Blog

March 01, 2019

"Winter is Coming" - Investor research on negative gearing and capital gains tax

A huge policy change that could come after the federal election in May this year relates to negative gearing and capital gains tax.

The Federal Opposition claims current concessions are highly inequitable, skewed towards high-income earners and not supportive of investment in new housing. Touted as a “positive plan to help housing affordability” latest research from the Property Council of Australia indicates that the proposed changes may have a far more adverse effect than first anticipated, especially as it relates to renters.

The research found that investors would be less likely to invest in newly constructed housing under the oppositions tax changes, not more likely as had been assumed.

But why the change? Market conditions are dramatically different now as to when the policy was first announced in early 2016. Housing prices are still declining from the market peak in 2017. Investor lending has dropped dramatically, off the back of increased regulation. Foreign investment has decreased and banks have tightened their lending standards of the back of the royal commission and now building approvals are declining.

Why is this important? Because if less new housing is created for people to rent, it will lead to higher rents in the medium term. Goods news for current real estate investors but bad for those who rent (approximately one-third of all Australians).

The survey shows that making changes to negative gearing and capital gains tax will indeed change the housing market, but perhaps not for the better.

If you or your friends wish to discuss circumstances regarding any property issue please feel free to call me on +61 467443838.  I am here to help.