A new survey has revealed that 79 per cent of investors would walk away from property if negative gearing were abolished.
The Real Estate Institute of Queensland (REIQ) has released the results of a state-wide survey of more than 14,000 of its members and their property investor clients.
The survey confirmed that changes to negative gearing would be disastrous for the Queensland property market.
“We now know for a fact that 79 per cent of respondents will get out of property and find an alternative investment strategy that works more effectively and yields a better return,” REIQ chairman Rob Honeycombe said.
“That will have a crippling effect on house values and on the rental market, where the private rental market plays such a critical role in keeping rents affordable.”
The survey also found that investors would be drawn to a different asset class if negative gearing benefits were to be removed from property. However, almost 25 per cent of respondents said they were unlikely to move to shares.
“Mum and dad investors trust property as their investment strategy and that’s where they want to build their wealth. They believe it’s ‘as safe as houses’,” Mr Honeycombe said.
“We know from this survey that removing negative gearing would smash rental affordability as investors, who provide rental accommodation for about a third of Queenslanders, sold their assets and adopted a new investment strategy.”
A recent report by the Grattan Institute titled Hot property: negative gearing and capital gains tax claimed that 2 per cent would be wiped off housing values if negative nearing were curbed, but Mr Honeycombe said the impact on the broader economy would be extensive.
“The state government would lose a significant amount of revenue from stamp duty if people’s house values fell by 2 per cent, and the Grattan Institute is being very conservative with its estimate of 2 per cent,” he said.
“How does the state government feel about this massive loss to revenue? ABS data released yesterday reveals that revenue from property taxes at a local and state level [has] increased 70 per cent over the past nine years – representing an increase of $1.6 billion in council rates and $1 billion in stamp duty over the past nine years.
“Negative gearing plays an important role in the Queensland property market and any changes to it will be detrimental.”