Negative gearing cuts no solution to budget hole: Antonia Mercorella

GUEST OBSERVER

The Real Estate Institute of Queensland (REIQ) rejected Federal Treasurer Scott Morrison’s suggestion that curbing negative gearing was a responsible fiscal alternative to raising the GST.

Negative gearing was well established as a vital tool to encourage investors into the property market, where their continued investment was vital to ongoing rental affordability.

Removing negative gearing from property investment will only serve to drive investors to other assets such as shares, where the offset would remain intact.

This would further impact affordability as there would be fewer houses available to meet rental demand

A review of history would confirm this, with the Hawke government removing gearing benefits in in 1985 only to reinstate them in 1987 when rents surged approximately 24 per cent. 

Removing or scaling back negative gearing would actually hurt the most vulnerable in Queensland, with middle and low-income families unable to afford the resulting rising rents as stock dwindled.

In Queensland more than a third of our population is in rental accommodation, so it’s crucial that supply is maintained for this large section of the community.

If private rentals were drastically reduced this would place enormous strain on the limited resources in public housing.

In its 2013 report Housing 2020, the Queensland State Government outlined its public housing strategy to limit its public housing new builds and to actively transition residents through its public housing, moving them towards private rentals or home ownership.

The Government recognises that the private sector is able to gain more efficiencies in the housing market and the public sector is more costly and less efficient.

The Government strategy focuses on moving residents away from “a view that social housing is a home for life” and instead, places “greater emphasis on social housing as a transitional period on the path to private rental or home ownership”.

If supply was limited to the private rental market and public housing was being scaled back, the social consequences would be significant and detrimental.

Instruments such as negative gearing encouraged individuals to save and invest in property, and this boosted financial self-sufficiency for individuals later in retirement, a key plank of government policy.

There was a common misconception about investors who access negative gearing benefits and capital gains tax concessions, as very wealthy with a vast portfolio of property.

Recent ATO statistics, provided by the Property Council of Australia, revealed that about 70 per cent of investors who benefit from negative gearing earn less than $80,000 and about 73 per cent own just one investment property.

In Queensland, owner occupiers account for two-thirds of the residential dwelling market, with investors making up about a third (34 percent).

ANTONIA MERCORELLA is CEO of the REIQ.