There’s a lot of noise at the moment about potential tax changes, particularly around negative gearing and capital gains tax (CGT).
It’s unsurprising given that these topics seem to resurface at least once or twice a year.
Abolishing negative gearing or increasing CGT would cause one of the biggest house price booms in history. Having said that, there is little to no prospect of it happening.
It was just five years ago that the Labor party lost the unlosable election by going to the polls with a radical negative gearing policy change. The Greens suffered a similar rejection in the most recent Federal Election.
Why? Because the majority of Australians instinctively understand that it would be akin to throwing gasoline on the fire that is our housing crisis.
Real reason for housing and affordability crisis
We aren’t even close to building the houses we need to be. Currently, we are building 160,000 homes per annum, when we need to build 240,000 homes per annum.
That’s the reason we have a housing and affordability crisis in the first place.
It’s also worth noting that 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, nearly 1 in 3 Australians have a roof over their head thanks to mum-and-dad property investors.
If negative gearing were removed, we’d go from building 160,000 houses per annum to 110,000 houses per annum – rents and property values would explode!
What effect would negative gearing changes have on housing supply?
If you’re wondering what the effect changes to negative gearing would have on housing supply, I’m here to tell you they’d make it worse.
When issues around housing supply and affordability are discussed these days, the blame is often pinned on property investors, 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 or younger. Further, the most common occupations of property investors are nurses, accountants, teachers, electricians and administration workers.
Quick solution to the housing crisis
If the government wants a quick solution to the housing crisis, it should offer incentives for mum-and-dad property investors, starting with accelerated depreciation and full deductibility of interest during construction. Perhaps even fast-track building approvals for investor-led housing.
We need 100,000 houses to fix the housing crisis – you would need just one in 20 mum-and-dad property investors to build one more to solve the problem.
If you’re ready to explore opportunities and have the capacity to invest in property, join us for a Custodian Masterclass. Learn how you can help address the housing crisis while building intergenerational wealth. Click here to learn more and register.
