Real estate lobby takes aim at negative gearing plan

Adam Smith 20 June 2016

targetA real estate lobby has once again taken aim at proposed changes to negative gearing.

The Real Estate Institute of Australia (REIA) has claimed the Labor Party’s proposed changes to negative gearing would shrink investment in housing and see rents increase.

“Negative gearing contributes to the provision of new housing with around a third of all new dwellings construction being financed by investors every year and the amount of investor loans committed to new housing increasing by more than seven-fold since 1986,” REIA president Neville Sanders said.

Sanders said negative gearing contributed to an increase in rental supply, keeping rents lower than they would otherwise be. He claimed CPI figures demonstrated the efficacy of negative gearing in keeping rents low.

“From 2013, when investment in housing started to pick up, we have seen the rate of increase in rents slow down in Australia. The March quarter 2016 increase was 0.1%, the lowest since March 1995. The annual increase in rents to March 2016 has been 0.9%, again the lowest since March 1995,” Sanders said.

Sanders argued that tenants would face steeper rents under Labor’s policy. Barry Plant chief executive Mike McCarthy agreed.

“The changes will inevitably lead to a decrease in the number of rental properties available. Lower supply with the same, or increased, demand, equals a rise in rents. This in turn will make it even more difficult for renters to save for a deposit. I think renters will potentially suffer the biggest detrimental impact if these changes are adopted,” McCarthy said.

But proponents of Labor’s plan have claimed the changes would not impact rental prices, with an increase in new housing stock filling the demand for rental properties.

Everything you need to know about negative gearing

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