conditions, investors should consider the following strategies:
✅ Stay Informed — Monitor policy changes and their implications on the property market.
✅ Assess Financial Position — Evaluate how tax reforms and increased disposable income may affect borrowing capacity and investment opportunities.
✅ Explore Emerging Opportunities — Consider investments in sectors benefiting from government incentives, such as Build-to-Rent projects.
✅ Monitor Market Sentiment — Be aware of potential market fluctuations leading up to and following the election, adjusting strategies accordingly.
✅ Seek Professional Advice — Engage with financial advisors or property experts to make informed decisions.
Final Thoughts
While elections bring uncertainty, it’s the budget that delivers concrete policy shifts with immediate consequences for the property sector. Pay close attention to government measures aimed at affordability, rental supply, and tax changes to make informed decisions in this dynamic period. By staying proactive and adjusting to new policies, property buyers and investors can capitalise on emerging opportunities in the market, they are there and there will emerge. Remember you “can’t’ hit what your eyes can’t see.”