Property investors are being handed $7 billion a year by government policies favouring owners, according to a new report from an independent think tank.
The Renovating Housing Policy report accuses the government of locking young people out of the property market by subsidising property owners while providing limited support for renters.
However, this claim was dismissed by PIPA, the peak industry body for property investment professionals, who claimed investors play a vital role in providing young people with accommodation.
The Grattan Institute’s study found capital gains tax discounts and negative gearing rules provide property investors, on average, with $4,500 each.
Meanwhile, exemptions for the family home from capital gains tax mean owner-occupiers profit by $6,100 each on average.
According to the report, the government’s owner-centric policies drive up demand for residential property, inflating prices and pushing first home buyers into outer suburbs away from transport and employment.
“If governments want to increase home ownership and at the same time give the many renters a better deal, they should reject policies that reward those who already own homes while making life harder for those who don’t,” said the institute’s program director Jane-Frances Kelly.
“While home ownership is stable or declining slightly in Australia, there are sharp falls in ownership rates among households with low incomes or aged under 45,” she said.
However, PIPA chairman Ben Kingsley hit back, claiming investors were vital to the continual health of the property market.
“If that marketplace is then taken over by owner occupiers, the people who are going to miss out the absolute most are the people who want to rent close to the city,” he said.
Property in inner-city locations would remain popular even if incentives to invest were removed, Mr Kingsley said.
As such, prices in prime locations were unlikely to drop dramatically even if the demographics shifted from investors to owner occupiers, he said.
“The people who want to live closer to town or try an area before they buy, simply won’t be able to do that if there isn’t any stock for them to rent,” Mr Kingsley said.
Despite the incentives, PIPA argues property investors ultimately conserve government resources.
“To provide public housing for 30 per cent of the population would be significant money for the government, not only in initial capital investment but in the upkeep and maintenance of those properties. Currently, individual investors take on that burden, Mr Kingsley said.
“I just find it a little narrow-minded in regards to the benefits being provided by mum and dad investors who are helping provide accommodation for people.”