On the 28th April 2016 the Property Observer wrote that the majority of property investors would pull out of property investment should negative gearing be removed which would lead to a drop in property prices.
Whilst the Labor party will allow negative gearing to new homes which constitute only around 7% of the market it fails to see how that will impact the market.
What will in fact impact the economy is if the other 93% dropped in value. There will be a huge domino effect as so many industries rely on the property market to do well.
If it’s about making housing affordable than its not negative gearing that will make an impact on housing affordability as only around 20% of the property market is negatively geared, but it’s supply that will impact on housing affordability.
The various Federal and State governments have stifled supply via various government red tape that delays approvals from getting through, added taxes that have made the cost of land incredibly expensive and not releasing more land.
The Labor party is taking a huge risk in potentially driving down the property values of 93% of the property owners plus the domino effect of loss of property taxes to the States and the hundreds of other smaller industries that rely on the property markets to be doing well, just when we are transitioning from a struggling Mining Industry.
We need to keep GDP at around 2.5% to 3% to keep unemployment at 5% or below.
If unemployment is kept around 5% than there are enough people paying taxes to assist the governments budgets.
Just when the government is struggling to get the budget into surplus in order to pay off its huge debt, it seems ludicrous that they are trying to introduce a Policy that will no doubt slow down one of the only industries that is keeping the economy firing, by taxing it.
It’s been proven throughout history that if you want to disincentivise investment in a particular industry, just tax it.
As they say it’s all about timing. It does not seem sensible to do it now but rather look at it when the economy is healthier and the budget is back in surplus.
As John Symonds says in a recent article, its really poor timing. http://www.propertyobserver.com.au/forward-planning/investment-strategy/property-news-and-insights/52961-any-negative-gearing-changes-would-be-unwelcome-in-the-softening-market-aussie-john-symond.html
As the Liberal Party is now struggling in the polls it will be interesting to see who will win government and which Policy will finally be adopted and what the final economic outcome will be.
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