Negative gearing to remain unchanged
The government’s decision to leave negative gearing untouched is a win for both property owners and renters according to Momentum Wealth managing director Damian Collins.
“Negative gearing allows average Australians to grow their nest eggs through property investment, and also works as a rent subsidiary for low-income earners and those not yet ready to purchase a house,” he says.
“Tinkering with negative gearing puts the financial future of millions of Australians, and the broader economy, at risk, which is why it’s crucial to leave the existing structure as is.”
Housing Industry Association (HIA) chief executive industry policy and media Graham Wolfe says negative gearing is not the domain of so-called “wealthy investors”.
“Australian Tax Office data confirms that nearly eight of every 10 taxpayers with a rental property declare a taxable income of less than $100,000, while 70 per cent earn less than $80,000,” he says.
“With an ageing workforce and mounting pressure on publicly funded services, retaining negative gearing will support the delivery of a larger stock of rental accommodation, increasing access to shelter, while promoting wealth creation and self-sufficiency in retirement for hundreds of thousands of ‘mum and dad’ investors.”
Research conducted by Independent Economics on behalf of the HIA confirmed that restricting access to negative gearing for residential property would reduce investment in housing and put upward pressure on rents.
Research confirms that negative gearing also provides a positive force for the Australian economy and Australian living standards.
Housing affordability?
Collins says neither political party directly addressed housing affordability, reiterating his calls for all levels of government to take action on the issue.
“If governments were serious about improving housing affordability, they could immediately start by taking three simple steps,” Collins says.
“Firstly, governments could remove taxes on land developers and buyers, secondly they could allow more medium- and high-density housing options in established suburbs and finally they could address the high cost of land development for new housing estates.
“By taking these steps, housing affordability will dramatically improve allowing countless more Australians to obtain home ownership.”
The Urban Taskforce agrees that the decision to leave negative gearing alone is positive news for the housing market, saying: “The new housing market is currently slowing down through restrictions on lending by banks and it’s essential that investor confidence in new housing, particularly in apartments, is maintained.
“Australia, as one of the most urbanised countries in the world, is moving more towards a stronger rental market as other major cities in the world currently have.
“A stronger rental market comes with urban density with apartments close to public transport nodes and this rental market clearly needs investors to deliver new apartments.
“Australia’s economic support of investment in rental housing through negative gearing and attractive capital gains is essential to maintain the necessary stock of rental housing.”
CEO of LJ Hooker Grant Harrod reveals that a poll of 1,700 investors with properties managed by LJ Hooker showed 37 per cent of investors earned a combined household income under $100,000, while 67 per cent had a household income of $150,000 or less.
The poll also found 31 per cent of investors would sell some or all their portfolio if negative gearing was abolished or restricted, revealing that property investment is central to an individual’s, couple’s or family’s wealth accumulation.
“The residential real estate market – including construction, sales and rentals and related services – is one of the Australian economy’s largest sectors both in value and employment,” Harrod says.
“Changing negative gearing legislation will lead to a structural change of the real estate market.”
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