A desperate Treasurer Josh Frydenberg again hit the airwaves yesterday attempting to scare voters into believing that Labor’s negative gearing policy would simultaneously smash house prices, force up rents, and shut-out first home buyers:
“Anyone that owns their own home under Labor’s policy, their home will be worse less. Anyone that rents their home under Labor’s policy, they’ll pay more”…
“Labor’s policy will be a terrible outcome for people with debts in their own home, people who are even looking to get into the housing market”…
“You don’t want everyone’s value of their home to go down and that’s effectively what Labor’s gonna do”…
Later in the interview, Frydenberg went on to hypocritically claim the Coalition has sensibly “managed down” Australia’s house prices, but that lowering house prices under Labor’s negative gearing policy would be a “disastrous outcome”.
Seriously, this is embarrassing stuff. When the housing market was roaring and Sydney and Melbourne house prices were growing out of control, the Coalition furiously opposed Labor’s “reckless” negative gearing policy because it would “smash” house prices. Yet now we are supposed to believe that the Coalition’s “smashing” of investor demand and prices via macro-prudential is sensible and desirable? Basically, house price falls under the Coalition are good, but under Labor are bad, according to Frydenberg?
However, the contradictions don’t end there. Frydenberg also claims that lower house prices would be a “terrible outcome” for “people who are even looking to get into the housing market”. As if paying less for something somehow makes it less affordable!
But wait, there’s more. Rents would also magically rise, according to Frydenberg. Never mind the fact that 90% of investors buy existing dwellings rather than new construction. Therefore, they do not materially add to supply:
So, at worst Labor’s policy would turn houses to let into houses for sale, in the process turning renters into home owners and leaving the supply-demand equation for rental properties unchanged.
However, as we all know, Labor’s policy of restricting negative gearing to new construction would very likely boost rental supply and place downward pressure on rents, as suggested by Deutsche Bank:
“Our sense is that the relative attractiveness of new dwelling investment compared to investment in established dwellings should be a positive, at least at the margin, for new dwelling construction”.
As well as by developer Stockland:
The Labor Party’s plan to limit negative gearing tax breaks to new housing would put a rocket under the business of residential developers because demand from investors would surge, Stockland chief executive Mark Steinert says…
“Our business will rip,” he said at the Property Council of Australia’s annual congress in Darwin.
Let’s also remember that Labor’s policy on negative gearing is practically identical to the Coalition’s policy restricting foreign investment to newly constructed dwellings, which is aimed at boosting dwelling supply, economic activity and jobs. Again, 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”.
Substitute “foreign investment” for “negative gearing” and the argument is exactly the same.
Josh Frydenberg needs to stop lying and develop genuine arguments if he hopes to derail Labor’s policy.