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One property expert believes that Labor’s negative gearing policy will lock everyday Australians out of opportunities to invest in their first or second property while making it business as usual for the nation’s wealthier investors. Here’s why
The Labor government’s negative gearing policy is likely to rob everyday Australians of the opportunity to invest in property and, in turn, impact the bottom line more than anyone else, said property investor and co-host of the Property Couch, Ben Kingsley, on the Smart Property Investment Show.
Mr Kingsley said that Labor’s negative gearing policy carries a high level of irony, as it is intended to “stop the person buying their sixth or fifth property and give everyone a fair playing field” but in reality does little to do so.
“I get annoyed by their positioning of this policy... [because] it robs average mum and dads, typical Australians, the labor heartland of the opportunity to invest in property,” he said.
“That little bit of extra cash help that they get, in terms of being able to subsidise a little bit of that in the early stages, gives them an asset that’s going to provide along with their superannuation, and so they won’t be a burden on the federal government’s purse.”
According to Mr Kingsley, in reality, the policy still allows investors with high income to invest in as many properties as they wish, because “negative gearing is not a strategy, it’s a moment in time”.
This is because investors may see a loss in the early days of acquiring property, but that gearing will become neutral and positive over time, yet they will still pay tax on it.
There are a lot of changes at federal and state levels, alongside media hype around property investment in general, that could be giving investors a bad reputation for being “greedy” in the current climate leading up to the 2019 federal election.
Mr Kingsley said: “That hasn’t been helped by effectively the miscommunication that’s being sprouted about the sixth and seventh property, or fifth and sixth property, when the vast majority – in terms of almost 72 per cent of people – only own one investment property.”
Further, nine out of 10 property investors “only own two” investments, according to Mr Kinglsey.
Alas, the perception that most property investors buy existing properties has been “debunked”.
The Labor government has removed a significant amount of information from their website justifying their negative gearing policy, from “4,400 words” of rhetoric about the importance of this change in policy, down to “650 words” – all regarding how only 9 per cent of property investors purchase new builds, according to Mr Kingsley.
On the contrary, the reality is that Australian property investors are already buying “around 40-45 per cent new” investment properties as it stands, Mr Kingsley said.
“So, I’m a great believer in everyone having a fair go… as someone who’s also a business owner and someone who’s having a go, which is what a lot of property investors are doing,” Mr Kingsley said.
“The question of the redistribution of wealth… [is] sort of an interesting conversation in my mind. I don’t want to be in a country more so where there’s a reliance on the government doing most of the heavy lifting for its people, right?”
“I think if we work hard and earn well, we should be able to enjoy some of the fruits of those labors.”
According to Mr Kingsley, for high-income earners, Labor’s negative gearing policy is business as usual. Australians in higher tax brackets will go about buying their fifth or sixth properties without breaking a sweat.
“But the mum-and-dad investor could be locked out on getting their first. That to me is, if we’re all about fairness and equality, I want to see those people have the opportunity that the high-income earners have,” Mr Kinglsey concluded.
Gearing is defined as the relationship between debt and equity of a company that shows how much of its operations are financed by lenders or shareholders.