Property investment becomes a political football

Residential property investment is going to be a political football during 2016, right up to the election and then beyond.

Just which way the investment herd heads will unfold but property markets don't like uncertainty.

As our politicians dwell on how to tax property investors, many will pause their decision making.

Yes some might rush in ahead of any change, but more likely there could be a flight of capital away from rental housing at the very time when the early 2016 sharemarket turmoil was likely to attract investment towards property.

We have a scenario where both the Turnbull Government and Shorten opposition work have mooted significant changes that will reduce tax benefits arising from property investment.

Both major parties seem intent to end the longstanding negative gearing arrangements that have been in place since the Hawke/Keating Government days.

The opposition has also signalled it intends changing the capital gains tax benefits that have been their since the Howard-Costello government, ie halving from 50 per cent to 25 per cent the capital gains tax deduction for investors who sell a property after holding it for at least 12 months.

The Turnbull government is pursuing negative gearers after tentative plans for an increased GST were virtually ditched as too hard.

Then Bill Shorten announced that a Labor government, if elected, would change the rules so that only new homes purchased after July 1, 2017, could be negatively geared.

Existing investors would supposedly not be affected by the grandfathered tax change, but that ignores the disappearance of the potential investor buyer pool into new housing and leaving just owner occupiers to compete for the established home rental offering. 

While the Turnbull government has rejected Labor's policy to restrict negative gearing to new properties, it seemingly plans to target high-end and professional investors by either capping the number of properties that can be geared or limiting the annual tax deductions of which can be claimed.

Earlier this month the Property Council of Australia released data on the number of negatively geared voters in the most marginal seats and threatened a campaign in Labor and Liberal marginal seats should negative gearing be touched.

Their data indicated over 430,000 Australians who negative gear an investment property live in marginal seats held by the Government and the Opposition.

The 10 most marginal Coalition seats have an average of 8,181 investment property owners and the 10 most marginal Labor seats have an average of 8,357 property owners. 

Federal Liberal Craig Laundy in Barton has over 11,000 with a stake in the outcome. Opposition treasury spokeperson Chris Bowen has 7400 negative gearers in his Sydney electorate.

“Mums and dads see owning an investment property as a way of securing their long term prosperity," said Property Council chief executive Ken Morrison.

“To play with negative gearing is to play with the financial futures of 430,000 people who live in the most marginal seats."

This article was first published in the Saturday Daily Telegraph.