TERRY’S VIEW APU NOVEMBER

It’s become fairly standard practice whenever an election is in sight for one side or the other of politics to try and curry favour with voters by once again demonising property investors.

The next Federal election does not need to be held until September 2025, and already the calls to scrap negative gearing have started.

Aside from the fact neither major party is likely to get rid of negative gearing, even if they did it wouldn’t fix Australia’s housing crisis, if anything it could make it worse.

The loudest detractors generally can’t explain what negative gearing is, how it works, why it’s bad and how ending it will solve all the problems in the housing industry.

Those who do know how it works will tell you the consequences of getting rid of it will likely far outweigh any advantages.

Australia did get rid of negative gearing in the 1980s but backflipped within two years after it made the housing crisis worse. There was a serious shortage of rental properties, higher rents and it didn’t make property cheaper.

The same thing is happening in New Zealand now, where they are once again reinstating it.

A recent survey of experts polled by the Australian Financial Review came to the conclusion that investors will sell up, meaning fewer rental properties at a time when vacancy rates are the lowest on record.

Any benefit from price falls, which are hypothetical and not based on any precedent or research, would be modest, potentially short-term and effectively traded off against a consequent squeeze in supply.

Their overwhelming message is - BE CAREFUL WHAT YOU WISH FOR!