We called for no changes to national property tax policies like negative gearing and capital gains tax (CGT).

 

Changes to negative gearing and CGT concessions were a hot topic of debate in the 2019 federal election.

 

REIWA was very vocal in advocating against these changes. Meddling with one component of a broader tax system is reckless and would have significantly impacted every day Australians and further stifled WA’s already struggling property market.

 

 

Why we’re against changing negative gearing and CGT

 

WA would be hit hard by any changes to negative gearing. While rents have become more affordable for tenants, the costs associated with owning a rental property have increased.

 

There are 330,000 West Australians who own at least one rental property.

There are 215,000 people in WA who use negative gearing to help off-set losses occurred through owning a rental.

 

How would changes to negative gearing and CGT affect WA landlords?
 

Many investors rely on negative gearing to help afford the ongoing costs of an investment property. With changes in lending standards, landlords are now often required to pay off principal on the loan.

 

This is increasing the costs of owning an investment property, making West Australian landlords more reliant on negative gearing to counteract any losses.

 

Without negative gearing, many prospective property investors would have to reconsider if owning a rental property is financially viable, causing them to withdraw from the private rental market or seek alternative investment options.

 

The value of investor loans in the WA market has declined by 69 per cent since 2015 (see below graph), a result of unfavourable market conditions and investors lacking confidence in our local housing market. Any changes to negative gearing or capital gains tax will further deter investment in the WA property market.

 

 

A recent study by Newgate Research (January 2019) found that in WA:

How would changes to negative gearing affect tenants?
 

If negative gearing was changed, landlords would be less likely to invest in property. If landlords are deterred any further from investing in the WA property market, it would be tenants who ultimately bear the financial burden of this change, with a shortage of rental supply guaranteed to push up rent prices and reduce affordability – which is exactly what happened when negative gearing was removed in the 1980s

 

In the last two years, the Perth vacancy rate has declined to 2.7 per cent from a high of 7.3 per cent in June 2017. Any taxation changes that affect supply will only further drive down the vacancy rate making it more difficult for WA tenants to find appropriate rental housing.

 

In March 2019, SQM Research released a report into how the Australian Labor Party’s plan to abolish negative gearing, if elected, would negatively impact everyday Australians.

 

The report showed rents would rise across the country by between seven and 12 per cent, with Perth and Brisbane likely to be the most affected.

 

Election outcome

 

The Liberal National Party’s victory in the 2019 federal election was a big win for the Australian housing market. Throughout the election campaign, a clear line in the sand was drawn between those parties that were in favour of changing negative gearing and those that were against it.

 

The Morrison Government was in strong opposition to these changes. Their victory means national property taxes will remain unchanged, which will go a long way towards helping the WA market recover, providing our local market with some much-needed stability.

 

REIWA will continue to work with WA’s local federal members of parliament and senators on ensuring good housing and investment outcomes for all West Australians

 

For more information about this issue, email advocacy@reiwa.com.au.

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