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Investors weigh in on negative gearing debate

By Vivienne Kelly
4

With industry experts, politicians and journalists all weighing in on the future of negative gearing and investor activity in the property market, property investors have now had their say about what should happen next. 

In recent weeks, commentary has increased around whether the government or the central bank (the Reserve Bank of Australia) needs to step in to curb investor activity and slow property price growth, with a Fairfax opinion piece by Gareth Hutchens arguing that negative gearing has been playing havoc with the property market.

“The combination of our capital gains tax rules and negative gearing has been artificially increasing the demand for investment housing and pushing up the price of surrounding homes,” Mr Hutchens argued in a piece published by Fairfax on Wednesday.

“In the past 12 months, investors have been borrowing more to purchase established housing than owner-occupiers have.”

Mr Hutchens said this was “clear evidence that aspiring owner-occupiers can’t compete with investors who have their debt-servicing costs subsidised through the tax system” and argued that in order to make the property market more accessible to first-timers, “it’s time we fixed this mess”.

On the back of this debate, Smart Property Investment asked its readers for their opinions. So far, a vast majority of respondents have argued negative gearing needs to stay – largely because the burden on governments to provide rental accommodation would become too intense without negatively-geared property investors.

“It was a disaster when it was briefly ceased in the 1980s – rents skyrocketed, housing markets stayed much the same because rents went up so much,” said Jan Macpherson on Smart Property Investment’s Facebook page.

Ms Macpherson said when the policy was previously altered, the “only winner (on paper) was the government for a couple of years when tax refunds decreased but losses need to be quarantined so all will be made up at a later point in time”.

According to Ms Macpherson abolishing negative gearing could only work if governments were prepared to subsidise more housing but “the amount of displaced renters will have a marked effect on the economy and at the ballot box”.

Bruce Linton agreed that abolishing negative gearing would have a negative effect on the economy, “leaving many developers in trouble and potential tenants forced to pay higher rents for the fewer properties which will then be available”.

Mr Linton said with the mining boom “over”, property investors are the driving force behind the economy and are “the main way this country is moving forward”.

To have your say, click here and leave a comment or leave a comment below – your opinion could be featured on Property Success with Margaret Lomas on SkyNews Business.

 

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