Budgets, Elections, and Housing: How Will Government Spending Impact the Real Estate Market?

With the recent federal budget announcement and an election on the horizon, Victoria’s housing market is set for potential changes. While the budget outlines key housing initiatives, the election outcome will ultimately shape the long-term direction of property policies. Here’s a balanced look at how different scenarios could impact homebuyers, investors, and the overall market.

Regardless of the election outcome, Victoria’s housing market will be shaped by broader economic conditions, supply constraints, and interest rates. First-home buyers should explore government incentives available now, while investors should assess potential tax policy changes. Staying informed and seeking expert advice will be key to making well-timed property decisions in 2025 and beyond.

One thing is for sure, in the lead-up to the election, uncertainty can lead to a “wait and see” approach from buyers and sellers. Historically, property markets tend to slow down before elections and rebound once policies become clearer. Investors and developers may delay major decisions until they understand the regulatory environment post-election.

If the Current Government Retains Power

The recently announced budget aims to tackle affordability and supply issues through various incentives:

• Expansion of the ‘Help to Buy’ Scheme – The government has committed to increasing access to shared-equity homeownership, where eligible buyers can purchase a property with just a 2% deposit while the government contributes up to 40% of the price for new homes. This could benefit first-home buyers in Victoria, particularly in high-demand areas like Melbourne.

• Support for Prefabricated Housing – With $54 million allocated to modern construction methods, there’s potential for increased housing supply at lower costs. This could help alleviate housing shortages but may raise concerns over long-term quality and market acceptance.

• No Changes to Negative Gearing or Capital Gains Tax – Investors can expect continued tax benefits, which may encourage rental property investments. However, critics argue that these measures primarily benefit existing property owners rather than new buyers.

• Cost-of-Living Tax Cuts – While these could improve borrowing power for many Victorians, increased disposable income may also contribute to rising property prices.

If the Opposition Wins Government

A change in leadership could mean a shift in housing policies, with potential reforms such as:

• Adjustments to Negative Gearing and Capital Gains Tax – The opposition may revisit policies around property investor tax benefits. If changes are made, property prices could stabilize or decline slightly, making it easier for first-home buyers to enter the market. However, a reduction in investor activity could impact rental supply and lead to higher rents.

• Increased Housing Supply Measures – A new government may focus on boosting housing construction through additional infrastructure projects, rezoning initiatives, and affordable housing programs. Victoria, with its growing population, could see benefits from such policies.

• Additional Cost-of-Living Relief – If further cost-of-living measures are introduced, homebuyers may find it easier to save for deposits or manage mortgage repayments. However, inflationary effects may also need to be considered.

Written by Hamish Mitchell.

Director