Negative gearing and the impacts on rent
As a company with a clear interest in property, it will surprise no one that LJ Hooker has concerns that rules around negative gearing could change after the Federal election.
A change of government would mean this long-held, allowable tax concession could be limited to investors who purchase off the plan or newly built properties only.
Negative gearing helps many in the community offset the losses they make on their investment properties.
Negative gearing, asset depreciation, repairs and maintenance have long been allowable tax deductions and a key feature of the Australia taxation system, to support investments and maintenance of assets across all industry sectors.
If negative gearing was restricted, we would expect to see both an initial and long term increase in rents as investors look to cover their costs or sell-off property, reducing the available pool of rental properties. The suggestion this would be offset by a focus on new constructions overlooks the substantial time lag in approvals, funding and the delivery of new developments. Plus, these new developments are more likely to be high density apartment living, suggesting tenants who would previously have rented a free standing home with a backyard would now no longer be able to do so.
From an employment perspective, abolishing negative gearing for established properties could reduce employment in a number of sectors. The real estate sector would require fewer strata and property managers and as rental properties require regular maintenance and renovations to meet regulations, a fall in demand would impact trades people, handymen and other service providers.
For further information on negative gearing, visit negativegearingaffectsyou.com.