Property investors fear forced sales under negative gearing changes

When Sydney architect Chirayu Shah and his wife bought their first home in 2017, they hoped it could be something to pass on to their children.

But with changes to negative gearing and capital gains tax concessions on the cards, Shah fears he could be forced to sell what is now their investment property, but would also be unable to offer his sons housing security down the track.

Chirayu Shah and his two boys at their Baulkham Hills homeCredit: Wolter Peeters

“If I can hold on it’s not just an investment, it could be for my kids,” he said.

On Wednesday, this masthead revealed the Albanese government had asked Treasury for advice on possible changes, as the Greens demand an end to the tax breaks and the Liberals warn against a hit to investors.

Negative gearing allows an investor to deduct any losses from running a property (such as interest, rates and maintenance) from their annual income, reducing how much tax they pay.

Shah is currently up to $500 a month out of pocket to keep his Carlingford unit in the family. He says any reduction in tax breaks would see his outlay become so unaffordable he would need to sell – at what he fears would be at least a $70,000 loss.

“I will have to really think about it. I’m already putting in $400 or $500 a month to keep up this property,” he said.

Purnell Real Estate principal Nick Purnell said only about 5 to 10 per cent of the 400 properties his agency manages were positively geared.Credit: Alex Ellinghausen

Purnell Real Estate principal Nick Purnell, who bought an apartment in Canberra as an investment property in 2020, said people will stop investing in property if negative gearing is abolished.

“At this stage, and in this market, negative gearing is entirely necessary in the Australian Capital Territory,” he said, noting rents in Canberra often fall short of the combined cost of mortgage repayments, land tax and general rates.

“Without property investors in the market, there won’t be enough stock of rental properties, and you’ll see a massive increase in rent because the people who do have properties will be looking to positively gear them, and other people won’t be buying them.”

Purnell said only about 5 to 10 per cent of the 400 properties his agency manages were positively geared.

There is “no way” rents will ever outperform the increase in rates and land tax, Purnell said, and without negative gearing, he would have considered cheaper properties in regional areas.

While it is common for governments to ask for officials to assess policies without proceeding with changes, Prime Minister Anthony Albanese on Wednesday distanced himself from the modelling.

“I have no plans to do it. It’s not our policy,” Albanese told radio station 2GB.

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