Last night, Australia’s treasurer for the Property Council of Australia, Scott Morrison, appeared on ABC’s The Business, whereby he warned of a housing “crash” if Labor’s negative gearing reforms are implemented:
“Changing negative gearing is not an ambitious reform, it’s a bad idea. It’s going to undermine the value of people’s homes and it’s going to crash house prices”.
Today, Morrison has quoted analysis by Queensland-based Adept Economics, which has predicted home values would fall by – wait for it – 4% if Labor abolishes negative gearing on existing properties from 1 July, 2017. From The AFR:
“Let me remind Australians what a 4% reduction in the value of your home means,” Morrison said.
“That’s about two to three years in the reduction in the principal on your mortgage you would pay off over that time, gone like that, by the stroke of Labor’s pen.
“Two to three years of reducing the principal on your mortgage, blown away by comparison by the impact on property values that would come about as a result of Labor’s policy as analysed by Adept Economics, and a 10% reduction in the rate of return for investors.”
Some “crash”, hey Scott. Particularly in light of the fact that Australian dwelling values have risen by 10% in the past 12 months alone, and by 37% since May 2012, according to RP Data.
A 4% fall in dwelling values seems a small ‘price’ to pay to save the Budget some $6 billion a year, according to Treasury’s recent briefing, along with less upward pressure on prices and more rental availability in the longer-term from channeling investment into new builds.
