Negative gearing raises its head again as an election issue

The spectre of changes to negative gearing has been raised as a potential federal election issue following comments by Prime Minister Anthony Albanese on Wednesday.

The Labor Prime Minister backtracked on his statements on Thursday, saying changes to negative gearing “were not our policy” but he didn’t explicitly rule out changes to this important policy in the future.

REIWA CEO Cath Hart said the Institute would resist any proposed changes to negative gearing.

“Changes to negative gearing would not add to housing supply and would in fact deter investment and adversely impact WA’s already-challenging rental market,” she said.

“About 85 per cent of WA’s rental stock comes from private investors, most of whom are middle-income earners who only own one investment property. We would be very concerned if signals that negative gearing might be changed spooked investors into selling, particularly given the conditions for selling are favourable at the moment.

“The debate about housing supply needs to focus on ensuring a stable legislative and regulatory environment that supports and encourages investment in housing, rather than making it too hard.

“We saw a huge fall in WA rental properties after a mass exodus of investors following the COVID rental moratoriums. We’re still grappling with the impact on WA’s rental market; with rents rising to record highs and Perth’s vacancy rate falling to a record low of 0.4 per cent in March.

“Perth’s rental vacancy rate was below 1 per cent for most of the past two years and has only recently recovered to 1.4 per cent in August. This is still far below the 2.5 – 3.5 per cent we consider a balanced market, so it is critical the continued recovery is supported with stable policy settings at all levels of government.

REIWA’s stance is aligned to the REIA with national President Leanne Pilkington cautioning against demonising negative gearing.

“Disencentivising investment will exacerbate an already strained market and create a massive exodus of current investors if brought in,” Ms Pilkington said.

“The potential removal of negative gearing will result in a reduced supply of rental properties, leading to rent increases of up to 12 per cent. As vacancy rates tighten and competition among renters intensifies, many will face even greater financial pressure.

“Rental vacancy rates remain tight, with a national average of 1.6 per cent — if negative gearing were removed, the reduction in rental investment would likely exacerbate this issue, decreasing rental property availability and leaving renters with fewer housing options. This will result in higher rents and a more competitive rental market.

“Moreover, the impact on small investors—predominantly 'mum and dad' investors—will discourage them from entering or remaining in the market, further reducing housing supply. With 37.9 per cent of all finance to households for residential property coming from investment loans, the REIA stresses the urgent need for policy measures that promote investment and enhance housing affordability.”