Labor’s negative gearing policies are flawed: Doug Driscoll

EXPERT OBSERVER

Labor’s negative gearing plans will disadvantage some first-home buyers and lower-income Aussies who are property investors working hard to get ahead.

A more effective policy would be to means-test investor tax subsidies, and cap the number of properties that can be negatively geared. 

Labor’s plans to limit negative gearing to new housing and halving the capital gains tax concession will do little to help this hardworking market segment.

Labor has wrongly suggested that all investors are higher-income earners. Through the Starr Partners network of 31 real estate offices, he has learned that many investors are also first home buyers and lower-income Aussies.

I’m hearing from agents and brokers across markets popular with first home buyers, that approximately 30-35 per cent are rentvesting.

They are often purchasing a property, living in it for six to 12 months, then putting it on the rental market.

Labor is trying to help middle- and working-class families, but let’s not forget that many nurses, teachers, and policemen are also purchasing investment properties – they make up the investor profile, too. The Opposition’s proposed policy could inadvertently disadvantage many of the people it is trying to help.

To make the Australian dream of purchasing a home true for all Australians, there are more effective strategies that would appease investors and nurture first home buyers. From what I can tell, this policy is a regurgitation of Labor’s previous election manifesto.

What puzzles me most is that if it didn’t curry favour in the lead up to the last election when investors made up the majority of the market, then how is it going to garner support now that their numbers have decreased considerably. House prices are cooling, which shows the government’s macroprudential measures are working, but I agree more could still be done.

Instead of limiting negative gearing, as Labor has suggested, Aussies that want to claim tax subsidies could be means tested. This would ensure that higher-income earners are not benefitting the most, and tip the balance in favour of those that need the subsidies the most. Alternatively, capping the volume of properties an investor can negatively gear will reduce the number of negatively geared properties, without limiting it to a subset of homes. 

Any existing properties need to be grandfathered. Labor has got it right to grandfather existing investment properties, a policy I strongly stand by. Without this, it could lead to property Armageddon.

Doug Driscoll is the CEO of Starr Partners.