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Disclaimer: Information contained herein have been sourced directly from reiwa.com.au. The article/s below have been slightly altered.
The Australian Labor party is going to the federal election with a risky housing tax policy that will exacerbate already falling house prices, force up rents and threaten the broader economy. REIWA is calling on all political parties contesting the federal election to commit to no blanket changes to national property tax policies, like negative gearing and capital gains tax, if elected.
REIWA President Damian Collins said meddling with one component of a broader tax system was reckless and would significantly impact everyday Australians and further stifle Western Australia’s already struggling property market.
Under Labor’s plan, property investors wishing to buy older style properties will be prevented from claiming interest payments against their incomes, and the capital gains tax break they currently receive would be halved.
“Changing one component of a broader tax system is irresponsible. History has already shown us that removing negative gearing and capital gains tax for investors has wide-ranging implications. In the 1980s when negative gearing was removed the impact was so significant across the country that negative gearing was re-introduced just two years after it was removed,” Mr Collins said.
Everyday Australians to feel brunt of change
According to data from the Australian Taxation Office (ATO), 330,000 West Australians own at least one investment property and of those, 215,000 rely on negative gearing to help off-set losses incurred through owning a rental.
“The myth that property investors are wealthy moguls with extensive investment portfolios is simply not true. The vast majority are ‘mum and dad’ investors with less than two rentals who are utilising property investment to help secure their future,” Mr Collins said.
“Without such a mechanism available to prospective investors to help them afford the ongoing costs associated with owning a rental, many will reconsider if property is a financially viable investment choice, causing them to withdraw from the private rental market or seek alternative investment options.
“This will have huge implications on the WA property market. We’ve already seen the value of investor loans decline 69 per cent since 2015 due to soft market conditions and subdued consumer confidence levels. Any changes to negative gearing or capital gains tax will only serve to further deter investment in the WA property market which is the last thing we need.
“Our local vacancy rate has declined to 2.3 per cent from a high of 7.3 per cent in a little over 18 months. If landlords are deterred any further from investing in the WA property market, it will be tenants who ultimately bear the financial burden of this change, with a shortage of rental supply guaranteed to push up rent prices and reduce affordability – which is exactly what happened when negative gearing was removed in the 80s,” Mr Collins said.
Report shows Perth tenants will be most impacted
A report released last month by SQM Research detailed how the Australian Labor Party’s plan to abolish negative gearing would negatively impact tenants. It showed rents would rise across the country by between seven and 12 per cent, with tenants in Perth and Brisbane likely to be the most affected. And that will of course be a direct hit on young Australians saving to buy their first home’
“Those vying for our country’s top positions seem to have little regard for the WA property market when considering such dramatic shifts in property taxation policy. REIWA is calling for all parties contesting the election to commit to not tinkering with negative gearing or capital gains tax until a full governmental review into the implications has been conducted,” Mr Collins said.
