Investors taking risks in negative gearing purchasing: Robert Gottliebsen

Investors expecting to retain the ability to negatively gear their properties when the Labor Party win government next year are taking a big risk, says economist Robert Gottliebsen, The Australian columnist.

"At the moment, while the auction clearance rates in both Sydney and Melbourne are low, they are being boosted by investors seeking to retain the ability to negatively gear in anticipation that the ALP will win government next year," Gottleibsen said in his column in The Australian.

"But in my view those investors are taking a huge risk," he added.

If the Labour Party win government in May 2019, negative gearing will still be available on new homes, but not on existing homes.

"That means that after July 1, if those investors currently buying houses want to sell then the buyer will not have the benefit of negative gearing," Gottliebsen said.

"Investors buying old homes after July 2019 will want positive gearing — ie interest and costs must be lower than rental incomes.

"The only way to achieve positive gearing on pre-owned houses is for the price to fall sharply and/or rents to rise.

"Banks under the close day-to-day supervision of the regulators will lower their house valuations and then reduce the amount they are prepared to lend, accelerating the fall in prices."

Gottliebsen called the Labor Party negative gearing policy an "atom bomb".