Changing negative gearing is a reckless move and a huge concern for the Western Australia property market, as well as the country, according to Real Estate Institute of Western Australia (REIWA).

Negative gearing was removed in the 1980s, but the fallout was severe that it was re-introduced just two years after it was axed, REIWA pointed out.

“Those who favour changing negative gearing and CGT believe this will make housing more affordable. They purport the myth that Australian investors are wealthy mogul types, using this tax to prop up their already very comfortable financial position. This couldn’t be further from the truth,” said the industry group.  

Research shows that the majority of investors in WA are ‘mum and dad’ types, who own an average of 1.4 investment properties. Property investment, for them, is a way to secure their future, and negative gearing enables them to offset the expenses incurred from owning the rental.

Hence, changing negative gearing is not going to make housing more affordable, it is simply going to make property investment less affordable, pulling investors away from the market, according to REIWA.

Once there are fewer investors in the market, there will be less available rental stock. “Property investors play a vital role in helping keep the rental market affordable and accessible. Less rental stock means rent prices will rise (as they did in the 80s) making housing less affordable – which is in direct opposition to the ALP and Greens’ reasons for implementing this change,” REIWA said.

Which political parties are against or for changing negative gearing?

The Australian Labor Party (ALP) and the Greens have the intention to alter negative gearing. The Liberal National Party has pledged to stop Labor’s housing tax if re-elected. The Nationals Party of Australia, the United Australia Party, the Western Australia Party, and the Liberal Democrats, meanwhile, committed to leaving property taxes alone.