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Negative gearing changes could see values slide by 6%

A new report has suggested that changes to negative gearing policy could push rents up dramatically, while simultaneously putting a dampener on property values, new building construction and GDP.

The report from BIS Shrapnel, predicting that changes to negative gearing could push unit rents up by as much as ten per cent by 2026, has reignited fears that proposed policy changes will be detrimental to the property market.

However, questions over its commissioning have raised doubts as to its accuracy.

The Economic Impact of Limiting the Tax Deductibility of Negatively Geared Residential Investment Properties estimates that unit renters in Melbourne and Adelaide will bear the brunt of any rental increases, with rents to jump by 9.6 per cent and 10 per cent respectively, according to figures reported by Fairfax Media.

Sydney would cop the largest reduction in unit values, falling from $873,000 at what the company terms “full negative gearing” to $820,000 at “limited negative gearing”.

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The BIS report also predicts new home building will decline by around 4 per cent nationally, 175,000 fewer jobs will be created, GDP will fall by $19 billion per annum and government revenue would shrink by $1.65 billion annually.

The report was compiled using modelling based on changes to investor tax concessions, changes that resemble proposals by the Labor Party.

However, Shadow Treasurer Chris Bowen released a statement on Wednesday, slamming the report’s analysis of changes that are “purporting to be Labor policy”.

“It ain’t Labor’s policy. It isn’t modelling. And it is not analysis that stands up to any scrutiny,” the statement said.

“The report is full of incorrect and quite frankly bizarre assumptions.”

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BIS Shrapnel has refused to disclose the identity of the report’s commissioning body, leading Labor to raise questions about the report’s independence.

“And by the way, who was the private client who commissioned it?” Mr Bowen said.

The report has prompted the Real Estate Institute of Queensland (REIQ) to reiterate its opposition to Labor proposed changes to negative gearing.

“The BIS Shrapnel report confirms what the REIQ has been saying all along – that investors would abandon property as an asset class, causing rents to rise and housing affordability to be crippled,” REIQ CEO Antonia Mercorella said.

“Any changes to negative gearing would be disastrous in Queensland, pushing thousands of families into financial distress as rents rise as the predictable result of diminishing supply,” she said.

The release of the report is the latest development in an ongoing saga which has dominated headlines and parliamentary sitting times in recent weeks, following ALP leader Bill Shorten’s announcement that a Labor government would restrict negative gearing to new builds only.

[Related: My take on negative gearing reform]

Negative gearing changes could see values slide by 6%
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