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First home buyers could take advantage of negative gearing to gain a foothold in the property market, a leading economist has said.
Recent media comment has suggested negative gearing hinders first home buyers from entering the property market because it inflates home prices.
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However, AMP chief economist Shane Oliver said the tax strategy could help new buyers make their first purchase as investors rather than owner-occupiers.
“If first home buyers think about it, it's quite easy to get into property by just negatively gearing their first property,” he said.
Mr Oliver said he and his wife used negative gearing to buy their first home.
“The way I got into property was through negative gearing. I was a first home buyer and became an investor in the process,” he said.
The couple bought a negatively geared house while continuing to live in a cheaper, rented apartment and spent several years paying off the mortgage on their property with the assistance of rental income and negative gearing write-offs.
When the mortgage payments had decreased to a more financially manageable level, Mr Oliver and his wife moved in.
“You think to yourself, I can't buy this property and live in it at the same time, but I can buy it, live somewhere else and negatively gear the property,” he said.
He encouraged first home buyers to consider this option for buying their ideal home.
“You can still get married or live with your partner in a low-cost rental property and find a home of your dreams and negatively gear it, then mortgage down until you can afford to get into the property market as an owner-occupier as opposed to an investor,” he said.
