The results of a new survey polling current and potential property investors have found despite various benefits available for holding new properties, Labor’s proposed taxation policies are more likely to turn investors away rather than attract them.
After polling over 1,000 current and prospective property investors on the impact of the Labor party’s policies on negative gearing and CGT tax, the Property Council of Australia found interest in investing in new properties over the next five years dropped for current investors from 34 per cent under current taxation policies to 27 per cent, as well as for prospective investors from 33 per cent to 24 per cent.
Further, approximately 49 per cent of those polled said they would be turned off property investment and 42 per cent would reconsider the kinds of property they invest in.
Established property purchases were also found to be impacted, with current investors interest in the property type declining from 39 per cent under current policies to 21 per cent under the new changes, and prospective investors dropping from 42 per cent to 16 per cent.
When asked how investors would act if the proposed policies were in power under their most recent property purchase, 46 per cent of respondents said they would increase the rent on the property, 36 per cent would have paid less, 33 per cent would invest in another type of asset and 27 per cent would have invested in new property instead of established.
Ken Morrison, CEO of the Property Council of Australia, said Labor’s policy could have the potential to drastically change the actions of property investors.
“These findings directly challenge the ALP’s key assumption that its property tax package will stimulate new housing supply and construction,” Mr Morrison said.
“They show that investors will be less likely to invest in newly-constructed housing under the ALP’s tax changes, not more likely.
“This is a critical new insight, because if less new housing is being created for people to rent it can only mean higher rents in the medium term.”
If investors decline, Mr Morrison said this could also lead to the further decline of housing construction, making the situation worse.
“These findings highlight the dangers of making big policy changes at this uncertain time in the property cycle.”
He added that Labor’s policy was first announced to a very different property market, and the current conditions do not support the change as it stands.
“Since then, we’ve seen banks tighten up their lending, as well as changes to foreign investment rules, along with falls in residential property values in most markets,” Mr Morrison said.
“We are concerned that the proposed changes would drive away investors which will affect the supply of new and established property to the rental market which is essential for one-third of Australian households.”