Gearing Change “Would Distort Housing”

Posted on 2/11/2018  
Gearing Change “Would Distort Housing”

Labor’s plan to direct the negative gearing tax break only to new housing will distort the $7 trillion housing sector and hurt the first-home buyers it purports to help, according to the country’s biggest residential developer, Stockland.

“Policies that can distort markets need to be carefully considered,” Stockland chief executive Mark Steinert says.

“Housing is the largest asset class in Australia and more than twice the size of the stock market, with investors accounting for one third of the market. If all those investors are focusing on new builds, there isn’t enough for them.

“We are worried about a crowding-out effect of first-home buyers and owner-occupiers over the long term. Historically investors have been able to move ahead of first-home buyers as they have had more equity.”

Steinert says there is also an incentive for existing negatively-geared properties to be retained by investors, reducing the volume of property available to buy in the established housing market and compounding the crowding-out effect.

The Property Council of Australia and the Housing Industry Association believe the policy could worsen a softening housing market.

HIA principal economist Tim Reardon says ending negative gearing for existing housing and reducing the capital gains tax break would result in less investment in housing and would worsen the affordability challenge.

“We cannot tax our way out of the housing affordability problem,” Reardon says. “The solution is less tax on housing and less government distortions on the market, not more.”

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