Real estate profession unites on issue of negative gearing
Consumer tips Provided by REIQ
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.