A change to negative gearing laws would cause the biggest house price boom in history.
The idea is floated once or twice a year, and it was that time of the year in the past week or two.
According to media reports, Prime Minister Anthony Albanese is considering a change to negative gearing laws as a possible solution to the housing crisis.
There is little to no prospect of it happening; if you recall, it was just five years ago that Labor lost the ‘unlosable’ election by going to the polls touting a radical negative gearing policy change.
In the very unlikely event that there was to be a change, it would be like throwing gasoline on the fire that is Australia’s housing crisis.
House prices, along with rents, are rising 7 percent per annum because we’re not building enough houses to keep up with population growth.
We aren’t even close; I’ve said it before and I’ll say it again, we are building 160,000 homes per annum when we need to build 240,000 homes a year.
We need more houses, not less. That’s the reason we have a housing and affordability crisis in the first place.
Three out of 10 houses in Australia are rentals and almost all of them are owned by mum-and-dad property investors. In other words, 1 in 3 Australians have a roof over their head thanks to mum-and-dad property investors.
We’d go from building 160,000 houses per annum to 110,000 houses per annum if negative gearing was taken away – rents and property values would explode.
So, how does negative gearing changes solve housing supply you may ask? To those in the know they will make it worse.
When housing supply and affordability issues are raised, the blame is often pinned on property investors.
The Australian Greens are the latest in a line of many to try and make mum and dad property investors the whipping boy for the country’s housing affordability issues.
But the biggest misconception is that every property investor in Australia is wealthy and/or a high-income earner.
The reality is 2.23 million Australians own an investment property and two-thirds earn $100,000 or less, with half of them aged 50 years or younger. The most common occupations of property investors are nurses, accountants, teachers, electricians and administration workers.
If the government wants a fast solution to the housing crisis, it should provide incentives for mum-and-dad property investors, rather than providing accelerated depreciation and tax discounts to super funds and foreign corporations.
We need 100,000 houses to fix the housing crisis – you wouldn’t need many of the 2.23 million mum-and-dad property investors to build just one more to solve the problem.
James Fitzgerald
Author, BULLETPROOF INVESTING
