As the federal election nears, cries against proposed changes to negative gearing are getting louder. Property associations and pundits are banding together to warn against the Labor Party’s controversial negative gearing tax reform.
Property Investment Professionals Australia (PIPA) char, Ben Kingsley, has claimed Labor’s economic modelling underpinning its plan to limit negative gearing to new housing is “dangerously misleading”.
“Such major reform requires comprehensive and detailed modelling. Until there is real evidence to support such a policy, which industry experience tells us doesn’t exist, the opposition should be very careful about changing negative gearing and capital gains tax provisions,” Kingsley said.
“Our message is clear - $6.5 trillion worth of Australians’ wealth is tied up in property. That’s roughly three times that held in superannuation and equities. Don’t play with this unless you know what you’re doing.”
Echoing PIPA’s concerns, the Real Estate Institute of Australia (REIA) has claimed changes to negative gearing is not the answer to housing affordability.
“With large increases in house prices, particularly in our two largest capital cities, there have been many claims that the current tax treatment of negative gearing and capital gains of residential property is exacerbating housing affordability issues. This is simply not the case,” REIA president Neville Sanders said.
Sanders believes limiting negative gearing will amplify affordability issues, not the other way around.
“It is supply that is the critical factor in resolving the affordability problem. Changes to current taxation arrangements as proposed will do nothing to address affordability. If anything it will exacerbate the problem.
“There is ample research that shows that negative gearing and the CGT discount are not driving excessive, unproductive and speculative investment in housing but instead they are adding to housing supply with currently $7 billion a year invested in new dwellings.”
The chief executive of national real estate network, First National, believes the answer to addressing affordability lies in tackling the deposit gap for first home buyers, not binning negative gearing.
“It is the upfront costs, not the actual purchase price or the size of repayments, which are the greatest barrier to first home buyers. Labor’s policy on negative gearing if implemented will have a negligible effect on this,” Firtst National CEO Ray Ellis said.
“Unless house prices collapse - which Labor says will not happen – there will be no real difference for first home buyers in overcoming the deposit gap but at the same time paying higher rents whilst saving.”
Angus Raine, executive chairman or major real estate network, Raine & Horne, said limiting negative gearing under Labor’s proposed reforms will keep Australians on the “rental treadmill” and out of the property ladder.
“In reality, cutting negative gearing will have the unfortunate effect of driving up rents, making it harder for tenants to save for a deposit to help them get off the rental treadmill,” Horne said.
“At the same time, there are plenty of young professionals with careers tied to the property and construction industries, who will potentially lose their livelihoods if the ALP wins the election and takes the axe to negative gearing.”