Abolishing negative gearing ‘a serious threat’

Abolishing negative gearing ‘a serious threat’

by 5 comments

The Real Estate Institute of Australia (REIA) has highlighted the importance of negative gearing to the Australian property market, saying it keeps rents lower.

REIA chief executive Amanda Lynch said the federal Treasury is again pushing for the removal of negative gearing and the rumour is that modelling will be done on retaining it for new housing only.

“This is a serious threat not only for our profession and geared investors but potentially for all property owners,” she said.

“Negative gearing increases investment supply with almost 1.9 million of Australians investing in the residential property market.

“The arrangement keeps rents lower than they otherwise would be,” she added.

The Hawke government abolished negative gearing for property in 1985, only to have it reinstated in 1987.

According to the REIA, during that period rents increased by 57.5 per cent in Sydney, by 38.2 per cent in Perth and by 32.0 per cent in Brisbane, highlighting the importance of upholding the arrangement.

The Henry Review – released in 2010 and led by then Treasury secretary Ken Henry – acknowledged that negative gearing applies downward pressure on rents.

The REIA estimated the impact of the implementation of the Henry Review recommendation to replace the current negative gearing arrangement with the introduction of a 40 per cent discount for income from rental properties would lead to an increase in the weighted average capital city median house rent by 2.4 per cent.

“In the current tight rental market expectations are for outcomes similar to the mid-1980s,” Ms Lynch said

“The removal of negative gearing would increase demand for social housing, an area that governments have been struggling to address.”

Based on the information on rental property schedules by state and territory, the REIA estimates the following increase in median rents as the result of the Henry Review recommendation:

$1·         0.8 per cent for NSW

$1·         1.9 per cent for Victoria

$1·         3.3 per cent for Queensland

$1·         2.3 per for South Australia

$1·         1.9 per cent for Western Australia

$1·         1.1 per cent for Tasmania

$1·         1.2 per cent for NT

$1·         2.4 per cent for ACT

promoted content
Recommended by Spike Native Network
Listen to other installment of the Real Estate Business Podcast
reb top 100 agents 2017

With a combined sales volume of over $14 billion in 2017, the Top 100 Agents ranking represents the very best sales agents in Australia. Find out what sets them apart and learn their secrets to success.

featured podcast

featured podcast
Learning from the best led Michael Clarke to success

In this episode of Secrets of the Top 100 Agents, number four-ranked agent, Michael Clarke, returns to the studio to explain why he’s less...

View all podcasts

How difficult is it to maintain a good work/ life balance?

Very – if I’m having balance my competitors are working
Not – I schedule the time into my calendar in advance
A little – It’s scheduled, but something always crops up
Work/ life balance – what’s that?
Do you have an industry update?