Experts weigh in on negative gearing

Rents will increase if investors are discouraged from the South West market by proposed changes to negative gearing laws, REIWA’s Bunbury chairman Drew Cary has warned.

Mr Cary’s comments come as laws around the practice could change after the coming election, with the Labor Party planning to restrict negative gearing to new properties if it wins next month’s election.

The move would mean rental properties would become less attractive for investors and rents would increase with reduced supply, Mr Cary said.

“The important point is any change in policy which discourages people from purchasing investment property can only dry up supply,” he said.

“That in turn can only push up prices for rental properties.”

Mr Cary said every property available for rent was an investment and said making it harder for investors would have flow-on supply and price impacts for renters.

Negative gearing is when the interest on a loan for an investment property is more than the rental income returned, meaning the investor is making a loss.

The Real Estate Institute of WA has started a campaign that aims to push for wider reform, rather than just scrapping the often-controversial practice of negative gearing.

“The proposed changes to limit negative gearing to newly-built properties will not fully address the issue of housing affordability,” REIWA president Hayden Groves said.

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

“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.”