The Coalition is currently saying they will make no changes to negative gearing, but the Labor Party are proposing it will apply to the purchase of new buildings only – although existing negatively geared properties would remain so.
A recent report by RiskWise Property Research and Wargent Advisory shows the ALP policy would lead to a decline in property prices. This is great news for first home buyers, but more challenging for renters.
Fewer investors means less rental properties, particularly in metropolitan areas. In the past 12 months, there’s already been a drop in lending to investors, even without any changes to negative gearing.
Negative gearing has been a popular strategy for Australian investors for many years, but in other developed markets around the world it’s actually not allowed, with many economists claiming that it inflates house prices. Here’s a few things to think about:
Pros of negative gearing:
- Reduces taxable income
- Has long term gains
- Sound investment strategy
- Wide variety of tax deductions
Cons of negative gearing:
- Can be risky
- Not great for the economy
- Not great for the property market
- Favours high income earners.