AUSTRALIA’S peak property industry group has unveiled a plan to improve housing affordability, championing low-deposit loans for first home buyers, but warns against “playing with” negative gearing.
But it urges against pursuing changes to negative gearing or any other measures that purport to help with affordability but instead “act as a tax” on investment and supply.
“Negative gearing and the capital gains tax discount are essential components of the private rental market, as well as rational tax policy,” the Council’s report says.
“Retention of negative gearing — and carefully canvassing any changes to the capital gains discount — are essential to the continual supply of rental accommodation.”
It comes as a special Newspoll, taken for The Australian ahead of the budget, shows most Australians are in favour of reducing tax breaks for property investors.
Fifty-four percent of respondents to the survey said they would support kerbing negative gearing and reducing capital gains tax deductions for investors.
Support was high from Australians across the political spectrum, with Greens, Coalition and Labor voters all backing the plan.
Young Australians aged 18-34 were the only group where a majority (52 percent) were in favour of the plan.
Labor has been pushing for the negative gearing and capital gains tax reforms, but it’s believed the Turnbull Government is still internally split on whether to include the changes in its housing package, to be unveiled in the May budget.
Fairfax Media reports the package could also include measures to make it easier for retirees to downsize the family home.
It’s reported downsizers could be given exemptions from a cap on the non-concessional annual contribution to superannuation, normally $100,000 per year if the top up is a lump-sum payment from selling a family home.
After weeks of speculation over what the budget might bring to ease housing affordability pressures, Malcolm Turnbull has attempted to tone down expectations despite a red-hot property market in Sydney and Melbourne.
The Property Council says costly regulations, poor planning decisions and excessive taxes across all levels of government have created a logjam for the past 20 years.
“Australia is benefiting from population growth, record low-interest rates and relative economic prosperity, but getting so many other policy settings wrong has made affordability worse,” its chief executive Ken Morrison said.
Dwelling prices have climbed to 6.9 times the average wage and it takes 139 per cent of an average household’s annual income to pay the deposit on an average house.
“This affordability cauldron has taken years to develop and it will take a concerted effort over many years to unwind,” Mr Morrison said.
However, it points out 1.2 million rental properties are negatively geared and argues the tax breaks underpin the market.
“Housing is a $6 trillion asset class and government must tread carefully, otherwise it runs the risk of undermining the flow of jobs and investment in the economy,” Mr Morrison said.
“Too much of the housing affordability debate has misdiagnosed the problems, focused on measures that won’t do anything to fix affordability, or set out to blame scapegoats for political convenience.” The Property Council also wants to see institutional investment in “build to rent” housing, densities developed around transport hubs and corridors, and the abolition of stamp duty.
— Crank up housing supply, diversity and choice
— Make housing cheaper to produce
— Incentives to spur reform
— Bridge the deposit gap — Keystart low deposit home loans
— Remove barriers to downsizing
— Don’t play with negative gearing
— Institutional investment in ‘build to rent’ housing to give more choice for renters
— Location matters — densities around transport hubs and corridors
— Phase out stamp duty
— Re-establish the National Housing Supply Council
(Source: Property Council of Australia)