Prime Minister Scott Morrison has led the Coalition to a surprise win in the federal election over the weekend, meaning negative gearing remains unchanged.
Making massive changes to negative gearing and Capital Gains Tax was a key platform for the Australian Labor Party, which many expected to win at the polls on May 18.
However, this election result “shows that Australians have rejected risky taxation changes at such an uncertain time in the property cycle”, said Ken Morrison, Chief Executive of the Property Council of Australia.
“A key plank of the Opposition’s policy agenda were big changes to negative gearing and big increases to capital gains tax, and the election result can only be seen as a repudiation of this policy,” he said.
“Construction activity is falling sharply, house prices are declining and economic growth is slowing – this was the wrong policy and the wrong time.”
Negative gearing has been a long-established feature of the Australian tax system and supports 1.3 million Australian property investors.
The overwhelming majority of investors are “everyday Australians saving for their future”, Ken Morrison said.
“These investors also support the housing choices for the one-third of Australian households who rent their home. Australians have sent a clear message to all of our parties to leave negative gearing and capital gains tax alone.”
Peter Koulizos, chairman of the Property Investment Professionals of Australia (PIPA), added that the election result was a sign that all Australians valued property ownership strongly and were prepared to vote accordingly to protect their most expensive asset.
“Labor’s policy to restrict negative gearing and reduce the concession on Capital Gains Tax was always poor, but especially so in a mostly underwhelming property market environment,” Koulizos said.
“Creating an us and them campaign by classifying all landlords as ‘greedy’ also did the Opposition no favours when the vast majority of property investors only own one property and are just trying to improve their financial futures.”
Now that the election is over, the Urban Development Institute of Australia (UDIA) has urged the Government to ensure that measures to support the property industry, particularly in terms of access to credit, remain firmly in focus.
“UDIA congratulates the Coalition on its return to government and applauds its commitment to housing affordability and creating more liveable cities through its record $100bn commitment to infrastructure over the next decade, as well as initiatives such as the First Home Loan Deposit Scheme,” says UDIA National President Darren Cooper.
“The real key now… is for the Government to direct APRA to reduce its interest rate servicing benchmark rate that the banks must use to assess home loan applications.
“The current rate of 7% is unrealistic in the present interest rate environment and is locking thousands out of buying. Even a benchmark rate of 5.5% would provide a prudent buffer over current rates and would get home lending and therefore housing markets moving again.”
