Real estate boss issues firm warning on negative gearing

The owner and managing director of a leading real estate network has warned that Labor’s proposed negative gearing changes are a “blunt tool” that would negatively impact all Australians.

In a blog for Real Estate Business, R&W owner Andrew Cocks argues that negative gearing has been painted as the “menace” depriving young Australians of the chance to buy a home so as to benefit the wealthy few. However, the real estate boss said this position is misleading and “far too simplistic”.

“It denies the reality that we as a real estate network see every day – the many mums and dads who have invested in property with the long-term ambition to build sufficient wealth to live independently in retirement and not on the public purse,” he said.

“And importantly, it ignores the fact that many first home buyers are able to get a foot on the property ladder by investing in a negatively geared property.”

Mr Cocks pointed to the Grattan Institute’s modelling of the effects of the removal of negative gearing which predicts there would be an average 2 per cent reduction in residential property values.

“That 2 per cent represents a reduction in the value of the national real estate asset of around $130 billion,” Mr Cocks said.

“That should be of concern to everyone – home occupier, landlord, tenant and government. Of further concern, any reduction in real estate values will not be evenly distributed.”

According to the R&W boss, the impact of this is likely to be felt less in the high-demand areas of the strong housing markets of Sydney and Melbourne where any negative pressure on housing prices would be largely absorbed due to the inherent strength of these markets.

“It’s in the other capitals, regional cities and towns, where affordability is not such a pressing issue, that the drop in value is likely to be greater than 2 per cent and felt most keenly. And it’s going to hurt the nurses and teachers, policemen and bank tellers, who are the big investors in regional real estate, precisely because it is affordable,” he said.

"Every Australian home owner, regardless of whether they own an investment property or not, will see the value of their property reduced and if you happen to live anywhere other than Sydney or Melbourne, it is likely that the impact will be significant. The proposed changes are a blunt tool that will impact everyone.”

Stripping 2 per cent from the value of property will also have an impact on the stamp duty revenue that is propping up most state governments, Mr Cocks argued.

“In NSW, income from stamp duty would be reduced by around $82 million annually, with the national reduction in state government revenue exceeding $220 million. Combined with the negative impact on other taxes and council rates, it is clear that the costs for achieving a budget saving at a federal level will be borne by the states, local councils and all Australian home owners,” he said.

“So a word of warning to the legislators who seek election by attacking easy targets. Be careful what you wish for.”

Click here to read the full blog.

[Related: Investors not to blame for affordability crisis]

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