'Lunacy' negative gearing distorting Sydney housing market: Report

By |
Sydney’s housing affordability crisis is being artificially exacerbated by “lunacy” tax incentives, a new report has claimed.

According to the analysis by the UNSW's City Futures Research Centre, up to 90,000 properties are sitting empty in some of Sydney’s most sought-after suburbs as investors chase capital gains over rental returns.

The analysis’ researchers, Professor Bill Randolph and Dr Laurence Troy, said this is thanks to the "perverse outcomes" of tax incentives such as negative gearing, Fairfax has reported. 

“Leaving housing empty is both profitable and subsidised by government," Randolph and Troy told Fairfax

"This is taxation lunacy and a national scandal."

According to Fairfax, the 2011 census revealed that in Sydney's “emptiest” neighbourhood of the CBD, Haymarket and The Rocks, one in seven dwellings was vacant.

Close behind were Manly-Fairlight, Potts Point-Woolloomooloo, Darlinghurst and Neutral Bay-Kirribilli, which all had vacancy levels above 13%. These neighbourhoods, together with central Sydney, account for nearly 7,200 empty homes.

The UNSW analysis of the 90,000 unoccupied dwellings across metropolitan Sydney compared the number of empty homes in a suburb against the rate of return investors made by renting out a property.

It found that properties in neighbourhoods with lower rental yields and higher expected capital gains were more likely to be unoccupied.

Gordon-Killara on the north shore had the highest share of vacant apartments, with more than one in six unoccupied on Census night, according to Fairfax. By contrast, only one in 42 dwellings (2.4%) in Green Valley-Cecil Hills, in Sydney's west, was unoccupied.

These results suggest property investors in some of Sydney's most desirable areas have become indifferent to whether their investment property is rented or not. Instead, investors are chasing capital gains with rental losses offset by negative gearing and capital gains concessions. 

According to Troy and Randolph, this calls into question Sydney’s housing supply and affordability problem.

“If you choose to accept that there is a housing shortage in Sydney, then the sheer scale and location of these figures strongly suggest that this is an artificially produced scarcity,” they said, according to Fairfax.
 

Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker

Top Suburbs : north lambton , spearwood , alexandra hills , redcliffe , mt colah

go back
Comments
  • Jason says on 31/03/2016 06:44:22 AM

    What a crock. The lowest interest rates on record are what allows investors to keep their houses tenant free. The tiny amont gained in negative gearing is nothing. I guarantee when rates go back up those properties will be 90% full.

  • Mmm says on 31/03/2016 03:39:08 PM

    What a load of crock thinking about only self interest and not the cohesion of Australian society.

  • 1 says on 31/03/2016 04:14:48 PM

    You can't claim negative gearing if the property is not on the market for rental. Ask the ATO!!! The mere fact that it is vacant doesn't mean that the owner is claiming any deduction at all. These professors don't know tax law and just quote off the cuff, to drive a story

View 3 more comment(s)

Get help financing your investment



Do you need help finding the right loan for your investment?


When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.

Just fill in a few details below and we'll then arrange for a local expert Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus, our mortgage broking service is at no cost to you.

Why does  Aussie need your personal information?    How does Aussie keep your information secure?
Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a partly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945.
© 2016 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

 
How soon would you like a mortgage?
What is your Annual Household Income i $
Do you currently own any Investment Properties?
Do you own your own residence?
How much equity do you have in all your current properties?
First Name
Last Name
Where do you live?
What number can we reach you on?
E-mail address
We value your privacy and treat all your information seriously - you can check out our privacy policy here