From The Guardian:
Labor has hit back at a campaign against negative gearing changes by a group of large real estate agencies, arguing they are vested interests who have not produced any evidence for their criticisms of its policy.
The Real Estate Institute of Australia and major realtors, including LJ Hooker, Raine and Horne, Laing and Simmons, McGrath, Ray White and Century 21, have said they are going to campaign against Labor’s proposed changes to negative gearing using their databases of hundreds of thousands of landlords and tenants.
Labor wants to limit negative gearing to new housing from 1 July 2017 (while losses from new investments in shares and existing properties could still be used to offset investment income tax liabilities).
It also wants to cut the capital gains tax discount from 50% to 25% after 1 July 2017. Both are measures it says will improve the budget bottom line by $32.1bn over 10 years.
The Coalition has promised not to change either policy.
The Real Estate Institute of NSW president, John Cunningham, told Guardian Australia the campaign would be an awareness campaign asking voters if they had considered the risks of negative gearing changes.
These risks included the possibility of rents rising, and prices rising as investors snap up properties before Labor’s deadline for negative gearing on existing properties kicks in in 12 months.
He said real estate agents wanted to tackle housing affordability but thought negative gearing changes would be “one of the worst things to do to the sector”.
Labor’s policy would be targeted because “after the budget, only Labor’s policy was standing, that’s something we had to factor in”, Cunningham said.
The Raine and Horne chairman, Angus Horne, told Guardian Australia anecdotal evidence from real estate agents who had spoken to investor landlords indicated they would be less likely to invest in existing properties, which would decrease the stock of rental housing and increase rents.
But let’s not mention more investment in new homes shall we! Rents are going to fall not rise, along with prices, interest rates and the dollar. It’s fantastic policy.
As for the locusts, their campaign should be as loud as possible. It’s so transparently self-serving that it will help Labor. Moreover, the more Mad King Malcolm aligns himself with the parasites the more hated he will be. To wit, from Fairfax:
Labor is targeting property tycoon “Aussie” John Symond, accusing the multimillionaire of doing the bidding of Malcolm Turnbull to undermine the opposition’s negative gearing proposals.
And it says Mr Symond, and many of the major real estate firms campaigning to retain the status quo, are hardly “grassroots”, having been generous donors to the Coalition tipping in some $450,000 in the past decade compared to around $20,000 to Labor in the same period.Mr Symond appeared on Seven’s Sunrise program on Sunday to warn of a potential recession if Labor’s plan to limit negative gearing to freshly constructed dwellings from July 1, 2017, goes ahead.
Advertisement“Who knows? I don’t know whether prices will drop 10 per cent, 20 per cent or more,” he said.
“It is frightening and it will frighten others . . . and it creates this stampede. And that’s my concern that there could be a glut of properties come on the market, force the prices down, and then all of a sudden it could be Armageddon with the housing industry that’s propped up the Australian economy the last four years.”
And the PCA appears at the AFR:
Australia is having a false housing affordability debate. While the problem is very real, the solutions being bandied about have nothing to do with the problems that has left us with entry-level housing that is far more expensive than it needs to be…
There’s no running away from the laws of supply and demand… Some have argued that it is investors that are driving up house prices. The evidence does not support this. The fact is that owner-occupiers account for two in every three purchases. Far from crowding out home buyers – investors are supporting supply. In 2015, investors supplied 58,000 new dwellings nationwide…
One of the reasons the property industry opposes changes to negative gearing is because we believe it will impact housing supply. You can’t put $32 billion in new taxes on the property industry and not expect it to harm housing supply and make a bad situation worse. No modelling has been produced on the opposition’s proposed changes to negative gearing. No one can be certain about its impact on investment, construction, prices and rents.
What rot. When you exclude refinancings, investors account for nearly one-in-two mortgages in Australia:
And there is an inverse correlation between investors mortgages and first home buyer (FHB) mortgages, meaning FHBs are being crowded-out:
Meanwhile, over 90% of investors purchase existing dwellings over new construction:
Based on the above data, it is wrong to suggest that negative gearing has assisted dwelling supply and helped to keep a lid on rents.
Under Labor’s policy there would certainly be less “investment” (read transfer of ownership) in existing dwellings, but those homes would not magically disappear from the supply-demand equation. Rather, those homes would be purchased by an owner-occupier, thus reducing demand for rental properties by the same proportion as the fall in rental supply.
More importantly, because Labor’s policy would channel negative gearing towards new builds, dwelling construction would increase, as will the supply of rental accommodation. And this extra supply would lower rents, other things equal.
It is also worth pointing out that Labor’s ‘new homes only’ negative gearing policy is entirely consistent with the state government’s changes to first home buyers’ grants, which were shifted to newly constructed homes several years ago in order to boost supply.
Labor’s policy is also entirely consistent with the Turnbull Government’s own stance on foreign investment, which has sought to restrict foreign buyers to newly constructed dwellings only so that they boost dwelling supply, economic activity and rental availability. Here’s the chair of the foreign investment inquiry, Liberal MP Kelly O’Dwyer, explaining the benefits of this ‘new homes only’ policy:
“Currently the framework seeks to channel foreign investment in residential real estate into new dwellings in order to increase the housing stock for Australians to build, buy or rent. Foreign investment is encouraged in new dwellings whether they be apartments, units or homes because in addition to creating more supply, it also creates more jobs for the building and construction sector – all of which helps to grow our economy”.
The PCA’s argument that Labor’s policy would choke rental supply and force-up rents clearly does not pass scrutiny.
To Ken Morrison’s credit, he does at least make one useful suggestion:
…we should re-establish “national competition payments” and incentivise the states and local government to reform outdated planning laws. While we have seen piecemeal improvements from state governments in recent years, our planning systems are stymying growth and putting artificial pressures on house prices. Research undertaken by Deloitte indicates that national competition payments could provide up to $3 billion in economic uplift.
This is exactly the type of plan that has been advocated on this site, most recently last week.
But take a look around Ken Morrison. Is the Turnbull Government backing such a plan? No they are not. Which leaves Labor as the only major party with a housing policy.
