A chorus of real estate voices has united against Labor’s plans to change residential property taxes, saying the changes will shrink investment in housing, see rents rise more than otherwise, and require greater government investment in social housing.

“Negative gearing contributes to the provision of new housing, with around a third of all new dwellings construction being financed by investors every year,” said Real Estate Institute of Australia President, Neville Sanders.

“An increase in rental supply means higher rental vacancies and lower rents than would otherwise be the case,” added Sanders.

“One only needs to look at the CPI figures for evidence that the current taxation arrangements keep rents lower,” he said.

“From 2013, when investment in housing started to pick up, we have seen the rate of increase in rents slow down in Australia. The March quarter 2016 increase was 0.1%, the lowest since March 1995. The annual increase in rents to March 2016 has been 0.9%, again the lowest since March 1995,” Sanders said.

“In Sydney and Melbourne where much of the investor activity has been focussed the increase in rents in the past twelve months has been 2.3% and 1.4% respectively – the lowest annual increase since June 2006, while at the same time there has been a steady increase in population in both cities,” he concluded.

"If the proposed policy is enacted, tenants will face steeper rents - not at first, but over a period of time as supply becomes constricted and falls short of demand, and as those landlords who are providing housing demand higher yields in exchange for losing the current deductions," said Dan White, Director, Ray White Group.

“Whilst I am concerned about the impact on investors of proposed changes to the rules around negative gearing, I am even more concerned about the impact it will have on tenants,” said Mike McCarthy, CEO Barry Plant.

“The changes will inevitably lead to a decrease in the number of rental properties available. Lower supply with the same, or increased, demand, equals a rise in rents. This in turn will make it even more difficult for renters to save for a deposit,” McCarthy added.

“While the debate about negative gearing devolves into debates about which income groups get the greatest share of the benefits, negative gearing has played an important role in keeping rents affordable for low-income households,” said Ray Ellis, Chief Executive, First National.

“If we abolish or restrict negative gearing, the potential for investors to choose other asset classes instead of property could exacerbate the already slowing trend of investor lending. This would lead to fewer rental properties and rising rents,” said Ellis.

Read more at: negativegearingaffectsyou.com

See also:

Survey reveals negative gearing benefits everyday West Aussies

Look to 1985 for negative gearing impact, says John Howard

Retirement nest egg at risk under negative gearing proposal