Executive Director of the Australian Institute for Progress, Graham Young, has called on New South Wales Planning Minister Rob Stokes to reveal by how much he thinks abolishing negative gearing will reduce house prices.
He also renewed calls for first home buyers to be able to access their superannuation to supplement their private savings towards a house deposit.
“Abolishing negative gearing is sold as a solution to housing affordability, but if it does nothing to reduce the price of houses, then it does nothing to solve affordability.
“Yet proponents of negative gearing continually tell us it will not affect house prices at all.
“They can’t have it both ways.
“As the newest champion of the higher taxation cause, NSW Planning Minister Rob Stokes has to either nominate the amount by which he thinks house prices will fall, or admit that abolishing negative gearing is not about housing affordability at all.”
Mr Young said that research conducted by his Institute showed that current high house prices were largely due to record low interest rates.
“In most markets, mortgage repayments are as affordable as they have ever been in the last 23 years. The real issue for first home buyers is the deposit gap.
“If Mr Stokes wants to fix housing affordability, then he should look at supporting our idea of allowing first home buyers to access their superannuation to supplement their own personal savings, as is the case in Canada, a country with similarly high house prices and low interest rates.”
Mr Young said that in addition to a rational reaction to low interest rates, there is undersupply in the market, particularly in Sydney, which is fanning price rises, and Mr Stokes should tackle that problem before dabbling in the fiscal field.
Mr Young said that it was a myth that negative gearers were avoiding paying their fair share of tax.
“Australian housing is tax advantaged for both home owners and investors.
“Home owners pay no capital gains tax, and compared to renters, over time devote a smaller proportion of their before-tax income to ownership costs.
“Investors by comparison get to defer some of their tax by legitimately deducting business costs from their income, but this is recouped by the government when the property is sold through capital gains tax.
“There is no point negatively gearing a property in the short term if you do not intend to make a profit in the longer term, as all you would be doing is handing bankers a wad of interest in return for a fraction of it back as a tax deduction.
“And without negative gearing there would be fewer investors able to buy the dwellings needed to house young Australians while they save for their deposit.”
For further information contact Graham Young 0411 104 801.