Is now the best time to shut down negative gearing?
The Opposition leader Bill Shorten has conceded that Labor's negative gearing/capital gains tax reforms were not “universally loved.”
“I would rather see more young couples buy their first home, than spend billions subsidising investors acquiring multiple properties,” Shorten argues.
“All of the experts know that with scarce taxpayer dollars it’s better to put money into health and aged care than give a tax subsidy to someone buying their sixth or seventh investment property,” Mr Shorten said.
The last time I looked there were only 20,023 Australians with an interest in six or more investment properties, as according to ATO statistics 71 per cent of the Australians with rental properties have just the one investment.
The latest SQM forecast research suggest the policy was "risky" to the Australian economy.
There are some commentators who suggest the best time to shut down negative gearing as we know it is when few people are taking it up.
And they suggest that time is now, given our enduring low interest rates.
But the detailed SQM study ought dictate a policy rethink.
Labor announced it would abolish negative gearing as we know it before the last election, along with putting up the capital gains tax on housing investment by 50 per cent.
The policy was pitched to help housing affordability.
Sydney house have since fallen by some 13 percent from the peak, the biggest, quickest drop in living memory.
The landscape is very different now, yet the policy stays the same.
Wise heads don’t want a return to the runaway house price growth that denied first-home buyers getting into the market.
But there is a need to protect against seriously further undermining the value of people’s exisiting homes.
If Australians lose confidence in the value of the biggest investment they ever make, then this will impact everything.
No one really knows the full behavioural outcomes of investors, but polling shows Australians are unconvinced by the flagship Labor reform.
Property is a critically important asset class as Australian households hold more than half of their wealth in residential property.
Ofcourse the current anxiety assumes a change of Federal government and then the passage of the policy through the parliament.
This article was first published in the Saturday Daily Telegraph.
