Treasurer Josh Frydenberg said that Labor’s plans to limit negative gearing to new builds and halve the CGT discount will categorically increase rents and make property prices plummet, particularly in cities like Sydney where home values are currently in free fall.
Modelling on the impact of these policies is mixed. Some, like SQM Research, point to market disruption for property investors.
“There is likely to be upward pressure [on rents] from 2021 due to the current slump in building approvals which will be aggravated by the loss of negative gearing,” the research house said.
“SQM Research believes market rents could accelerate rise between 7 per cent [and] 12 per cent over the period 2020 to 2022, assuming there is an interest rate cut. Brisbane and Perth are likely to record the largest rises in rents.”
Others, like research house CoreLogic, foresee a confidence wobble from investors should Labor’s proposals pass.
However, tax experts like the Tax Institute’s senior tax counsel, Professor Robert Deutsch, believe the proposals won’t cause a catastrophic disruption. This is in part due to the fact that the proposals apply to all manner of investments, not just property.
This morning, both Mr Frydenberg and Assistant Minister for Treasury and Finance Zed Seselja referred to Labor’s package of proposals as a housing tax. Opposition Leader Bill Shorten hit back at this terminology more broadly in an interview with the national broadcaster this week.
“What we’re saying is on January 1 in 2020, new purchases of existing housing won’t be able to claim a government subsidy,” Mr Shorten said.
“If I’m not giving you a subsidy for you making a loss on an investment property, that ain’t a new tax. It just means you’re not getting a subsidy.”