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The Reserve Bank of Australia’s push for a review of negative gearing to the parliamentary Inquiry into Home Ownership has sparked debate throughout the broking industry.
Mortgage Choice CEO John Flavell said negative gearing plays an important role in the property market and that the tax benefits associated with it helps to make property investment more attractive to some Australians.
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“Given that the success and strength of the housing market is critical to the ongoing health of the Australian economy, it doesn’t make sense to consider removing any initiatives that help this market,” he said.
“Instead of placing the emphasis on negative gearing and the impact it has on the property market, we should be placing the emphasis on first home buyers and what initiatives/incentives we can introduce to help them.
“It would be great to see first home owners receiving similar tax concessions as investors, as we believe this would encourage a lot more first buyers into the market.”
Mr Flavell noted that if the government wants to improve housing affordability and help more first home buyers into the market, the right levers must be pulled.
“Housing affordability is a function of property prices, income levels, the cost of and access to credit as well as supply of rental accommodation,” he said.
“To have a positive impact on affordability, drive up the instances of home ownership and reduce rental burden, all of these levers need to be considered and used.”
Meanwhile, University of Sydney Business School associate professor Jamie Alcock said that the changes to the tax rules are unlikely to produce any significant improvement in housing affordability in the short or medium term, and could even have the opposite effect as investors withdraw from the market.
“The number of rental properties will fall, rents will rise and many aspiring first home buyers now trying to save a deposit will be significantly negatively impacted,” Professor Alcock said.
“If housing affordability is a genuine concern, governments at all levels can have a far greater impact on affordability by eliminating stamp duties, increasing infrastructure coverage, relaxing many planning regulations and tightening up trade-union legislation.”
[Related: RBA says 'case for negative gearing exists']
