One of Australia’s leading accounting and wealth advisory groups has argued that abolishing negative gearing would cause rent prices to rise significantly.
Chan & Naylor managing director Ken Raiss said the likely outcome of scrapping the mechanism would be market consolidation and rental increases of 50 per cent or more over time.
“Currently, the Australian rental market is controlled by 'mum and dad' investors, not commercial landlords, and as a result the Australian domestic housing market remains akin to a ‘public co-operative utility’, with rental properties available at varying levels of affordability,” he said.
“Like any public utility, as soon as they enter private and more entrepreneurial hands, then prices will go up, and in the case of public housing, this could lead to a rental price hike of as much as 50 per cent over time, resulting in the government having to shoulder the weight of providing a much larger percentage of housing for tenants and social dislocation for those unable to receive government housing.”
Mr Raiss said residential property must be treated as a business, and that any business has the right to recoup appropriate expenses.
“Small business owners wouldn’t invest in a new start-up business if they couldn’t claim their losses, so there is no reason why property investment should be any different,” he said.
Mr Raiss added that while property investors can claim their upfront costs, making a profit must be their ultimate goal.