HomeStart Finance, a first home buyer specialist owned by the South Australian government, has responded to the release of last week’s tax discussion paper by calling for negative gearing to be changed – but not scrapped.
Chief executive John Oliver said the discussion paper provided an important opportunity to explore how elements of the tax system were impacting on the property market.
“Capital gains tax discounts and negative gearing have both been blamed for creating more investor activity and driving up property prices,” Mr Oliver said.
“If you wanted to reduce housing demand and slow the growth of house prices, you could make a very strong case that abolishing negative gearing would go a long way to achieving that.”
Mr Oliver said there was a risk that modifying negative gearing benefits could reduce the supply of rental properties in the market, which would push up rents.
“The solution may lie somewhere in-between, where negative gearing isn’t scrapped entirely but is modified in some way to make buying a home as an investment less appealing,” he said.
“This may achieve a middle ground where there is sufficient investor activity in the housing market balanced with a clear pathway into home ownership for first home buyers.”
Meanwhile, Treasurer Joe Hockey has refused to rule out any changes to negative gearing and other tax concessions for investors.
Mr Hockey said the government was “very concerned” for first home buyers finding it hard to gain entry into the property market.
“One of the big areas of response is going to be supply and I'm also going to raise that with the [state] treasurers in the next couple of weeks,” Mr Hockey said.
“There are many other suggestions on the table and we welcome the input, but I'm not giving guarantees now.”