Lower property prices, higher rent?
It has been reported in a recent ABC article that Labor’s planned rollback of tax breaks for property investors could cause big ripples for Australians who have invested in property, or who are living in rental accommodation.
Labor’s policy includes restricting negative gearing to newly built properties, and reducing the capital gains tax (CGT) discount from 50 per cent to 25 per cent. Many industry experts have speculated about what this could meet for the property investment market.
What does this mean for owners and renters?
It is argued that, if the changes go ahead, property investors could seek a higher rental yield than what they have under current laws to compensate for their in-the-pocket loss in tax concessions. Some say this will be made up through raising rent prices, and others claim that property prices will need to fall.
SQM Research estimates that property prices could take a hit over the next few years, with a nationwide decrease between 5 per cent and 12 per cent. Negative gearing as a tax saving strategy will also be far more restricted under the new rules.
What does Reventon think?
Reventon CEO and Founder, Chris Christofi, has spoken on the changes and possible impacts on rent prices: ‘In 1985 when negative gearing was removed by Paul Keating, rent prices went up by around 30%. If history was to repeat itself, we’re going to have the same impact.’
But, Chris notes that the current tightening of lending could actually have a beneficial effect for the investment market to ensure that investors truly can afford their properties: ‘When you’re highly leveraged, that is the most risky element in getting into investment properties’, says Chris.
‘So yes it’s harder to get lending, yes it’s harder to get into the investment property market, but affordability is a much more important aspect.’
Learn more from Chris in this short video:
If you have a property investment or you are looking to invest in the current market, speak to an expert adviser about your options. Book a free consultation with a Reventon expert to talk about your situation and what to do should the changes take place.