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Further analysis of investing data suggests the Labor party's negative gearing policy is relying on incorrect data.
Analysis by MCG Quantity Surveyors has drawn a similar conclusion to that released last week by The Property Investors Council of Australia that the Labor Party’s negative gearing policy has not been using correct data.
The results from MCG Quantity Surveyors found that Labor’s policies were relying on “grossly” underestimated numbers of investors buying new homes, and called their revenue projections into question.
“Shadow treasurer Chris Bowen has suggested new-buy investors comprised anywhere between four and 14 per cent of the cohort, but our figures suggest this is patently wrong with the number actually over 40 per cent,” said Mike Mortlock, managing director of MCG.
“Labor’s based much of their projected budget revenue on the premise investors will move ‘en masse’ from buying existing property to purchasing new holdings due to its negative gearing changes.
“But our figures show investors are already buying new – and with gusto – under the current regime.”
By analysing data going back to 2016, MCG found that 43 per cent of its investor clients bought or built brand new housing.
Looking more in depth at the 2017-18 financial year, the trend was relatively consistent, with 44 per cent of investors buying or building new.
“We applied further scrutiny by removing from the data those properties bought or built new but lived in by the owner for a period prior to being used as an investment,” Mr Mortlock said.
“This still showed around 40 per cent of buyers were purchasing new stock as straight-up investments in the 2017-18 financial year.”
Mr Mortlock said that with this being kept in mind, Labor’s negative gearing policy would be concerning for everyday investors with one or two investment properties, and to rely on incorrect assumptions would be dangerous for the potential new government.
“Our analysis reveals the Labor Party’s estimates are woefully inaccurate,” he said.
“If negative gearing is to be addressed, it must be in the context of accurate data, otherwise the consequences could be financially dire with a shortfall in revenue and a huge potential drop in the real wealth of everyday families.”
“Unless the details of Labor’s policy are made available for scrutiny, we could be in for a disastrous economic outcome.”
This news follows analysis by the Property Investors Council of Australia and its chairman, Ben Kingsley, who said that Labor needs to “urgently authorise” the Parliamentary Budget Office to release the modelling assumptions for their negative gearing policies.
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.