Negative gearing is not a perk of “the rich,” it affects everyone. If the plan to get rid of it succeeds, it will be a disaster for our fragile economy. Why would we risk that? It will effect buyers, purchasers, landlords, tenants, investors and even your super!!
In recent months, a policy to get rid of negative gearing on existing residential property and increase capital gains tax has been all over the media.
This policy – if ever adopted – directly affects the millions of Australians who own any property, whether it’s an investment or their own home. It also affects the 18 million Australians who have a stake in property through their superannuation funds.
But as well as falling house prices, the knock-on effects will see jobs destroyed and government revenues fall, and may even send the Australian economy into recession.
This site (negativegearingeffectsyou.com) is part of a campaign by real estate groups across the country who have united with the Real Estate Institute of Australia to make Australians aware of these disastrous consequences. Our industry participants pride themselves on being apolitical, but this time, the issue is far too important not to speak out.
Yes, this policy will affect the property industry, which is now the biggest industry in Australia. Such a policy would rip billions of dollars out of our sector at a stroke. But it’s obvious that taking billions of dollars out of the economy all at once is a recipe for disaster for all of us.
It could be assumed the opponents of negative gearing for investment properties don’t appreciate how negative gearing contributes significantly to rental affordability, which is vital to the budgets of many households. One in four dwellings is owned by an investor, adding to the pool of properties available to tenants.
If negative gearing is restricted, there is a risk that investors will be discouraged from purchasing property, thereby reducing the number of rental options for tenants. And when you reduce supply, demand continues to increase, and pricing adjusts accordingly. Furthermore, landlords who currently negatively gear will need to raise rents to cover the loss of income, placing further budgetary pressures on tenants.
Historically, investors have made up around 30 per cent of housing finance commitments over recent years. Regional and rural towns are also expected to be negatively impacted if investors drop out of the market. These towns attract less new construction than metropolitan areas, but a high proportion of their population relies on rental accommodation.
A strong level of investor demand is crucial in delivering new housing stock and lifting the supply of rental accommodation across the country to keep rents affordable.
Likewise, strong investor demand in the existing market, which is more characterised by free-standing homes better suited to growing families, is equally as important in keeping rental accommodation affordable, as well as offering a choice of rental stock in communities where families would like to live.
Many first home buyers think that if the proposal to abolish negative gearing on existing property was enacted, they’d be better off.
This belief is simply not true and here’s why;
The main barrier to affordability for young people today is not actually the purchase price. It’s in getting together the upfront deposit of 20% (many lenders won’t lend more than 80% due to the new APRA requirements, or if they do, they charge a hefty mortgage insurance) as well as the high stamp duty fees, which vary in every state.
This big chunk of cash is hard to save up and won’t become much easier, even if house prices fall from their current levels. It will be even harder to save if the first home buyer is a renter as rents will probably increase to offset the loss the Landlord will have to face. It’s not a win win at all.
We encourage all Australians to make an informed choice. Negative gearing is not some taxpayer-funded perk for “the rich.” It matters to, and affects, everybody.
visit www.negativegearingeffectsyou.com and have your say