The Urban Taskforce says discouraging ordinary Australians from investing in property will slow down the supply of new housing.

Urban Taskforce, CEO, Chris Johnson, said being able to negatively gear a property investment makes investing in property more attractive than other asset classes, meaning mum and dad investors are contributing to growing Australia's housing stock while at the same time building themselves a nest egg. 

He pointed out that negative gearing mainly benefits ordinary Australians who have to borrow to invest in the property market. 

"The very wealthy don't borrow, or borrow less, and can use their own funds," he said.

"It seems unfair of the Labor Party to target ordinary Australian who need to borrow, and to discourage them from aspiring to be owners of income-producing properties," he said.

"Many Australians have preferred to invest in property over other forms of investment, like shares or bonds, and this has been based on negative gearing to minimise recurrent costs while expecting a positive return from capital gains over time.

"The aspirations of ordinary Australians to be property investors as part of a diversified approach to managing their long term finances should be encouraged rather than discouraged," he said.

Restricting negative gearing to new stock, he said, would lead to increased competition for new properties and therefore increase prices and rents. 

"The reduction in the use of negative gearing to only new properties, while appearing to boost supply, is likely to result in increases in new property prices, as more investors compete for only new housing," he said.

The proposed reduction in the capital gains discount will act as a further disincentive to invest in property he said, and will reduce investors' confidence in the property market. Less property investors means lower growth in the supply of new rental property.

"The slashing of the capital gains tax deduction by 50% will further discourage all property investors of new or old assets from investing in built assets," said Johnson. "The end product of the Labor Party proposals is to undermine confidence in property investment by ordinary Australians as well as larger organisations. This can only lead to less supply of rental properties with a consequent jump in rental fees."

Johnson said The Urban Taskforce, a non-profit organisation representing some of Australia's most prominent property developers and equity financiers, was proposing that future tax changes encourage property investment, and therefore boost housing supply. He said the Urban Taskforce supports the idea of removing stamp duty, and introducing a broad-based land tax. 

"The Urban Taskforce understands that adjustments to the taxation system needs to be considered, but we believe any changes should encourage the development of more housing funded by the broader community’s investment. Stamp duty is clearly a tax that is a disincentive to the purchase of a house or apartment and we believe this should be abolished and replaced by a fair, broad-based land tax which spreads the tax burden over a much larger ownership base. "