Political point scoring is overriding concern for first homebuyers, low-income earners, and renters, in the heated debate about negative gearing reforms, says Real Estate Institute of Australia president, Malcolm Gunning.
Gunning's comments come as voices from within the industry, including from Stockland CEO Mark Steinert, Aussie Home Loans boss John Symond, and members of the government, call for negative gearing to be included as part of a review of housing affordability.
The changes being proposed for negative gearing would drive rents higher and affect the most vulnerable people in the community, Gunning says.
“One of the major beneficiaries of negative gearing are renters because it is proven to increase supply," said Gunning.
"Any changes that are made would have serious flow on effects,” he warned.
Gunning said rate of increase in rents has plummeted since investment in housing picked up at the end of 2011.
"For Australia, rents increased by 0.7 per cent for the year ending September 2016 which is the lowest annual increase since March 1995," he said.
"In Sydney the increase was 2.5 per cent and in Melbourne 1.4 per cent.
"Changes to negative gearing would see less rental properties, which would cause rents to go up," said Gunning.
Gunning warned changes to negative gearing would only make it harder for first-home buyers to get into the market as higher rents would make it harder to save a deposit.
“This could cause a dire situation for young people who are already renting for longer due to higher house prices," he said, warning of a "vicious cycle where higher rents means less savings for their deposit, exacerbating the housing affordability crisis."
Negative gearing is "a legitimate deduction of expenses in the course of earning income from investment in all asset classes until the investment generates a positive income stream in the future," said Gunning.
Gunning said property investors are already feeling the pinch.
“There is already pressure on investors looking at real estate with changes to APRA’s borrowing guidelines and average yields falling to another all time low of 3.2 per cent in February, some full percentage point lower than the 4.2 per cent recorded five years ago by CoreLogic," he said.
Gunning said the REIA's stance on negative gearing has not changed.
“Our latest Adelaide Bank/REIA Housing Affordability Report (due to be released on Wednesday) will support our ongoing stance on no changes to negative gearing policy as outlined in our 2017/2018 Pre-Budget Submission, with rental affordability showing a trend improvement since mid 2012,” Gunning concluded.
Negative gearing rumblings gaining in volume
Negative gearing: the debate that won't go away
BankWest to remove negative gearing benefits for mortgages