Investor exodus ahead as property reforms take hold

New data from property valuation and advisory firm Herron Todd White found that the majority of industry professionals anticipated a drop in residential investment and a reduction in property values, further dampening sentiment.

Herron Todd White CEO Peter Maloney said the tax changes had a negative impact on investor confidence almost immediately.

Of the more than 500 professionals surveyed, around three-quarters said they expected a significant number of investors to sell their assets and exit the market.

He said that disincentivising investors’ purchases of existing properties by removing negative gearing could significantly impact rental supply, housing confidence, and broader market activity.

Despite the reforms being billed as a measure to increase dwelling numbers across the country, he said that investors weren’t likely to jump into new builds as confidence in the market was low.

“There is nothing to suggest that investors will suddenly pile in and take advantage of negatively gearing new dwellings to help fuel supply, and if they did, we now have the perverse equation of first home buyers having to directly compete with investors for new dwellings,” Maloney said.

“The irony of this is that the tax reforms may well have created more competition for new dwellings, the category in which first home buyers are more likely to start their home ownership journey.”

According to the survey, only about 10 per cent felt the tax reforms would actually add to housing supply, with the majority stating it would either worsen or have no material impact.

Maloney said the findings were a clear indication of the prevailing sentiment across the industry.

“The overwhelming view among respondents is that the tax reforms will reduce investor participation and do nothing to lift housing supply, which remains one of Australia’s most pressing economic challenges.”

Maloney said the data highlighted a significant disconnect between the policy objectives and industry expectations.

While designed to slow the market down, more than one-third of respondents anticipated that values would decline by between five and ten per cent as a result of the reforms.

The data also found that one in ten believed values would decline by more than 10 per cent, while approximately 22 per cent anticipated no change or that property prices would actually increase.

“While the extent of any market adjustment remains uncertain, there is a clear expectation among industry participants that the proposed reforms would place downward pressure on residential property values,” Maloney said.

“These findings provide an important insight into how the professionals who work across Australia’s property and finance systems believe the reforms are likely to impact investment, housing supply and market confidence.”