Property investor’s lobby launches laughable negative gearing attack

By Leith van Onselen

The idiocy is spreading with the Property Investment Professionals of Australia (PIPA) and Property Investors Council of Australia (PICA) releasing a non-sensical joint press release attacking Labor’s negative gearing and capital gains tax (CGT) policy:

Independent research commissioned by Masters Builders Australia has found the financial impact of Labor’s misguided policy could be a multibillion-dollar hit to a market that is already struggling in Sydney and Melbourne.

PIPA Chairman Peter Koulizos said the policy also showed the Opposition failed to understand and appreciate the vital part investors play in the property sector.

“Property investors provide housing for 30 per cent of Australians at a time when spending on social housing is at an all-time low,” he said.

“Also, contrary to media headlines, only about 70 per cent of investors own one property so the concept of ‘greedy investors’ is not supported by the facts.”

The 2018 PIPA Property Investment Sentiment Survey also reinforced that negative gearing is a not a strategy, but rather a moment in time because of the high transactional costs associated with real estate investment.

The survey found that about 60 per cent of investors say their portfolio will be positively geared within five years and 71 per cent believe changing negative gearing and Capital Gains Tax policy will not improve housing affordability.

Only six per cent of investors said they were interested in buying a new property, which again shows that restricting negative gearing to brand-new dwellings would not increase supply. ..

“The PIPA survey found that long-term capital growth beat out cash flow – both long- and short-term – as the most important aspect when choosing an investment,” Mr Koulizos said.

“In fact, short-term tax benefits were seen as the least important driver when choosing an investment”…

With the population booming, and the markets in Sydney and Melbourne softening, it made no sense to implement a policy that would likely decimate the sector even further, he said.

“Not only will thousands of jobs be lost, investors will retreat from the market at a time when more housing is needed the most,” Mr Kingsley said.     “The end result will likely be worsening housing affordability and rents skyrocketing as our growing population compete for a limited supply of accommodation”.

Mr Kingsley said Labour needs to listen to industry professionals warning of the dire consequences of its proposal.

“There seems to be a fundamental misunderstanding of the laws of demand and supply in Labour’s approach to property taxation,” he said.

There are more flaws in these arguments than a block of Swiss Cheese.

First, if Labor’s policy would supposedly crash the market, then how can PIPA and PICA then argue that housing affordability would worsen? Lower prices necessarily means better housing affordability.

Second, PIPA and PICA claim that investors are not interested in investing in new properties and boosting supply, therefore are merely substituting homes for sale into homes for let. However, they then contradictorily claim that investors provide Australians with vital rental housing that would otherwise not be available. They also claim that Labor’s policy would cause investors to “retreat from the market at a time when more housing is needed the most”, despite explicitly admitting that investors aren’t actually interested in adding new supply.

Third, PIPA and PICA claims that Labor’s policy would push up rents. But if this was true, wouldn’t investors rejoice?

Fourth, PIPA and PICA claims that “about 60 per cent of investors say their portfolio will be positively geared within five years”. But if this is the case, investors have nothing to fear since Labor’s policy allows past rental losses to be brought forward and used against future gains.

In short, PIPA’s and PICA’s attacks on Labor’s negative gearing policy are laughable.

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Comments

  1. Ha ha property investors are worried about rents and house prices skyrocketing “as our growing population compete for a limited supply of accommodation”.

    What are they investing for then? Charity?

  2. Property Investment Professionals of Australia (PIPA) and Property Investors Council of Australia (PICA)

    Property Investment Professionals of Australia? Property Investors Council of Australia? WTF? Are these real outfits? They sound like jokes from The Shovel or the Betoota Advocate.

    Property Investment Professionals, FFS. I’d like to know what sort of degree is required to become such a professional, what certifications they hold, what their code of ethics looks like etc.

    “The PIPA survey found that long-term capital growth beat out cash flow – both long- and short-term – as the most important aspect when choosing an investment,” Mr Koulizos said.

    So they’re just lazy parasites who want to achieve speculative growth as a result of buying a house and doing nothing. Not investment in productive enterprises or anything useful like that. Just buy a house and wait for it to increase in price.

    “In fact, short-term tax benefits were seen as the least important driver when choosing an investment”…

    Well, that’s great then! So none of them will be bothered by removing NG, as they admit it is the least important driver for investing in property. Colossal news!

    • C.M.BurnsMEMBER

      “I’d like to know what sort of degree is required to become such a professional” hahahahaha, oh, you’re serious

      “what certifications they hold” maybe a cert 3 for the really ‘credentialled’, most probably attended a 2-day course. or watching youtube videos (for their younger members)

      “what their code of ethics looks like etc.” I’ll let Billy Maddison portray it far better than words ever could: https://youtu.be/xKGeHuln08A

  3. Harvey Heinstein

    “Labor’s policy allows past rental losses to be brought forward and used against future gains.”

    If all Labor’s policy does is shift the timing of the tax deduction, then it’s not much of a policy, and won’t have much effect on anything. It’s all for show, to sucker the gullible into believing that Labor’s policy will have a meaningful impact on the housing market.

    • No, labor’s policy prevents future losses being claimed against other income. That is the main problem with negative gearing at present.

      • With interest rates at 1.5% that isn’t remotely the biggest problem with NG.

        The biggest problem isn’t NG at all, it is the overly generous CGT discount.

      • Yep – the CGT discount is the big problem.

        But if the ALP want to dodge the whinging AND drive the investment in new housing that their support for ponzi population growth requires they should maintain the existing CGT discount for new housing construction.

        Reducing the CGT discount for new housing construction will attract criticism and why give the LNP and its mates a free hit.

        Once the residential vacancy rates hit 5% and stay there for 5 years they can remove it for new builds until another burst of new construction is required.

    • kiwikarynMEMBER

      If you are a wealthy investor with a property portfolio the NG changes wont impact you, as you can offset recently acquired negatively geared properties against the income generated by older positively geared properties (or shares). If you are a Ma & Pa investor on a middle income with one IP then the NG changes will impact you, as you will no longer be able to claim the losses against your personal wage income, which might mean the difference between being able to fund the cashflow gap or not being able to fund the gap. So amusingly, the NG changes will only impact traditional middle income Labor voters, and have zero impact on already wealthy investors.

  4. More holes than a block of Swiss cheese……not flaws!…they are desperate and are trying to portray themselves as victims.

    • Any business lobby group parading themselves as victims and worse, altruistic in their pursuits by pointing out how their customers (the real victims) will lose out if they, the businesses involved dont get much needed government handouts is nothing but a bunch of liars.
      Unfortunately this will be presented in the Murdoch press and in TV news snippets etc in a way which draws in the real victims to take the wrong pill.

  5. Yeah oh I know the answer to this one. If the benevolent property investors don’t supply the 30% of property to renters, then those houses get sold to owner occupiers and you have one less renter. It’s a zero sum game.

    • Look, if their economic modelling is as detached from the real world as so much economic modelling is, then I really wouldn’t put it past them to be assuming that if an investor sells a property it just disappears!

    • Unless the price falls means less housing is built as a result? Even still it’s probably a more healthier market in general with less credit induced over building. I know a lot of investors have been buying the apartments coming up for rent in parts of Sydney; hence rents falling somewhat. Investor demand I think at least my local Sydney area has been a pretty big reason for the increased new apartments to rent lately.

      • If prices fall it would mean that the land price has fallen. The house can still be built but an all up price less than previously. Joe Hockey was spouting this stuff, ie that if prices rise, more will get built on account that the builders will be pleased.??? A total lack of real economic understanding for a treasurer. Builders would thrive if land prices dropped back to what they were back in pre the 2000’s ie about 40% of the total build cost, now land is 150% more than house build on the outskirts of Melb for eg.

      • I think that view is simplistic though in that it assumes apartments are priced on cost; I used to think that way. I think the last housing boom was partly stimulated to provide jobs (mainly in building) to the construction sector (i.e. build more supply and adopt the Ireland model). It isn’t cost that determines new housing builds but end demand – can I sell it at a big profit? Will their be buyers? What’s the point of cheaper land if you find it harder to sell it with the same profit margin? Even in current conditions which I suspect are due to NG/CGT removal starting to be priced in (everyone can see the polls) your seeing developers cancel building projects and starting to get into trouble. Besides construction workers and large home developers were paid quite well over cost pricing – all you have to hear is your local BBQ talk about how much your local tradie gets paid. Land prices are only one factor.

        As the economic saying goes the cure for high prices is high prices. It just takes time for the supply response (as it has in Sydney at least in my area) to kick in. You really think all those high rise apartments would of been built if prices didn’t rise so much? I’m not convinced. Don’t get me wrong – I prefer they didn’t stimulate the market (lower interest rates) to ensure stability and less debt even if it meant less housing being built and more missing out but it is what it is.

  6. Independent research does not include research commissioned by someone who will benefit from it. The first line should read “biased research whose results were provided by the MBA”

    • Look, if their economic modelling is as detached from the real world as so much economic modelling is, then I really wouldn’t put it past them to be assuming that if an investor sells a property it just disappears!

  7. Yes, clearly negative gearing must critically important to housing and rental affordability. I mean, it’s not like we’re one of the only countries with negative gearing and simultaneously have some of the worst housing affordability in the world, right? Oh, wait a sec…

  8. Unless the price falls means less housing is built as a result? Even still it’s probably a more healthier market in general with less credit induced over building. I know a lot of investors have been buying the apartments coming up for rent in parts of Sydney; hence rents falling somewhat. Investor demand I think at least my local Sydney area has been a pretty big reason for the increased new apartments to rent lately.

    • kiwikarynMEMBER

      Who is going to buy off the plan if they think (or know) that property prices are falling? Better to buy an existing property at a 30% discount, then buy off the plan and take a 30% loss in 2 years when its built and you can’t get finance on the original valuation.