Could scrapping stamp duty lead to ‘more efficient’ use of housing stock?
The answer to current shortfalls in housing supply and soaring property prices could be the removal of stamp duty in fav...
Now that the election is behind us the removal of negative gearing seems to be off the table — but will property investors be faced with its reversal again in the future?
Mortgage Choice CEO, John Flavell, said negative gearing is unlikely to ever actually be eliminated, but it is sure to be discussed again the next time it becomes ‘politically expedient’ to bring it up.
Speaking at the Mortgage Choice annual financial results briefing in Sydney recently, Mr Flavell told Smart Property Investment that removing the negative gearing rule would adversely impact the very people it was originally put in place to protect.
He said that negative gearing on property was originally introduced to provide an incentive for everyday Australians to invest in property.
The idea of it, he added, was to make sure there was an available stock of affordable rental accommodation for people that otherwise would have had to have had public housing provided to them.
“And so the economics around that from the government's perspective makes a whole lot of sense,” he said.
Mr Flavell also said that removing negative gearing would create ‘other distortions’ in the market.
“Have a look at the change in the regulations in the buy-to-let market in the United Kingdom,” he added.
“The practical impacts have been that the market has frozen, the actual cost of property spiked, the availability of rental accommodation diminished and rentals have spiked,” Mr Flavell said.
On the recent negative gearing discussion, Mr Flavell acknowledged he was “dismayed but not surprised” that it had taken place.
“In simple terms, let me be cynical, I think it was just politically expedient in the lead up to an election.
“And guess what? The election has come and the election has gone, and I don't expect you'll hear any more of it for some time. Until such time as it becomes politically expedient to talk about it once again,” he said.
Negative gearing occurs when the rental income of a property is not enough to cover the total costs of managing the rental and re-paying the interest portion of the loan.