Property policy changes will hit everyday Aussies where they live
[opinion piece published in The Daily Telegraph, 7 November 2018]
Property investors are
mostly everyday Australians,
spread across the community.
Treasury’s analysis bears
this out. We know from tax office
data that 71 per cent of
property investors have just
one investment property and a
further 19 per cent have just
two. Most investors have a taxable
income of less than
$80,000. These are not rich
property barons — they’re
everyday people making a
modest investment to prepare
for their future.
That’s where the facts stop
and the questions begin.
If Australia’s housing market
is a $6.8 trillion sector, how
will making big changes to tax
policy affect it?
The Opposition proposes to
limit negative gearing to newly
constructed properties and increase
capital gains tax by 50
per cent, while grandfathering
existing arrangements.
The aim is to help housing
affordability, cool an overheated
investment market and raise
new tax revenue. But what
would be the economic impact
if these tax changes were to
come into force?
How many future investors
would be dissuaded from investing
with these increases?
And what would happen to
rents? After all, every person
who rents needs an investor to
provide a roof over their heads.
Labor’s policy assumes that
house prices would drop
enough to convert renters into
buyers, but what if it doesn’t
and the rental demand outstrips
supply?
And with prices falling and
construction levels slowing,
what are the risks with making
such fundamental changes?
Since the end of the mining
boom, the economy has relied
on construction to provide jobs
and activity, as well as the
housing that Australians need.
The property cycle is definitely
turning.
Beware the well-intentioned
policy proposals that
could drag it down further.