Real es­tate pro­fes­sion unites on is­sue of neg­a­tive gear­ing

Whitsunday Times - - REAL ESTATE -

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PROP­ERTY is al­ways a pop­u­lar topic and with neg­a­tive gear­ing a cen­tral elec­tion is­sue, it’s ratch­eted up a few notches.

The real es­tate in­dus­try has united to cre­ate a cam­paign to high­light facts about neg­a­tive gear­ing that are be­ing lost in the de­bate.

There has been some crit­i­cism that these groups are act­ing out of self-in­ter­est. How­ever, a key point is that real es­tate agents will con­tinue to ex­ist, pretty much as be­fore, if neg­a­tive gear­ing is re­moved.

Peo­ple will still need to buy and rent houses – peo­ple will still use real es­tate agents to con­duct their prop­erty trans­ac­tions. It’s true that if the value of prop­erty drops, sales agents will have a frac­tion less com­mis­sion, but it won’t be a sub­stan­tial amount when all is said and done.

How­ever, stamp duty is one of the state gov­ern­ment’s big­gest bud­get rev­enue lines. Last year the Queens­land Gov­ern­ment’s to­tal taxes rev­enue on prop­erty was $2.7 bil­lion (ac­cord­ing to ABS data). And stamp duty is cal­cu­lated on the value of a prop­erty. If even 2% dis­ap­pears off the value of ev­ery Queens­land home, the state gov­ern­ment will lose hun­dreds of mil­lions in rev­enue dol­lars. And how will that be re­placed?

Then there’s the is­sue of su­per­an­nu­a­tion – most of the 18 mil­lion Aus­tralians who have a su­per­an­nu­a­tion fund have in­vest­ments in res­i­den­tial real es­tate. Ac­cord­ing to Core Logic res­i­den­tial real es­tate is worth $6 tril­lion in Aus­tralia. It’s our sin­gle big­gest as­set group. Com­pare that with $2 tril­lion in su­per­an­nu­a­tion, $1.7 tril­lion in stocks and $0.7 tril­lion in com­mer­cial real es­tate.

A re­duc­tion in the value of those in­vest­ments will di­min­ish their su­per fund’s value and/or their pen­sion in­come lev­els. This is surely not ac­cept­able.

A com­mon line trot­ted out in con­nec­tion with neg­a­tive gear­ing is that it pushes up house prices. That’s not ac­tu­ally cor­rect and has been re­futed by many. Queens­land’s net mi­gra­tion rate (ABS data) is around 55,000 a year. More peo­ple are liv­ing here ev­ery year and that means we need to build more houses for them to live in.

But prob­a­bly one of the most cru­cial – and over­looked – el­e­ments of the neg­a­tive gear­ing de­bate is the im­pact on rental growth.

Rents have been kept in check, partly due to neg­a­tive gear­ing. The in­come from the prop­erty must not ex­ceed the ex­penses to ac­cess the neg­a­tive gear­ing pro­vi­sions. Also, a steady sup­ply of rental prop­er­ties means sup­ply is suf­fi­cient to meet de­mand – in­vestors are com­pet­ing for ten­ants – and this stops rents ris­ing rapidly.

It is im­por­tant that vot­ers un­der­stand why neg­a­tive gear­ing af­fects ev­ery­one, and also, when voting on neg­a­tive gear­ing, what their vote means for the broader econ­omy.

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