Negative Gearing: The Impact on Investors and Renters
In the world of real estate investment, negative gearing has long been a hot topic of debate. The Real Estate Institute of Australia (REIA) warns against targeting negative gearing, arguing that the consequences could be dire for both investors and renters alike. Let’s delve into the implications of this contentious issue:
The Current Landscape
- The REIA highlights that over 2.2 million family investors supply 97% of rentals, positioning them as a crucial part of the housing market.
- Housing affordability is currently at its worst in three decades, affecting both home buyers and renters.
Proposed Changes and Potential Consequences
- Phasing out negative gearing could primarily benefit large-scale property investors, neglecting the impact on everyday Australians.
- The removal of negative gearing may lead to a reduced supply of rental properties, potentially causing rent increases of up to 12%.
- Tight rental vacancy rates, currently at a national average of 1.6%, could worsen if negative gearing is eliminated, resulting in higher rents and heightened competition among renters.
Impact on Small Investors
- Small investors, often referred to as ‘mum and dad’ investors, may be discouraged from entering or remaining in the market if negative gearing is phased out.
- With 37.9% of all finance to households for residential property coming from investment loans, the REIA stresses the importance of policies that promote investment and enhance housing affordability.
Final Thoughts
- Any changes to negative gearing should be approached cautiously to avoid inadvertently harming the very individuals they aim to support, as emphasized by Leanne Pilkington, the president of the Real Estate Institute of Australia.
In conclusion, the potential repercussions of targeting negative gearing extend beyond the realm of investment to impact renters and the overall housing market. It is essential to consider the broader implications of such policy changes to ensure a balanced approach that supports both investors and renters in achieving housing affordability.