Abolishing negative gearing on investment properties could see the cost of renting increase by 50% or more, according to a national accounting and wealth advisory group.
With 96% of public housing provided by ‘mum and dad’ investors, scrapping negative gearing would see the rental stock go into the hands of commercial investors.
They are likely to charge more in order to get the higher rental yields that they typically see on their commercial portfolios.
Chan & Naylor’s managing director Ken Raiss says that yields for commercial property are typically 50% above residential property.
“Like any other public utility, as soon as they enter private and more entrepreneurial hands then prices will go up, and in the case of public housing this could lead to a rental price hike of as much as 50% over time."
Raiss said this would result in the government having to shoulder the weight of providing a much larger percentage of housing for tenants and social dislocation for those unable to receive government housing.
“Small business owners wouldn’t invest in a new or start up business if they couldn’t claim their losses, so there is no reason why property investment should be any different.”
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