‘Exodus’: Dire forecast for negative gearing change proposals

A highly controversial housing policy Labor is considering would have a brutal effect upon a million Aussies, it’s argued.

OPINION

Targeting negative gearing will have dire consequences for both investors and renters.

The Real Estate Institute of Australia cautions against the demonising of negative gearing, arguing that disincentivising investment will exacerbate an already strained market and create a massive exodus of current investors if brought in for existing properties.

Disincentivising investment into housing for mum and dad investors will just make a bad situation worse.

REIA’s latest Housing Affordability Report reveals that housing affordability is at its worst in three decades, impacting both home buyers and renters.

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Is Albo setting his sights on negative gearing? Picture: NewsWire / Martin Ollman

With over 2.2 million family investors supplying 97 per cent of rentals, they are seen as part of the solution, not the problem.

Proposals to phase out negative gearing will primarily benefit large-scale property investors, neglecting the impact on everyday Australians.

The potential removal of negative gearing will result in a reduced supply of rental properties, leading to rent increases of up to 12 per cent. As vacancy rates tighten and competition among renters intensifies, many will face even greater financial pressure.

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A negative gearing crackdown could raise rents by 12 per cent. Picture: NCA NewsWire / Max Mason-Hubers

Rental vacancy rates remain tight, with a national average of 1.6 per cent — well below the industry benchmark of 3.0 per cent.

If negative gearing was removed, the reduction in rental investment would likely exacerbate this issue, decreasing rental property availability and leaving renters with fewer housing options.

This will result in higher rents and a more competitive rental market.

Moreover, the impact on small investors — predominantly ‘mum and dad’ investors — will discourage them from entering or remaining in the market, further reducing housing supply.

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Real Estate Institute of Australia president Leanne Pilkington. Picture: Supplied

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With 37.9 per cent of all finance to households for residential property coming from investment loans, the REIA stresses the urgent need for policy measures that promote investment and enhance housing affordability. Ultimately, any changes to negative gearing should be approached with caution, ensuring they do not inadvertently harm the very individuals they aim to support.

– Leanne Pilkington is the president of the Real Estate Institute of Australia

Originally published as ‘Exodus’: Dire forecast for negative gearing change proposals