Negative gearing doesn't just benefit the wealthy and helps deliver housing stock, the Real Estate Institute of Australia’s (REIA) acting president, Pamela Bennett, has said.
“There is a great misconception that current negative gearing arrangements support only the wealthy but the reality is that up to 80 per cent of people buying property for investment purposes are mum and dad investors with an income of between $30,000 - $80,000 per year,” Ms Bennett said.
She was responding to comments made by the Grattan Institute’s Saul Eslake about negative gearing at this week’s tax forum, and also in an article published yesterday in Real Estate Business.
Mr Eslake said negative gearing arrangements for property transferred $4.5 billion per year from ordinary tax payers to affluent ones and that current arrangements do nothing to improve the supply of housing.
The REIA said in a statement that there is a strong argument that negative gearing in its current form, for the purpose of property investment, is complementary to the goals of the Housing Affordability Fund (HAF) in addressing the supply of rental accommodation.
“With the state of housing affordability in Australia declining, REIA would like to see the current negative gearing arrangements maintained to continue the supply of rental properties to the market as an alternative for those who cannot afford home purchase,” Ms Bennett said.
The REIA said that research conducted for its pre-budget submission is contrary to Mr Eslake’s comments that rents would see no change if negative gearing was abolished.
“REIA research shows, if the negative gearing recommendations of the Henry Review were implemented, average rents would increase by $13 per week or four per cent of the median house rent for three bedroom houses,” concluded Ms Bennett.