Investors deterred by Labor’s property tax changes

Stock image.
Stock image.

LABOR’S plans to change negative gearing and capital gain tax are more likely to deter investment in new housing than encourage it according to new research by the Property Council.

Chief executive Ken Morrison said there was concern the changes would have a harmful economic impact and questioned the assumption they would be a stimulus to new housing construction.

“Our own research of investor attitudes showed that investors will be less likely to invest in newly-constructed housing under the ALP’s tax changes, not more likely,” he said.

Of the current and potential investors surveyed, 34 per cent said they would probably or definitely buy a newly-built investment property in the next five years under existing tax arrangements.

This dropped to 26 per cent with the proposed changes, which would be expected to encourage investment in new homes.

“This was a critical new insight, because if less new housing is being created for people to rent it can only mean higher rents in the medium term,” Mr Morrison said.

“Housing construction is already falling and is a major source of jobs for Australians.

“The last thing we want to do is make this worse.”

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The survey found investors currently favoured established property: 58 per cent of recently purchased investment properties were established compared with 44 per cent new properties.

Within WA the figure was higher, 66 per cent of purchases were established properties.

Labor’s proposed changes would not only discourage investment in new homes, it would discourage 49 per cent of respondents from investing in any sort of property.

That rose to 57 per cent in WA.

Those most likely to be deterred were the over 55s (55 per cent compared with 42 per cent of 18-34 year olds) and Coalition voters (66 per cent to 27 per cent of Labor voters).

The survey found the average number of predicted purchases for current investors would fall from 1.6 to 1.1, dropping from 1.2 to 0.8 for potential investors.

Labor’s proposed changes may also affect rent and property prices.

Charging a higher rent (46 per cent) and an unwillingness to have paid the price they did (36 per cent), were the most common actions investors said they would have taken if they were in place at the time of their most recent property purchase.

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