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Labor is said to be hesitant about reintroducing the deletion of negative gearing to its election platform, after losing the race in 2019 largely based on its lack of investment sweeteners.
Despite earlier indications to the contrary, “We’re removing negative gearing” is likely something Anthony Albanese won’t utter as he announces Labor’s election platform shortly.
According to economist Dr Andrew Wilson, there are a couple of reasons as to why Labor will opt out of chasing the removal of negative gearing, the main one being the sheer lack of investors in today’s market.
“Look, there’s a couple of positive reasons. Even though we are seeing an absolutely predictable revival in investor activity, we’ve got to understand that the level of investor activity has been absolutely dreadful,” Dr Wilson said in a recent episode of The Smart Property Investment Show.
“Investors have had to confront a credit squeeze for the last two or three years. It’s very difficult still to get loans from the banks if you are an investor. There’s been a lack of product to identify as an investor with the problems with inner-city apartments, but that’s all now obviously a thing of the past,” Dr Wilson noted.
At the moment, investor levels are back to their 2017-level, but they’re still well behind where they were at their peak.
“Average investor market activity is around about 33 per cent of all lending. It’s now pushing up into the mid-20s, but it’s still well behind where it is traditionally, and particularly where it is in strong market price outbreaks as we have at the moment,” Dr Wilson said.
“There’s really nothing there that can be in any sense overbalanced, and you don’t need to be targeting investors in any way to try to rebalance the markets as that negative gearing push was supposed to,” he noted.
As part of its 11 May budget reveal, the government held back from tweaking any existing budget sweeteners as it, too, braces for an election.
This was foreseen by property experts, with Right Property Group’s Viktor Kumar telling SPI in April that “parties don’t mess around with property and tax pre-election. If they do, they get annihilated at the elections”.
“If you look at how the market is performing, the whole basis of the economy is largely underpinned by confidence in property. So, if we are looking for our economy to recover strongly ahead of other countries, other developed countries, we want to throw our support behind property,” Mr Kumar said.
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.