Labor could have refined gearing policy but chose class warfare instead, property CEO says

A simple policy fix would have ensured wider support for Labor’s negative gearing plan, but the party ran with a problematic policy for a deliberate reason, a real estate insider says.

Developers rely on negative gearing to help sell their products to investors.

Simple changes to Labor’s negative gearing plan could have ensured wider support for their reforms but the party ran with a more problematic policy to “deliberately stir the pot”, an industry insider claims.

Starr Partners chief executive Douglas Driscoll said the Labor Party was right to explore ways of reforming negative gearing, but rather than present a feasible proposal the party resorted to a form of class warfare.

“I don’t think negative gearing should be removed, but it does need to be reviewed,” Mr Driscoll said.

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“Instead of doing that, Labor wanted to show they were taking on the big end of town and presented a policy that was intentionally polarising.

“They presented negative gearing as something that benefited only the wealthy, even though the numbers didn’t back that up.”

Starr Partners CEO Douglas Driscoll. Picture: Jonathan Ng

He added that the ALP wasted a chance to present meaningful reform and instead engaged in “left-wing scaremongering” that it thought would reel in voters.

If the ALP had been serious about levelling the playing field for new buyers it could have made numerous tweaks to its negative gearing plan.

These would have smoothed out some of the drawbacks of existing tax arrangements without risking a market collapse, Mr Driscoll said.

Negative gearing tax concessions currently allow investors to offset the losses on their rental properties against their taxable income.

Bill Shorten may have underestimated young buyers’ investment ambitions. Picture: Alex Coppel

Labor’s proposed policy, which it carried to both the 2016 and 2019 elections, was to restrict the concession to only buyers of new properties and leave existing gearing arrangements grandfathered in.

A sounder gearing policy could have restricted the number of properties investors could claim benefits on, rather than remove the concession entirely, or other tweaks could have been made, according to Mr Driscoll.

“There could have been a cap … it doesn’t seem fair for someone to be (claiming benefits) on 10-12 properties.”

Labor also underestimated the aspirations of young buyers who wanted to own investment properties and were hoping to use negative gearing, Mr Driscoll said.

These buyers would have viewed Labor’s offer to grandfather existing gearing arrangements as a betrayal because it meant older investors would still get the concession but not them.

“It is interesting that Labor took the exact same policy to both elections even though the market had completely changed,” he said. “That policy was not the answer.”

Mr Driscoll said Labor’s loss should not kill the debate about how to make negative gearing more efficient and it should be the subject of an independent review.

Real Estate Institute of NSW chief executive Tim McKibbin said the real estate industry dodged a bullet with Labor’s electoral failure.

“Labor’s negative gearing policy would have pushed many property owners into negative equity once the investors abandoned the existing property market and competition for those properties diminished, driving down prices.”

Originally published as Labor could have refined gearing policy but chose class warfare instead, property CEO says