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Housing affordability debate intensifies

Housing affordability debate intensifies

The property industry’s united opposition to Labor’s housing policy has been voiced in Canberra, while proponents of the housing reforms renew their push for the changes.

The federal Labor opposition’s proposed housing affordability plan to limit negative gearing to new housing and reduce the capital gains tax (CGT) discount from 50 per cent to 25 per cent has been met with strong criticism from the property industry, which has flagged the risks of Labor’s policy in a roundtable discussion held in Canberra.

The roundtable discussion was attended by Property Council CEO Ken Morrison, Riskwise CEO Doron Peleg, Master Builders Association CEO Denita Wawn, the Real Estate Institute of Australia CEO Jock Kreitals and Yellow Brick Road (YBR) chairman Mark Bouris.

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Prime Minister Scott Morrison, Treasurer Josh Frydenberg and Assistant Minister for Treasury and Finance Zed Seselja heard the industry’s concerns, with the government urging Labor to dump its “lose-lose” housing policy amid weakening market conditions.

“The clear message from the industry is that Labor’s plan to abolish negative gearing as we know it and increase the capital gains tax by 50 per cent will have a significant detrimental impact on Australia’s housing market and the broader economy,” Mr Frydenberg said.

“This is a lose-lose policy; if you own your own home, it will be worth less, and if you rent your home, it will cost you more.

“With Australia’s housing market cooling, now is the worst possible time for Labor’s new housing taxes.”

The Treasurer continued: “What’s worse is that Labor can’t even name a start date for their signature negative gearing policy, creating even more uncertainty for Australians and the housing sector, and putting a cloud over their own costings.

“Bill Shorten must listen to the experts, admit Labor got this one wrong and ditch their big new housing taxes.”

The Assistant Minister for Treasury and Finance claimed that Australians who adopt negative gearing as a wealth strategy typically earn a modest living.

“Two in three people who negative gear have a taxable income less than $80,000 and most own just one investment property,” Mr Seselja said.

“More than six in 10 of those tax filers making a capital gain have a taxable income under $80,000, these include tradies, farmers, nurses, teachers and hard-working families who save and invest to get ahead.

“Labor’s idea of fairness is not only to discourage those hard-working Australians who save, but to punish those who do.”

However, national housing campaign Everybody’s Home called on Treasurer Frydenberg to meet with Australians living with “crippling rental stress and housing costs”.

Everybody’s Home campaign spokesperson Kate Colvin said more than 811,000 Australian households are suffering from rental stress as a result of a housing system that favours speculation.

“The government currently spends $11.8 billion on housing assistance for property investors through negative gearing and capital gains tax exemptions – almost twice as much as it spends on social housing, rent assistance and homelessness put together,” Ms Colvin said.

“There’s almost unanimous agreement by everyone that we need to look beyond the self-interest of the already lucky.

“We need to look at these investor perks, which are the most generous in the world, to correct the balance between people buying their seventh investment property and people just wanting to buy a home.”

The Everybody’s Home campaign noted that it will be joining activist organisations on 14 March when they converge in Sydney Town Hall to “demand urgent action” to alleviate housing and energy cost.  

State and federal leaders and politicians have been invited to the assembly to outline what they plan to do to ease housing affordability pressures.

“It’s clear that negative gearing and capital gains tax breaks are doing a very poor job encouraging investment in housing where it’s needed – given we know we will need 730,000 social housing properties nationally over the next 20 years,” Ms Colvin added.

“Housing isn’t a niche issue; it’s one that affects thousands of households in every single electorate in every single state and territory – and with an election so close, it’s one no political party should ignore.”

However, CEO of Riskwise Property Research Doron Peleg, who participated in the property industry roundtable, said the impact of Labor’s housing plan would be felt by first home buyers.

“People need to understand the vast majority of investors are first-timers, which means for them to be separated from half a million dollars by, for example, refinancing their house is a very big decision. It is something that they will only undertake if they are confident to do so,” Mr Peleg said.

“The proposed changes and impact definitely don’t provide the appropriate environment and confidence to make those investments, which means what we will see is no pre-sales, no sales, no dwelling commencements and a reduction in sales of off-the-plan properties, and these all add up to continued housing affordability.”

Mr Peleg urged policymakers to consider increasing the supply of housing to reduce affordability pressures.

“The government needs to continue and increase infrastructure investment that will effectively enable a larger number of people to commute to employment hubs, and this can be done via a coordinated approach between federal, state and local government on land supply and rezoning in the middle and outer rings where there are already good transport networks,” Mr Peleg said.

“Even more important is to commit to major infrastructure projects, education and health in areas outside of Sydney and Melbourne as well as make major investments in innovation funds and offer tax incentives to technology companies to attract high-growth companies to the other states.

“Without investment and the creation of other industries, [the] majority of jobs will remain in NSW and Victoria, therefore increasing demand and decreasing affordability.” 

[Related: Property reform risks flagged in government roundtable]

Housing affordability debate intensifies
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