Negative gearing changes: A looming threat to the housing market’s balance?
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The Real Estate Institute of Australia (REIA) has recently sounded the alarm over the potential fallout from the Greens’ stance on negative gearing, suggesting it could further exacerbate the nation’s housing crisis by driving investors away from the market. Such a shift, the REIA warns, could leave renters facing an even scarcer selection of available properties and potentially push rental prices higher.
Leanne Pilkington, the President of REIA, expressed concern over the discouragement of mum and dad investors, asserting that it would only worsen the current situation. She remarked, “Adam Bandt’s agenda continues to exacerbate Australia’s housing issues. Last year, it was rent freezes and controls; this year, it’s negative gearing and capital gains tax. With over 2.2 million family investors supplying 97% of rentals, they are part of the solution, not the problem.”
Pilkington highlighted the importance of these family investors in maintaining rental supply and cautioned against policies that might deter their participation. The institute is urging the Albanese Government to keep its promise not to alter the frameworks of negative gearing and Capital Gains Tax (CGT), with a focus on enhancing housing supply instead.
According to Pilkington, the proposed changes to negative gearing could disproportionately benefit large-scale property investors while overlooking the broader impact on average Australians. She added, “Furthermore, removing incentives like negative gearing will make it harder for renters saving for a home deposit.”
REIA has presented data indicating that approximately 70% of rental property owners possess only one negatively geared property, emphasizing the widespread nature of this investment strategy among average Australians. The organization also outlined several potential repercussions of disincentivizing such investments:
- For renters, the reduction in available properties could see rent increases ranging from seven to 12 per cent.
- State Governments might experience diminished stamp duty revenues due to a decreased housing supply.
- The construction industry and small businesses related to it could face a slowdown, with an estimated 10,000 to 42,000 housing projects potentially being put on hold.
In light of these concerns, the REIA is calling for policies that support both investment in the housing market and affordability, cautioning against measures that might further distress an already strained system.
