A Message from the Chief Executive
Suggestions that negative gearing is a perk for the rich are misguided and, if eliminated in the next budget, the most vulnerable in our communities could soon see unaffordable rental prices.
The Real Estate Institute of Australia is right to urge the Government to retain negative gearing and the capital gains tax discount because it helps maintain the supply of rental properties.
The great Australian dream is to own your own home and it is important we remember just about every Australian begins his or her journey to property ownership as a tenant in a rental property.
Australia has one of the fastest growing populations in the OECD so keeping rents affordable depends entirely on maintaining an adequate supply of rental properties. This can only be done if Australians continue invest in properties they are prepared to rent to others. The main thing that keeps that attractive is
Current taxation arrangements offer Australians the opportunity to invest in real estate as a way of saving for independence in retirement. However, with the average property investor owning just one rental property and having an income no higher than $80,000, suggestions that the rich are exploiting negative gearing are an exaggeration.
If negative gearing were removed in an environment of the lowest interest rates since the 1950s, Australians would be unlikely to continue to invest in rental properties at current rates. They would seek better returns elsewhere and, with population growth near record highs, the supply of rental proper ties would fall short of demand, thereby forcing up rents.
This would place unacceptable pressure on the most vulnerable citizens in our community. It would also lengthen the amount of time it takes for first home buyers who are renting to save a deposit to buy their first home.
Currently, the rate at which rents are rising is slowing down. In fact, rents had an annual growth rate averaging 1.8 per cent in 2014, which means they were rising more slowly than inflation in 2014. If negative gearing were dropped, that situation could change rapidly.
Negative gearing plays a vital role in balancing supply against the demand for rental properties and this helps keep housing affordable for everybody. It is incumbent upon our industry to explain the benefits of negative gearing to Australian consumers at every opportunity.
First National Real Estate