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Changes to negative gearing "won't stimulate housing demand"

The ALP's proposed changes to taxation arrangements for investment properties will hit investor demand, not stimulate it, says the Property Council of Australia.

Investors are more likely to scrap plans to invest in new homes if the ALP introduces its crackdown on negative gearing and capital gains tax breaks, according to a new poll.

The poll of more than 1,000 people, commissioned by the Property Council of Australia, found that 33 per cent of potential investors surveyed said they would buy a newly built investment property under existing taxation arrangements.

But that number drops to 24 per cent if the ALP's proposed crackdown is implemented.

Property investors also said they would be less likely to buy a newly built property under Labor's proposed changes.

Property Council of Australia chief executive Ken Morrison said the findings "challenge the ALP's key assumption that its property tax package will stimulate new housing supply and construction".

“They show that investors will be less likely to invest in newly-constructed housing under the ALP’s tax changes, not more likely," Mr Morrison said.

“This is a critical new insight because if less new housing is being created for people to rent it can only mean higher rents in the medium term.

“Housing construction is already falling and is a major source of jobs for Australians. The last thing we want to do is make this worse."

Mr Morrison told WILLIAMS MEDIA the findings highlight the dangers of making big policy changes at this "uncertain" time in the property cycle.

“The ALP policy was first announced a few years ago when Australia’s residential property market was in a very different state.

“Since then, we’ve seen banks tighten up their lending, as well as changes to foreign investment rules, along with falls in residential property values in most markets,” Mr Morrison said.

“We are concerned that the proposed changes would drive away investors which will affect the supply of new and established property to the rental market which is essential for one-third of Australian households,” Mr Morrison continued.

Shadow treasurer Chris Bowen has come out in defence of the findings, saying there is clearly "still a large cohort that would continue to invest in new homes".

Source: 27th February 2019 The Real Estate Conversation

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