New economic modelling has warned that tightening negative gearing or capital gains tax (CGT) concessions in the federal budget could reduce new housing supply and push up rents, at a time when first-home buyers and property investors are already grappling with high mortgage rates and low vacancy.
The work, by Qaive and Tulipwood Economics for Master Builders Australia, the Housing Industry Association, the Property Council of Australia, and the Real Estate Institute of Australia, models nine policy scenarios around negative gearing and the 50% CGT discount.
Across the range of scenarios, the consultants conclude that reducing access to either concession would lower dwelling starts compared with a business-as-usual path.
One high-impact scenario – removing negative gearing for all current and future rentals except for one existing property per investor – is projected to cut dwelling starts by 45,524 between 2025–26 and 2029–30, a fall of about 4.4% versus the baseline. Construction employment is estimated to be up to 4,288 full-time equivalent jobs lower per year on average, while rents are forecast to rise by up to 2.4% in real terms above the baseline by 2029–30.
Industry groups argue this would make it harder to hit the National Housing Accord target of 1.2 million homes over five years. They stress that “housing policy demands a holistic approach” and that “simply pulling one or two policy levers that increase the tax impost on housing will not increase supply.”
A separate scenario modelling the removal of the 50% CGT discount, with similar grandfathering arrangements, points to a reduction in housing starts of up to 33,353 dwellings over the same five-year period, and construction employment projected to be up to 3,162 FTE jobs lower than business-as-usual. The reduced pipeline is projected to increase rents by up to 1.7% by the end of the decade compared with the baseline.
The report notes that almost one-third of Australian residents and visitors rely on the rental market, and that private landlords provide nearly six out of every seven rental dwellings. Investors also finance up to two in every five new homes, meaning policy changes affecting investor cash flow can have flow-on effects for overall supply.
For mortgage brokers, the modelling suggests any move to tighten negative gearing or CGT concessions could mean fewer new dwellings coming to market, more pressure on rents, and a tougher environment for clients balancing borrowing capacity with higher ownership and rental costs.
The industry bodies jointly urge the federal government to ensure this year’s budget “delivers a significant net increase in new housing supply” rather than measures that risk setting delivery backwards.
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