Big new house tax will smash values

Opinion Piece

Date : 08 November 2018

Author: The Hon Josh Frydenberg MP

Publication: The Daily Telegraph

LABOR’S plan to abolish negative gearing as we know it and double capital gains tax paid will hurt every Australian. If you own your home it will be worth less. And if you rent you will pay more.

Investors today hold around a quarter of the 10 million dwellings that make up the $6 trillion Australian housing market. But under Labor’s big new property tax there will be less incentive for investors to buy property, creating downward pressure on prices.

Reducing the number of investors in the market also pushes up rents. Investors often accept lower rents in the expectation of future after-tax capital gains when they sell.

Labor’s policy could not come at a worse time for the housing market as prices have reduced across capital cities, including Sydney. Labor’s changes will smash property values and undermine confidence in the stability of the market.

Their excuse is that they want to improve the opportunities for first-home buyers to gain access to the market. But that is already happening without changes to negative gearing, with over 100,000 first-home buyers getting loan approvals over the last year, the highest number since 2009.

Labor also claims that negative gearing is the domain of the so called “rich” and people with multiple investment properties. Again, the facts tell a different story. Two-thirds of those who negative gear have a taxable income of less than $80,000 and over 70 per cent of those who negatively gear have only one property. In fact, the annual deduction claimed by those who negative gear is less than $10,000 in seven out of 10 cases.

Labor’s “rich” negative gearers include 58,000 teachers, 41,000 nurses, 19,000 police and emergency service personnel. Not only is Labor hurting families right across the country but it’s attacking those aspirational Australians in its heartland.

Labor’s policy also risks sending home buyers into a position of negative equity, when the value of their home falls below the size of their mortgage. This not only impacts household wealth, but can also deter future buyers, shaking their confidence about entering the market.

Unfortunately when Labor’s frontbenchers try to justify their new property tax, they get caught out.

Bill Shorten and Chris Bowen have said Labor’s property tax will decrease housing prices, but opposition finance spokesman Jim Chalmers has said that prices will increase, while Joel Fitzgibbon says prices will neither go up, or down under Labor. What a shambles!

With unemployment falling to five per cent and GDP growth increasing to 3.4 per cent, it’s fastest rate since the height of the mining boom in 2012, the last thing the country now needs is a big new property tax.

Labor should listen to the critics of its policy, cut its losses and abandon the changes to negative gearing and capital gains tax.

Chris Bowen has said in recent days Labor will take the policy unchanged to the election. This would be a mistake and cause significant damage to Australia’s housing market.

Josh Frydenberg is the Federal Treasurer 

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