Brighter Landlording

Negative gearing and capital gains tax crackdown ‘to cut house prices’

by Kate Watt, Marketing Manager 29 June 2016

The first independent modelling of Bill Shorten’s negative gearing and capital gains tax crackdown predicts it will slash property prices prices by an average 4 per cent nationwide and property investors would be worse off by $20,000 over a decade on a $500,000 property.

The analysis by Brisbane consultancy Adept Economics and reported on warns the impact on inner-city apartments may be greater, at 5 per cent or more.

The ­Opposition Leader has promised to limit negative gearing to new properties from July 1 next year if Labor wins the election and to cut the discount on capital gains tax from 50 per cent to 25 per cent.

The report also warns Labor’s changes to the capital gains tax discount would initially produce up to 90 per cent of the additional revenue generated by the two measures but the impact of negative gearing changes would rise as interest rates increased.

“Even though existing properties purchased before July 1, 2017, are grandfathered, their value will be affected because the value that they would be sold for would be ­affected as a prospective investor would earn a lower rate of ­return due to the changes,” the report says.

The cut to the CGT discount may encourage people to delay the sale of a property, until they face a lower marginal tax rate (for example when they are nearing ­retirement).

Labor’s policy changes could also have a significant impact in Queensland as the market adjusts to the significant additional supply that will occur in the next couple of years.

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