The real estate sector says independent research shows Labor’s negative gearing policy will have a far greater impact on property prices, economic activity and state revenues than previously thought.

SQM Research, a respected research company that specialises in residential property, has released a paper showing the potential impacts of Labor’s negative gearing policy.

“What SQM have done is examined Labor’s proposal and in detail assessed the consequences so there can be no claims that it doesn’t represent the stated policy,” said Neville Sanders, President of the Real Estate Institute of Australia.

“According to the research, prices on a national basis could be as much as 16% lower than otherwise over the three years 2018 to 2020. For some areas, such as Sydney, the drop could be 20%,” said Grant Harrod, CEO of LJ Hooker. “This is a far cry from the 2% we have been told by other researchers.”

“SQM points out that investors purchasing new property, as Labor hopes to achieve, may experience losses on a resale in the first three years of the property’s life. For owners that have bought houses on low deposits and the banks that have funded the mortgage, this is particularly worrying,” said Harrod.

“Sales of property are predicted to fall by between 17% and 20% in the first full year of scrapping negative gearing,” said Craig Gillies, Sales Director, Coronis. “While the immediate impact of this is the employment of real estate agents, the multiplier affects of this are tremendous and particularly so in regional areas where alternative opportunities are limited.”

“The lower sales activity will also mean state revenues through stamp duty collections are greatly reduced, with a predicted fall of $3.1 billion to $4.1 billion in state revenues. Either state services will need to be reduced, or rates and other state charges will need to rise to compensate for the loss”, concluded Gillies.

“SQM Research is recognised as one of Australia's most accurate property forecasters, so we welcome its modelling on the specific Labor policy, over and above any general modelling undertaken by a non-property industry participant," said Dan White, Director Ray White.

"The SQM report, in essence, acknowledges and validates the position the industry has taken on Labor's policy: that it will fail to do any of the things it purports to do, and in fact will hurt all parts of our community," said White.

"We view this policy as irresponsible, particularly given Labor's failure to model the effects of the policy themselves. The debate on negative gearing and housing affordability is one, as an industry, we want to have, but in short, the Labor plan is destructive,” added White.

“It’s important for the health of the Australian economy to leave negative gearing laws for residential real estate in place,” said Angus Raine, Executive Chairman, Raine & Horne.

“Property is already a heavily taxed asset class. According to research from CoreLogic, while residential property investors wrote $3.7 billion off their taxable income, it’s estimated that they paid capital gains tax on $51.2 billion of profits made from dwelling resales over the 2015 calendar year and contributed significantly to the $45 billion in property-related tax revenue collected by state and local governments,” said Raine.

“Data from the ABS shows that over the 2014/15 financial year, state and local governments collected $45.2 billion worth of taxes from property (this includes residential and non-residential), or the majority (50.6%) of all tax revenue to state and local governments. With government deficits spiralling out of control, it seems counterproductive to take the knife to negatively geared residential property investments,” said Raine.

“Negative gearing is a not a wealth creation tool used by the wealthy. Individuals with a taxable income of $60,001 to $70,000 are the most likely to claim a net rental loss and subsequently utilise a negative gearing strategy, according to CoreLogic. This proves once again that the vast majority of property investors are middle income Australians, simply trying to build some wealth for their retirement,” said Raine.

“Shelter is a basic human need, like air, food and water,” said Michael Davoren, Managing Director, RE/MAX Australia and RE/MAX New Zealand. “Australians need an ongoing, sustainable supply of decent, habitable shelter. ‘Everyday’ landlords and property investors, not just the wealthy, provide this shelter; and many do so because there are tax incentives. Take the incentives away, investor motivation will disappear and a lack of shelter will affect people from all walks of life and from all financial levels. There’s no talk of government stepping up to meet rental demand. I have particular concern for the almost one-third of Australians who rent, as too many will be affected.”

Ben Kingsley, Chair, Property Investment Professional of Australia, said, “Labor’s policy will not deliver the tax savings and economic windfall it is spruiking to win votes, nor will it solve the affordability issue. It’s a poor policy which will negatively impact too many Australian households financially.”

“Labor’s policy is a risky one. We have seen the disastrous impacts of ill-thought out policy decisions before and it's disappointing that Labor have not learnt from those mistakes,” said Leanne Pilkington, Managing Director, Laing + Simmons.

“The weight of evidence simply doesn’t support Labor’s position on negative gearing,” said Ray Ellis, CEO, First National. "It’s now essential that Labor release its modelling to explain how its policy won’t damage house prices, push up rents and destabilise the economy."

www.negativegearingaffectsyou.com

For more on this topic, read:

Agents say Labor's property plan would hurt renters

Look to 1985 for negative gearing impact, says John Howard