THE Real Estate Institute of WA (REIWA) has said the complete removal of negative gearing provisions for established property is “dangerous” and could see house prices fall in a “wholesale way”.
REIWA is the peak industry body for Western Australian real estate agents.
The Labor party proposes limiting negative gearing, which allows investors who own loss-making rental properties to subtract the losses from their taxable income, to new dwellings from next year, should they win the July 2 federal election.
Speaking at the launch of REIWA’s position on the issue, which invites community debate, the organisation’s president Hayden Groves said the impact of the changes was unclear, but could see house prices fall dramatically.
“The worst thing that could happen is that property values fall in a wholesale way,” Mr Groves said.
“Because essentially, in investors, you remove an entire class of purchaser out of any given market for established residential property.
“The impact there could be quite significant where we see prices fall.
“It’s estimated that property values across Australia, as a result of changes to negative gearing, could fall by about two per cent.”
Mr Groves said Labor’s proposal was indicative of a heavy Eastern States focus in drawing up the policy.
“It (negative gearing) has been part of our taxation system for more than 100 years,” he said.
“This policy of removing negative gearing for established residential property is very much a Sydney-centric perspective of the way the property market is behaving.
“The Sydney market has experienced 20 per cent increases in its median house price in the past two years.
“The Perth market in contrast, in the last three years, from the March quarter 2013 versus the March quarter (in 2016), we’ve seen a one per cent growth in median house price in the Perth metro area.
“In WA there are 175,000 properties that are owned by private investors who rent them out.
“Approximately 80 per cent of those, own one investment property. So the idea that negative gearing benefits those who own multiple properties it’s actually not the case.”
But Mr Groves said REIWA welcomed debate on the issue, and suggested the policy could be softened rather than abolished completely.
“I think if we’re going to talk sensibly about negative gearing provisions we need to look at the policy,” he said.
“If, as a community, we decide that it’s too generous, we could perhaps put a cap on how much in deductions you can claim in regard to negatively geared property.
“Perhaps there should be a cap on the amount of properties that you can actually negatively gear.
“But to actually just completely remove it, for established residential property as an isolated class of property asset, is quite dangerous because it skews the market.”