Theresa Worrell: Is Labor’s Policy On Negative Gearing Bad For Property? – Maybe Not So Bad Now

Negative gearing is set to be a key issue in the upcoming federal election.

If elected, Labor intends to reform the practice with the aim of improving housing affordability.

The Coalition intends to leave negative gearing as is.

The problem is Labor’s proposed policy will affect every Australian home owner and all property investors is designed to put downward pressure on home prices and improve affordability, particularly for first home buyers.

But will it really be as bad for property prices as some media commentators suggest?

Maybe not!

Watch the first of our regular Property Insiders chats where Dr Andrew Wilson and I chat about how the proposed negative gearing and CGT changes will affect our property markets

Watch Andrew and I and you’ll learn about Labor’s tax grab and what it could mean to you.

We also talk about:

How the proposed negative gearing and CGT changes will affect our property markets
Is there really a debt time bomb ticking away
Are migration levels too high

Here are some of the other things we’ll discuss

The Labor Party’s proposed new policy abolishing negative gearing for established properties has been roundly criticised by many as being a potential significant negative for housing markets. neg-gearing-hero2-Recovered

The policy is designed to reduce high-levels of activity from investors putting downward pressure on home prices and improving affordability, particularly for first home buyers.

The policy is also designed to increase demand from investors for new housing by maintaining negative gearing for this class of property.

The policy was primarily designed as a significant boost to government incomes through savings from removal of the negative gearing tax concession

But market conditions have changed markedly since the policy was developed

Investor activity has collapsed through APRA actions and sharp decline set to be reinforced by sharp decline in prices
Investor market share has also declined sharply
First home buyer numbers have soared recently due to state government incentives and tax reductions with growth to be reinforced through lower prices
Home prices are now falling across the board with rising affordability
Yields are rising with higher rents and lower prices which will improve gearing
Interest rates are set to fall which will also improve gearing
Interest only loans declining so investors have higher equity positions in borrowing

Laons