Current talk about the future of negative gearing is unlikely to result in any changes to the system according to one investment expert.
A proposal put forward by the Greens would see negative gearing scrapped and the increased tax revenue used to build affordable housing, but this plan is likely just the latest in a long line of ideas that have never got off the ground… another scare tactic to create political noise.
“This is nothing new. Every so often when the market heats up we hear the same regurgitated speach we’ve been hearing for the last 20 years. Ever since negative gearing was introduced threats have been put forward to bring it down however it would be an utter disaster if it was.. the country would suffer too much and rents would skyrocket” Xavier Quenon said. ‘Furthermore we have seen how succesful the prior governments have been at creating and managing Low socio housing… This is a pipe dream’
“I don’t have a crystal ball, but I don’t think the government is going to do anything at all to it. The Keating government tried and got badly burnt back then and most likley the same would happen today… or worse.”
While some people believe investors are using negative gearing to avoid paying their fair share of tax, the system actually benefits the country and the economy that needs a steady supply of housing the public sector cannot provide.. hence the private – tax – incentive Quenon Says.
“The people who are getting the real benefit out of negative gearing are the investors who have five, six or seven or more properties and I think the ABS had statistics that there’s only about 15,000 of them in Australia,” he said.
Most people own their own home and one investment property if they’re lucky and negative gearing might save them $4,000 or $5,000 a year.
According to costings from the independent Parliamentary Budget Office, The Greens’ policy would save the government $2.9 billion by 2020 and $42.5 billion over 10 years. Part of that money would then be used for to build housing for the homeless or those on public housing waiting lists.
While The Greens argue getting rid of negative gearing would allow for the construction of affordable housing, others believe it will make finding somewhere to live harder for low income earners.
The Real Estate Institute of Queensland believes the plan will turn investors off housing and result in housing stocks dwindling, something Quenon agrees with. If it is removed it would make property a less attractive asset class for investors and if they are removed housing stock will dwindle and rents will rise. This would cause a housing affordabilty issue of its own nature