The Labor Party’s proposed changes to tax policies for investment property will discourage investment in new housing and cause demand for all residential property types to drop, according to a Property Council of Australia survey of more than 1,000 current and prospective property investors.

If implemented, the changes both on negative gearing and capital gains tax could have a significant impact on the property investment decisions made by Aussies. 

“These findings directly challenge the ALP’s key assumption that its property tax package will stimulate new housing supply and construction. They show that investors will be less likely to invest in newly-constructed housing under the ALP’s tax changes, not more likely,” said Property Council of Australia Chief Executive Ken Morrison.

The new insight is significant since less new housing for people to rent can lead to higher rents in the medium term.

“These findings highlight the dangers of making big policy changes at this uncertain time in the property cycle,” Morrison said.

Labor Party’s plans were first announced years ago when the country’s residential property market was in a very different condition. Over time, banks have become stricter in lending. There were changes to foreign investment rules, and residential property values declined in most markets.

“We are concerned that the proposed changes would drive away investors, which will affect the supply of new and established property to the rental market, which is essential for one third of Australian households,” Morrison said.