Limiting negative gearing tax breaks for investors would pose serious risks to the stock of rental properties available, warns a large property group.
The RBA warned again this week about the risks, as investors stoke soaring housing prices, and continued to flag that it would join with financial regulators to take “modest” action.
According to Mirvac Group chief executive Susan Lloyd-Hurwitz, tightening Foreign Investment Review Board regulation of offshore buyers and an additional stamp duty levied on foreign investors would slow superheated parts of the market.
“[But] as a society, we would have to think long and hard about the removal of negative gearing because it has very far-reaching implications,” she told The Australian.
“We need rental stock and it’s currently owned by mum and dad investors, negatively geared.
“Where [will] the housing stock come from for the rental market?” she added.
Foreign developers, who have forged into the Sydney, Melbourne and Brisbane markets, are selling their new projects offshore and a proportion may not be rented locally, reported The Australian.
“It’s hard to visualise how that plays out. I don’t think they permanently replace the mum-and-dad investors who negatively gear their investment flat,” Ms Lloyd-Hurwitz said.
She said years of chronic under-building in Sydney and to a lesser extent Melbourne would underpin the cities’ housing prices for another two years. But the days of soaring price growth in the two capitals were numbered.
“We believe that is unsustainable,” she said.
“We would expect house prices to increase in the mid to single digits for the next couple of years.”