HIA leaps to the defence of negative gearing

ScreenHunter_01 Jun. 28 09.52

By Leith van Onselen

Right on cue, the property lobby has rallied to the defence of Australia’s negative gearing regime, slamming the Murray Inquiry into Australia’s financial system’s Interim Report for claiming that negative gearing “encourages leveraged and speculative investment in housing” and recommending that the Abbott Government’s upcoming Tax White Paper examine its efficacy (see here for details).

According to The AFR, Housing Industry Association (HIA) chief economist, Harley Dale, has hit back at the Inquiry stating that:

…singling out negative gearing and its role in investment demand “provides an inaccurate and misleading picture of the current dynamics at play in Australia’s housing markets”.

According to Mr Dale, while there is “strong housing demand evident from investors in some parts of some markets”, trade-up buyers are also fuelling the rise in house prices.

“In a market like Queensland, where demand is recovering from a very low base, first home buyer, trade-up buyer and investor demand is well in the mix,” he said.

One only has to present the below chart showing record investor demand for Australian housing to debunk the HIA’s claim that investors are not primarily responsible for rising house prices:

ScreenHunter_3321 Jul. 16 09.21

That’s right, over the three months to May 2014, investors accounted for an incredible 47.9% of total housing finance commitments (excluding refinancings) in Australia. If that is not an investor-led market, then I don’t know what is.

The HIA’s constant spurious defences of negative gearing (read previous efforts here, here, here and here) sure is getting tiresome, and is damaging the Association’s brand.

What is particularly odd is why the HIA doesn’t support targeting negative gearing at new builds? After all, such a policy would stimulate construction and benefit its homebuilder members. I can only speculate that the HIA cares more about protecting the value of its member’s land banks, rather than actually boosting construction.

This is why builders should split from the HIA.

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Comments

  1. Maybe we should start exporting enquiry services and investigations. It seems to be what we are best at these days.

    F me. When did Australia become the “no can do” country ?

    The inertia in this country is pathetic and both sides of federal government seem equally inept at doing anything about it. Credit where credit is due though, NSW seems to be getting its act together.

    • Rusty PennyMEMBER

      F me. When did Australia become the “no can do” country ?

      March 1996 you can track it back to. We elected a government that endeavoured to do nothing but cave into the desires of rent-seekers and bogan boomers

    • I often ask Google what I can do to help burst the housing bubble here, but no great options are presented 🙁

      @RP – So true, 2nd worst PM in Australian history (KRudd is 1st).

  2. A similiar defence of the current state of the Canberra RE market here….

    Quite laughable really….

    http://www.canberratimes.com.au/act-news/its-better-to-buy-a-house-than-rent-in-canberra-20140715-zt8q4.html

    “The spokesman for the Real Estate Institute of the ACT, Frank Pompeani, said if people took a long-term view, owning property would always win out over renting”

    “Domain Group senior economist Andrew Wilson said there was no evidence to suggest that house prices were not going to maintain their long-term average”

  3. The taxes I pay are higher than otherwise because of the negative gearing loophole. I subsidise this foolishness – for what?

    We have to change the tax system. Untax wages (neg gearing would vanish) and use the land and resources base. This would tubocharge national performance. Do you want to live in the richest country in the world? Make this change.

    • All politicians are self serving crooks. They need to pretend to be doing something to get elected so they can keep their snouts in the feeding troth, all the while gaming the system in favor of their own financial interests and their mates.

      • That’s right and why wouldn’t they be when you have a lemming moron population who keeps voting for them.

      • Surely there’s a limit they reach like one morning they look in their oversized mirror and think, “Yeah I’ve got enough – Time to abolish NG, remove the CGT discount (index instead), open up land supply, raise interest rates, untax savings, implement LVT, implement MP 50% max LVR, set refinancing to trigger a CGT event, end the super inequality rorts… my it’s going to be a busy day”

      • Maybe im permanently broken and have eternal cynicism, but i think its more like ,

        one morning they look in their oversize mirror and think, yeah i dont have enough and neither do my mates. What else can i do to steal from the taxpayer and help out my mates so that i can live a really wealthy lifestyle before i get booted out.

      • There’s never enough. Keating and Hawke are as rich as shit. Keating lives in Potts Point where it’s about $50m just for a house.

        Anyway there’s not enough call from the people to change. So you can’t entirely blame them. Gen y are more concerned about refugees and gay whales.

  4. Could any HIA members out there please advise if they agree with their association opposing “NG for new builds only”.

  5. No point sinking borrowed money into existing properties – it does not create more dwellings!

    If we’re going to give high income earners a tax break, at least make it productive debt. This should create more jobs, at least in the short term.

  6. sheltieMEMBER

    Some MB members here will know I am a HIA member and a registered builder. I have today sent the following email to the Master Builders Association of Victoria.

    Hi,
    this enquiry is about membership of the Master Builders Association of Victoria. I have been a member of HIA and a registered builder for 30 years. My subscription is now due, but I am now wondering if the MBAV can offer me a better deal, and provide better policies to provide more work to its members.

    To be honest there is an issue with HIA that I am not happy about, and I would like to know what MBAV position is on this. This issue is “Negative Gearing” and negative gearing on existing houses by investors in particular. I and a lot of other people strongly believe that negative gearing on existing houses should be scrapped because it just sucks in investors to buy the existing stock, does not increase the supply of houses, and just pushes up prices. First home buyers don’t get a tax incentive to compete with investors. They are being forced out of the market. Negative gearing should only be allowed on new houses / apartments / units. This would encourage new construction and provide a lot more work for builders and tradespeople. This would increase the supply of houses, bring house prices down, and allow a lot of first home owners into the market. HIA do not advocate scrapping negative gearing for existing houses for reasons I can’t discuss here.
    Anyone who knows anything about what’s happening in the property market know that negative gearing on existing houses is bad policy, and costs the government billions of dollars a year in foregone revenue, but one that politicians are loath to change for various reasons including losing votes from 1.9 million investors.

    The present Murray enquiry into Australia’s financial system has criticised negative gearing, and the HIA’s chief economist Harley Dale has quickly responded by defending negative gearing.

    Can you let me know MBAV position on this. Can you provide links on any article the MBAV have published where they have criticised negative gearing on existing houses.

    Please read this email and then pass it on to the senior management of the MBAV. I can’t stress enough how important this issue is to the membership of both the MBAV and the HIA, with the possibility of mass exodus from the HIA and the MBAV picking up the members if it adopts a policy to increase the supply of houses and make housing more affordable.

    PLEASE NOTE.
    WITH THE PRESENT SENATE ENQUIRY INTO HOUSING AFFORDABILITY DUE TO FINISH SOON, THIS WILL BE AN OPPERTUNE TIME FOR THE MBAV TO STATE ITS POSITION ON HOUSING AFFORDABILITY, AND NEGATIVE GEARING IN PARTICULAR.
    I HAVE BEEN A MEMBER OF HIA AND A REGISTERED BUILDER FOR 30 YEARS. THIS LETTER WILL ALSO BE PUBLISHED ON LINE TO BE VIEWED BY OTHER INDUSTRY MEMBERS.

    I LOOK FORWARD TO YOUR REPLY.

  7. ‘In a market like Queensland, where demand is recovering from a very low base’

    HIA might need to look under the base.