Survey says investors to sell up if negative gearing changes go ahead

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More than half of one state’s property investors would abandon the asset class if Saturday’s election ends with a Labor victory.

According to a survey conducted by the Real Estate Institute of Western Australia (REIWA), 55% of Western Australia’s current real estate investors would leave property if negative gearing changes, like the ones Labor are campaigning on, are introduced.

REIWA president Hayden Groves said that while rental conditions in the state are currently well in favour of tenants, that would easily change if such a large portion of investors deserted the market.

“While rental affordability in Perth is currently at an all-time high, in the long term we’re likely to see a significant impact on rental supply and affordability should negative gearing be removed,” Groves said. 

“In the eighties when negative gearing was abolished, quarterly data shows that rent prices increased as much as $34. Those who rent will most definitely be worse off if negative gearing is removed or restricted,” he said.

According to Groves, there are around 175,000 rental properties across WA and the government would not be able to make up any shortfall in rental supply if investors leave the market.

Of those who responded to the survey that they would continue to invest in property if negative gearing changes were introduced, 60% said they would continue to target established rather than new properties, which Groves said puts another hole in Labor’s plans.

Labor's plans for neagtive gearing would see the tax break quartantined to new builds only from 1 July, 2017.

“These findings contradict the idea that by restricting negative gearing to newly built homes, housing supply will increase,” he said. 

“With a trend towards smaller households and an ageing population, restricting negative gearing to newly built homes will not address the changing needs of the WA community. Good planning policies, such as infill development and affordable housing strategies, will achieve better diversity of housing options and lead to the increase in supply of appropriate and affordable housing for everyone, WA tenants included.”

As part of the survey, respondents were asked what their views on negative gearing were. 54% of respondents were in favour of negative gearing being retained in its current form, 21% would prefer it to be abolished and just 3% want it restricted to newly built homes only.  

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