Govt told to avoid new property taxes

By webmaster 03 May 2011 | 1 minute read

The federal government has been urged to avoid any new taxes that would damage the nation’s property market.

Aaron Gadiel, Urban Taskforce chief executive, said the government should be careful to avoid any measures which could damage efforts to improve housing supply in the upcoming federal budget.

"We're concerned at reports that the federal government is considering a new vendor tax for property investors and restricting negative gearing for investors in multiple properties,” Mr Gadiel said.

Such tax changes would cripple Australia's supply of new housing and have severe economic impacts, he said.

"Investors are an important source of funding for new home construction.


"Given that our national undersupply of housing now exceeds 200,000 homes, the government should be encouraging more investor participation in the residential property market, not less.”

Mr Gadiel said investor activity in the residential property market boosts supply by funding the construction of new homes that renters cannot afford to own – with higher density homes particularly popular among renters.

"But they are more expensive to build," he said.

"Many people can't afford to fund these higher construction costs, and that's why investors have an important role to play.

"Across the mainland state capitals, 56 per cent of medium and high density homes are occupied by renters."

Mr Gadiel said tax policy should not aim to force asset prices below their replacement cost.

"If tax policy is used to deliberately engineer a collapse in prices for medium and high density homes, property owners, many renters and building workers will be left worse off, as new home construction dries up," he said.

Mr Gadiel said that investors are less likely to be purchasers of newly built detached houses, but said they did play an important role by purchasing the older stock of houses sold by families upgrading to newer and better stock.

"Investors have an important role in making those older homes available to low and middle income families as rental housing," he said.

"Upgraders may be unwilling to sell their older homes if tax changes significantly reduce prices in the market for these established houses.”

Govt told to avoid new property taxes
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