While much has been made of the big economic policies Labor is taking to the next election and the potential fallout from them, it’s not all bad news.
The federal Opposition’s proposals to grandfather negative gearing settings and abolish franking credits have been the focus of a “scare campaign” in the lead-up to what’s likely to be a May federal election.
However, Money Talks host Peter Switzer has told Your Money Live that there will be opportunities to cash in on the policies, should the Labor party take government.
These are the groups, he says, who stand to benefit from a Shorten government.
Before the election even rolls around, an opportunity may present itself for those looking to sell their property.
With polls indicating Labor is leading the Coalition, many buyers looking to get their hands on a negatively-geared existing property only have a few months to do so.
“I think a lot of retirees will think about buying a property and negatively gearing it before the election,” Switzer said.
“There could be an incentive to actually buy an investment property before the election because that can be negatively geared for life, it’s grandfathered,” he explained.
This could see sellers between now and May command a premium.
Interestingly enough, Switzer understands that politicians in particular, from both sides of the aisle, are lining up to take advantage of the window.
Home buyers and property developers
However, there’s a catch.
Once the negative gearing reforms are implemented, the tables will be turned on the property market.
“If you have an existing property and you try to sell it, a property investor or a landlord will not be that interested because they can’t negatively gear it,” Switzer said. “[So] you’ll have less [people] turning up to an auction, less turning up to an open house.”
This should see more investment flow into property development, as only new properties will be able to become negatively-geared.
In turn, property prices may slink lower off tempered demand.
“So, I’m generalising, but the changes are good for home buyers [and property developers]. They’ll make money out of a prime minister Bill Shorten,” he explained.
Away from the property market, Labor’s policies may be a major boon for shareholders.
Its proposal to do away with franking credits means that companies may choose to purchase stock back from shareholders.
“A lot of big companies may do buy-backs because they have all these tax credits,” Switzer began.
“They’ll put buy-backs into the market which means that if you’re a shareholder, you participate in the buy-back, you get money [and] the value of the shares often goes up because there are less shares in the market, and what are you going to do with that money that you’ve got? You’ll probably buy more shares,” Swtizer explained.
This cycle could see Australian stock valuations rise, as companies consolidate supply and more money floods into in the market.
Watch the full interview with Peter Switzer above.