Renters forgotten with negative gearing reforms

Written by in Renting on March 6, 2017

Businessman holding a model house.

According to the Real Estate Institute of Australia (REIA), changes to negative gearing policy would drive up rents and affect the most vulnerable people in the community.

REIA President Malcolm Gunning said political gamesmanship has seen the plight of first home buyers, low-income earners and other renters forgotten in the debate around reforms to negative gearing.

“One of the major beneficiaries of negative gearing are renters because it is proven to increase supply. Any changes that are made would have serious flow on effects,” Mr Gunning said.

“The rate of increase in rents has plummeted since investment in housing started to pick up at the end of 2011. For Australia, rents increased by 0.7% for the year ending September 2016 which is the lowest annual increase since March 1995. In Sydney the increase was 2.5% and in Melbourne 1.4%. Changes to negative gearing would see less rental properties, which would cause rents to go up.

“This could cause a dire situation for young people who are already renting for longer due to higher house prices. This creates a vicious cycle where higher rents means less savings for their deposit, exacerbating the housing affordability crisis.

“The reality is that negative gearing is not a special concession for property. It is a legitimate deduction of expenses in the course of earning income from investment in all asset classes until the investment generates a positive income stream in the future.

“There is already pressure on investors looking at real estate with changes to APRA’s borrowing guidelines and average yields falling to another all time low of 3.2% in February, some full percentage point lower than the 4.2% recorded five years ago by CoreLogic.

“Our latest Adelaide Bank/REIA Housing Affordability Report, due to be released on Wednesday will support our ongoing stance on no changes to Negative Gearing policy as outlined in our 2017/2018 Pre-Budget Submission, with rental affordability showing a trend improvement since mid 2012,” Mr Gunning said.