Negative Gearing Debate Continues In Earnest

08.03.16 | Marc Barlow | News

The negative gearing debate that has dominated Australian politics in recent times has continued on with a new and interesting twist coming in the form of a new report just released by business research and forecast group BIS Shrapnel.

The report – The Economic Impact of Limiting the Tax Deductibility of Negatively Geared Residential Investment Properties  – uses modelling similar to policy changes which have been previously suggested by the Australian Labor Party (ALP) – a method that has raised eyebrows and drawn a rebuke from the ALP themselves.

The Findings Of The New Report

BIS Shrapnel have concluded that any changes made to current policy on negative gearing using a particular type of modelling will have largely adverse effects including an increase in rental prices and a decrease in new building construction, gross domestic product (GDP) and home property values overall.

According to the report the cities of Adelaide and Melbourne would see the highest increase in rental prices with a forecasted rise of approximately 10% over the next ten years.

The New South Wales capital of Sydney would top the leader board for property value drop, with unit prices there predicted to fall from $873,000 to $820,000.

New home builds across the country would also decline under the modelling implemented by BIS Shrapnel, with a 4% decrease having the flow effect of creating 175,000 less jobs and a $19 billion decrease in GDP overall.

Who Instigated The Report To Begin With?

While any reporting on the health of the Australian property market is always welcome, this particular study from BIS Shrapnel does come with a healthy dose of political intrigue.

The ALP is interested in knowing who instigated the report to begin with, with the answer so far from BIS Shrapnel being that is was a “private client”.

As the report uses modelling very similar to the ALP’s mooted changes to investor tax concessions it is suspected that the Australian government or somebody close to them is behind the whole affair.

Somewhat predictably, the ALP has come out against the report and disputed many of the elements that are contained within it.

Enter the REIQ

Not to be left out, the Real Estate Institute of Queensland (REIQ) has decided to voice its opposition to the ALP’s proposed changes to negative gearing.

The REIQ’s CEO Antonia Mercorella has spoken out with some strong rhetoric in favour of the just released report, stating that she believes its findings indicate that the ALP’s proposed changes are flawed and have potential to cause harm.

Watch This Space

The release of the BIS Shrapnel report is the latest development in an ongoing debate regarding Australian negative gearing laws, which began when ALP leader Bill Shorten flagged changes to the current rules that would see negative gearing restricted to new property builds only.

With the use of negative gearing being an important and widely used element of Australian property investing for many years, the subject matter itself is quite delicate, and it will be interesting to observe where the debate goes and if any related policy changes make an appearance from here on in.