Perth agents share views on Labor’s proposed changes to negative gearing

REIWA president Hayden Groves said the debate around negative gearing did not fully address the issue of housing affordability.

“Housing affordability can only be solved with a combination of supply levers and planning and development policy reform,” he said.

“Rather than tinker with negative gearing, we’ll be promoting the need for broader tax reform where the system is simple, fair and efficient.

“Changing just one part of a very complex system can lead to inefficiencies and distortions.”

While REIWA is seeking public opinion, we asked local agents what they thought of the proposed changes to negative gearing.

Airey Real Estate principal David Airey said limiting negative gearing to new houses was foolhardy given the likely consequences of such a change to the property market and the failure of this change in 1985/1987 by the Keating/Hawke government.

“It’s a knee-jerk reaction to complaints fed by media commentators who feel there is some unfair tax advantage for investors who negative gear,” he said.

“It’s the overall tax act that needs looking at, not bits and pieces to be used for electoral advantage.”

Acton Dalkeith and Cottesloe director Grant Heymans said investors were finding it hard to cope with current market conditions and the potential changes would create problems.

“As the vacancy rate in Perth has blown out, I am increasingly talking to investors who are struggling to make ends meet with properties vacant or reduced rents,” he said.

“The low interest rate environment is a saving grace for them at present.”

Mr Heymans said investors were already leaving the market.

“Increased competition from new dwellings has already dampened the market and the mass exodus of mining boom tenants has already made many an investor sell their investment properties,” he said.

As the proposed changes would only apply to investment properties bought after July 1, 2017, investors were not likely to leave the market “in droves” and people were still expected to invest; however their approach might change.

“Current negatively geared investors will not be affected, but all new investment will be, so there will be a slowdown and the market will slant heavily away from investment in established homes,” Mr Airey said.

Mr Heymans said bricks and mortar would always be on an investor’s shopping list but only if there would be a reasonable return on their investment.

“Investors typically follow the path of best return and so I think many investors will prefer to buy new property should Labor’s plan come to fruition,” he said.

“I believe without negative gearing, established rental properties will become more unaffordable for investors and when we return to a higher interest rate cycle, I think many investors will prefer more stable and safe investments such as long-term bank deposits.”

Investors in established properties might try to charge higher rents to cope with the loss of negative gearing.

Mr Heymans said this was the most obvious strategy for landlords.

“The obvious option open to them would be to try and increase rents to cover the shortfall, but I’m not sure how this would play out,” he said.

“It is uncertain whether they would be able to do so and in the current oversupply environment, I believe it would be impossible to do so.”

Mr Airey said it was highly likely rents for newer dwellings would rise very quickly, and there would be rent increases across the board over time.

The First Home Owners Grant was already encouraging first-home buyers into the new home market, and limiting negative gearing to new homes would also point investors in that direction, increasing competition between these buyers.

Mr Heymans said this would put first-time homebuyers at an unfair disadvantage as they would inevitably be competing with investors as well as other first-time homebuyers.

Have your say at reiwa.com. n