John Symond, the founder of Aussie Home Loans, says the federal government must scrap negative gearing for investors in the luxury home market, claiming it does little to promote the construction of new homes.

Symond's comments came after Treasurer Joe Hockey handed down the tax discussion paper which suggested that house prices were inflated by negative gearing and capital gains tax concessions. “The intention of negative gearing when it was introduced was not to facilitate a $10 million to $20m house to rent out, get a 2 per cent yield and write the rest off on negative gearing,” Symond told The Australian. “It needs tweaking on capping the benefits.”

However, Symond said he didn't recommend scrapping negative gearing altogether. “The downside with messing with negative gearing is that it would stifle investor appetite and there would be an even bigger problem in the supply of housing," he said. "The lack of an orderly supply strategy for housing has brought on price increases in cities like Sydney."

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John Symonds lists Point Piper mega-mansion for sale