Nearly four out five property investors would abandon real estate as an investment class if the Labor Party’s negative gearing proposals became law.
According to a survey conducted by the Real Estate Institute of Queensland, Labor’s proposal of restricting negative gearing to new homes only form 1 July 2017 and reducing the capital gains tax discount to 25% would see 79% of investors move on from the property market.
“We now know for a fact that 79% of respondents will get out of property and find an alternative investment strategy
that works more effectively and yields a better return,” REIQ chairman Rob Honeycombe said.
“That will have a crippling effect on house values and on the rental market, where the private rental market plays such a critical role in keeping rents affordable,” Honeycombe said.
According to the survey, which was sent to more than 14,000 REIQ members and their investor clients 38% of respondents said a different asset class would be a more likely investment option if negative gearing benefits were removed from property.
Around 25% of respondents indicated they would be unlikely to consider shares as an alternate investment avenue.
Pointing to research from independent think-tank The Grattan Institute which claimed the changes to negative gearing would reduce home values by 2%, Honeycombe said the Queensland government would be left significantly out of pocket by amendments to the tax break.
“The State Government would lose a significant amount of revenue from stamp duty if people’s house values fell by two per cent, and the Grattan Institute is being very conservative with its estimate of 2%,” he said.
“How does the State Government feel about this massive loss to revenue? ABS data released yesterday reveals that revenue from property taxes at a local and state level have increased 70% over the past nine years – representing an increase of $1.6 billion in council rates and $1 billion in stamp duty over the past nine years.
“Negative gearing will decimate those tax revenues, adding further stress to local council and State Government budgets. Regional Queensland councils can ill-afford this enormous hole in their budgets.”
While the Labor Party claim their negative gearing plan is driven by a desire to improve housing affordability, Honeycombe said that will require more than just changing one policy due to the complicated nature of Australia’s tax system.
“It’s a complicated web of interconnected policies and it’s virtually impossible to “tweak” just one without affecting everything.
“Negative gearing plays an important role in the Queensland property market and any changes to it will be detrimental.”
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