A month after delivering a scare campaign direct to your email inbox, the Real Estate Institute of Australia (REIA) has issued a media release claiming that retirement nest eggs are at risk from Labor’s proposed changes to negative gearing and the capital gains tax (CGT) discount:
The provisions in Labor’s policy to “grandfather” negative gearing on current investments will not protect the interests of existing investors in real estate and will put at risk planned for retirement nest eggs according to the real estate industry.
Mr Neville Sanders, President of the Real Estate Institute of Australia says “With negative gearing only available for investment in newly-built residential property existing investors will find it more difficult to sell their properties as other investors will show little interest in existing property with inevitable falls in value to follow.
“These falls in value will in time translate to a lower standard of living in retirement as many mum and dad investors have purchased property as a means to improve their retirement living as independently funded retirees”, added Mr Sanders.
“This will also apply to superannuation funds with any exposure to residential property including many selfmanaged superannuation funds”, concluded Mr Sanders.
Angus Raine, CEO Raine and Horne said “The reality is, the proposed changes to negative gearing will take significant lustre off property as an investment option, and will drive investors into other asset classes.”
“We should also remember that property investors are not just landlords – everyone who has any financial interest in property (including the 67% who own their own home as well the 18 million who have a stake in property through their super) is ultimately a property investor too” added Dan White, Director Ray White Group.
“If this policy were to become reality, immediately a third of the buyers who were previously competing won’t be there when the time comes to sell. The only outcome of such a massive decrease in competition can be price falls, and areas where there are more investment properties will suffer the most.” Dan adds.
“If the intention was to curb so called excesses, the proposal will not have any impact – yet it will penalise the mum and dad investors saving for their retirement,“ concluded Mike Green CEO of Harcourts International.
If real estate agent parasites are squealing like stuffed pigs, then it must be great policy.
But seriously, it is hard keeping-up with the REIA’s lies. Just last month, they argued that rents would jump by 10% under Labor’s reforms:
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So, shouldn’t “mum and dad investors” rejoice at earning higher income from their rental properties under Labor’s policy, thus boosting their retirement nest eggs?
As usual, the REIA has conveniently failed to acknowledge that under Labor’s policy, there would be less pressure on house prices and younger Australians would not need to devote as much of their lifetime’s earnings to pay-off a home.
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Surely, the financial situation of ordinary Australians would be improved materially if they were not required to pay-off some of the world’s biggest mortgages, due in part to egregious policies like negative gearing?
Rather than rely on the advice of real estate agents with a vested interest in lining their own pockets, how about we refer yet again to the views of 51 economists surveyed by the McKell Institute:
Between 29 February and 2 March 2016, The McKell Institute surveyed 51 of Australia’s leading and most respected economists to gauge their opinions on negative gearing policy.
Respondents were asked to nominate whether they strongly agreed, agreed, were uncertain, disagreed, strongly disagreed, or had no opinion about six statements presented in the survey.
Economists surveyed were from a range of leading Australian universities and financial institutions. The statements presented to economists surveyed reflected current debates regarding proposed negative gearing reforms.
Bernie Fraser, former Governor of the Reserve Bank of Australia, was one economist surveyed, and provided additional commentary regarding the subject matter of the survey: ” From a national interest – rather than political interest – perspective, tax measures (and policy measures generally) should be assessed in terms of their contributions to four goals, namely resource allocation, economic growth, price stability, and what is too often forgotten these days: fairness.
The current negative gearing (and related capital gains) tax arrangements score poorly on all four tests – they divert savings and resources away from potentially more productive investments into (sometimes speculative) property investments to take advantage of the tax concessions ; this does nothing to improve economic growth (or the budget bottom line ) ; they can accentuate short term fluctuations in house prices and sustain long term increases in house prices which far outstrip increases in the earnings of most Australians ; this lastmentioned consequence , plus the fact that the benefits of the concessions flow disproportionately to people on higher incomes, make the current measures manifestly unfair” –
Bernie Fraser, former Governor of The Reserve Bank of Australia. The comments of Mr. Fraser broadly reflect the sentiments of the majority of leading Australian economists surveyed.
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Once again, I’ll see your REIA garbage and raise you 51 economists…
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
