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Negative gearing back in the spotlight

By webmaster
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Concerns over the future of negative gearing have been reignited following comments from one of the nation’s biggest banks that the tax break is unhealthy for the property market.

Speaking at a business lunch in Sydney last week, ANZ Bank chief executive Phil Chronican, voiced concerns that negative gearing rules are pushing house prices into unaffordable territory, The Sydney Morning Herald reported.

“Governments might want to look at whether the current extent of negative gearing tax breaks are fostering an unhealthy focus on housing as in investment vehicle, thereby compounding affordability issues,” he said, according to the daily.

But property development group Urban Taskforce has been quick to criticise Mr Chronican’s comments.

Such comments overlook the clear findings of the Henry Tax review released just 12 months ago, according to the group’s chief Aaron Gadiel.

“Small investors are an important source of funding for new home construction,” Mr Gadiel said.

“Investor activity in the residential housing market boosts housing supply, by funding the construction of new homes that renters cannot afford to own outright.

“Given that our national undersupply of housing now exceeds 200,000 homes, public policy should focus on allowing more investor participation in the residential property market, not less.

“Policies that try to force down home prices, without also reducing the cost of supplying new homes, will only kill-off new home construction.”

Last year’s Henry Tax review found that negative gearing for rental properties should be retained and any changes made only after reforms to the supply of housing were made, Mr Gadiel said.

“The best way to make housing more affordable is to reduce the cost of supplying new homes.”

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