La­bor wants a house of pain

The Daily Telegraph (Sydney) - - Front Page - FIONA WINGETT AS­SO­CIATE ED­I­TOR

PROP­ERTY ex­perts are adamant that La­bor’s prom­ises to abol­ish neg­a­tive gear­ing and raise cap­i­tal gains tax are con­tribut­ing to falling house prices.

It comes as Syd­ney’s auc­tion clear­ance con­tin­ues to stag­nate de­spite the usu­ally bumper spring pe­riod be­ing well and truly un­der way.

Just 52 per cent of the 665 houses put up for auc­tion sold this week­end — well down from the 64 per cent of homes that sold at the same time last year.

Data com­pany CoreLogic has said that there is “no doubt” Op­po­si­tion Leader Bill Shorten’s pro­posed pol­icy changes “are ad­versely af­fect­ing hous­ing de­mand”.

FALLING house prices across the coun­try are be­ing driven by La­bor prom­ises to abol­ish neg­a­tive gear­ing and raise cap­i­tal gains tax if it wins the next fed­eral elec­tion.

With the Syd­ney mar­ket hav­ing al­ready slumped 6 per cent since last year, Bill Shorten’s vow to raise cap­i­tal gains tax by 50 per cent and abol­ish neg­a­tive gear­ing for all but new builds, is caus­ing “head­winds” that are de­ter­ring in­vestors.

Kevin Bro­gan, from real es­tate data com­pany CoreLogic, said the pro­posed pol­icy had an im­pact on in­vestor sen­ti­ment.

“With pol­icy changes that have oc­curred over the last three or four years, we have seen a sig­nif­i­cant im­pact on the mar­ket,” he said.

“And if we are talk­ing about other is­sues — like the pos­si­bil­ity of the end of neg­a­tive gear­ing — that may erect head­winds for in­vestors, that will be fac­tored in to their de­ci­sion to pur­chase.

“Any­body who is pur­chas­ing will be look­ing at the fun­da­men­tals of what is the rental re­turn and the op­por­tu­nity for cap­i­tal growth.”

CoreLogic head of re­search Tim Law­less said in­vestors were al­ready start­ing to “fret” about the im­pact of the poli­cies. “There’s no doubt La­bor’s poli­cies are ad­versely af­fect­ing hous­ing de­mand right now as cur­rent and prospec­tive in­vestors fret about not be­ing able to neg­a­tively gear and be­ing sub­ject to much higher cap­i­tal gains tax,” he said.

Mr Bro­gan said some prop­er­ties were tak­ing longer to sell.

“It will be in­ter­est­ing to see if there will be more prop­er­ties come on to the mar­ket and if peo­ple have been ‘hi­ber­nat­ing’ over win­ter.”

Martin North, from con­sul­tancy Dig­i­tal Fi­nance An­a­lyt­ics, said La­bor’s plans were al­ready chang­ing the mar­ket.

“It’s a rel­a­tively small pro­por­tion of the in­vest­ment pop­u­la­tion that will be af­fected by La­bor’s pro­posed changes,” he said.

But in­vestors were “tilt­ing” to­wards newly built prop­er­ties be­cause de­vel­op­ers were mak­ing heavy dis­counts due to an abun­dance of sup­ply and were of­fer­ing buy­ers five-year rental guar­an­tees.

La­bor leader Bill Shorten made the end of neg­a­tive gear­ing — which al­lows in­vestors to deduct losses from wage in­come and re­duce tax li­a­bil­ity — on all but new prop­er­ties cen­tral to La­bor’s pol­icy plat­form more than two years ago.

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