Negative gearing important to property market and economy says Mortgage Choice CEO

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The head of major mortgage franchise Mortgage Choice has defended the importance of negative gearing, after the Reserve Bank of Australia called for the controversial tax break to be reviewed.

In a submission to the parliamentary inquiry into home ownership, the RBA questioned the role of negative gearing in fuelling speculative property investment and creating risks in the housing and mortgage markets.

However, Mortgage Choice CEO John Flavell says negative gearing plays an important role in sustaining the strength of the Australian economy.

“At Mortgage Choice, we think negative gearing plays an important role in the property market. The tax benefits associated with negative gearing helps to make property investment more attractive to some Australians, and given that the success and strength of the housing market is critical to the ongoing health of the Australian economy, it doesn’t make sense to consider removing any initiatives that help this market,” he said.

But instead of placing the emphasis on negative gearing and the impact it has on the property market, Flavell says there needs to be more effort and emphasis on making it easier for first home buyers.

“It would be great to see first home owners receiving similar tax concessions as investors – as we believe this would encourage a lot more first buyers into the market. If we want to improve housing affordability and help more first home buyers into the market, we have to pull on the right levers.

“Housing affordability is a function of property prices, income levels, the cost of and access to credit as well as supply of rental accommodation. To have a positive impact on affordability, drive up the instances of home ownership and reduce rental burden, all of these levers need to be considered and used.”

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