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‘Suck it up’ on tax changes investors told as 40% of rentals avoid negative gearing
A property expert has asked for investors to put any fears about the potential loss of negative gearing into context, and those that are still concerned to “suck it up”.
Negative gearing is a tax policy that can benefit property investors, and while its loss would be felt, losing it would be the least of property investor’s worries, Simon Pressley, head of research at Propertyology has said.
“Negative gearing is not an investment strategy, negative gearing is one tax policy,” Mr Pressley said to Smart Property Investment.
“Stamp duty is a tax policy. Land tax is a tax policy. There are a number of property specific tax policies and the most important things that affect property markets have nothing to do with tax policy.
“It's things like affordability, it's things like immigration, it's things like job creation, it's things like housing supply, it's things like confidence; they will always be the most important things that affect property markets.”
Data crunching
Using data from this year, Mr Pressley said that Sydney and Perth saw property prices decline this year, while Hobart, Adelaide and Perth saw prices increase, even though all of these states have negative gearing.
“They’ve all got negative gearing, so if scrapping it was going to have such an adverse impact, well, why with it hasn’t it had such a positive impact? The reality is, it doesn't have a big influence on property markets at all,” he said.
Mr Pressley’s reasoning behind this is that stamp duty impacts a small margin of overall property buyers, as he stated 70 per cent of buyers are owner-occupiers, which leave 30 per cent as investors.
“Of the 30 per cent who are investors – this is an official ATO statistic – 40 per cent of those investment properties already in this country today are either neutrally geared or positively geared. So, we're talking about a small segment of the market,” Mr Pressley said.
“It’s bad policy to change it for a whole heap of economic reasons, but if it happens, I’d say to everyone: … suck it up, move on, it’s the new norm.
“If I protest and sit on the sidelines, it’s not going to help myself or my family later in life to retire comfortably, so put things in some context.”
The fallout
While Mr Pressley said changing negative gearing would not leave a great impact, an example of what would change the market significantly would be altering stamp duty.
“If a state government scraps stamp duty on properties for a first home buyer, there’s an initial positive impact that that change has on a property market, because it means some people will get that extra motivation to transact in property,” he said.
“If stamp duty increased, there would be an initial hit, there’d be some buyers that would say, ‘We won’t transact in property because of that,’ but I’d suggest not many, because buying a property, owner-occupier or investor, is a big decision, so really, you’re either going to do it or you’re not.”
