Allowing Aussies to hold at least one negatively geared property each might be the answer to cutting back the cost of the tax concessions without impacting the market too harshly. Picture: Darren England
RESTRICTING negative gearing to just one property each may be the answer for federal politicians looking to slash housing tax concessions.
Amid fears housing will become a political football in the lead-up to next year’s Federal Election, experts have thrown up options that could see concessions remain with Mum and Dad investors — but only for one property each.
Allowing Aussies to hold at least one negatively geared property each might be the answer to cutting back the cost of the tax concessions without impacting the market too harshly, according to Nerida Conisbee, realestate.com.au chief economist.
The Block 2018: Why Jess and Norm lost
Property prince cracks Young Rich List top three for first time
She told The Courier-Mail that the market had changed substantially and adjustment was needed to policies that doggedly wished to outlaw negative gearing.
“We’ve had a 30 per cent reduction in lending to investors from the peak in 2015, there’s been a clear resurgence in first home buyers, all the things people were worried about have turned around,” she said.
“That is one of the challenges of policy that you make it at one time and the situation can change dramatically by the time it comes into place and it’s quite clear that that’s what’s happened here.”
Nerida Conisbee, REA Group chief economist, believes there are options that could make negative gearing changes more palatable to the market.
Ms Conisbee warned that given most rental housing was currently produced by mum and dad investors, drastic policy changes would have longer term impacts on rent prices and availability.
“If people stop investing in housing, rents start to push up. Renters are far more sensitive to price rises.”
The answer, she believed, was “slight changes” to policy to ensure it was more palatable to the market.
“One thing may be keep it but only to one negatively geared property (each),” she said.
Ms Conisbee agreed that for those who couldn’t afford their first home it would seem unfair that others held up to 20 negatively geared properties.
“For most mum and dad investors it would probably would be great to still negatively gear one property, and perhaps politically it would be more palatable too.”
One of the options ALP is considering is to limit negative gearing to new properties. Picture: AFP photo/Paul J Richards.
Rental housing supply tax incentives, potentially to large corporations would also need to be considered as an option, she said.
As well, allowing negative gearing across regional areas should also be looked at, given very little new development was now going into places like Wagga Wagga while Hobart was seeing a rental crisis.
“Investing in housing is something people have always been confident in but if you erode that, it does impact outlook and that can have compounding effect on pricing,” she warned.
“I don’t think anyone thought price rises in Sydney and Melbourne were a good thing. When it was reaching 10 per cent rises a year, there was a real sense of panic in the market. Things have settled.”
Negative gearing has become a popular way to reduce personal tax liabilities, according to the Australian Labor Party, with the policy coming into full swing after concession changes put in place by former Liberal PM John Howard in 1999.
FOLLOW SOPHIE FOSTER ON TWITTER OR FACEBOOK