A report issued earlier this week slamming the state and Federal governments’ housing policies has provoked a strong reaction from one industry spokesgroup, which says the recommendation that negative gearing me removed is ‘short-sighted’.
The Real Estate Institute of Australia (REIA)says it agrees with the Grattan Institute Renovating Housing Policy report in that a major overhaul of housing policy in Australia is needed, but disagrees with what needs to be done.
“We strongly agree with the report’s recommendations to eliminate stamp duties, however it’s essential negative gearing be retained in its current form for the purpose of property investment,” says REIA president, Peter Bushby
“REIA has always supported negative gearing because it helps in the provision of rental accommodation. Negative gearing for property investment is complementary to the goals of the Government’s Housing Affordability Fund (HAF) in addressing the supply of rental accommodation.”
Bushby says that, to remove negative gearing would show that Australians ‘haven’t learnt anything from history’.
“When negative gearing was abolished in 1985 it had disastrous consequences for the property market and for people trying to rent. Rents rose 37% across Australia and by 57% in Sydney. Thankfully, negative gearing was reinstated in 1987. It is far too short-sighted to link investor interest in housing to negative gearing alone. Negative gearing is only one of a range of factors that contribute to the level of investment in property. Other factors include interest rates, availability and accessibility of finance, share market performance, the unemployment rate, housing supply and consumer confidence.”
He says the ‘myth’ that negative gearing is a plaything of the well-heeled also needs to be dispelled, claiming the majority of taxpayers with negatively geared property earn less than $80,000 per annum.
“Findings in the Renovating Housing Policy report are important and let’s hope they assist in kick-starting a debate on housing policy. With the new government, expectations that industry will be involved in finding workable solutions to these old issues are high.”