No negative gearing changes is great news for investors
Negative Gearing has been in the news yet again, and this time the Coalition confirmed it will make no changes to capital gains tax and negative gearing in the upcoming federal budget on 3 May. Labor has also confirmed that if it wins, from July 2017, both new and off the plan properties will continue to benefit from negative gearing. But what does this really mean?
Negative Gearing has been in the news for decades with changes always proposed and dismissed. Recently, the government had suggested that there might be some changes made for negative gearing to affect those higher earners. Other ideas also included to limit the number of properties that could be negatively geared or on the dollar value that could be deducted. However, Prime Minister Malcolm Turnbull stated that it was “common sense” to make no adjustments to existing arrangements.
In the upcoming election campaign, the Coalition wants to make property prices a key feature.
On the other hand, Labor wants negative gearing to only be placed on new housing investments from July 2017 as well as on existing investments. They also want to cut the capital gains tax by half from 50 per cent to 25 per cent. Labor argues this would make it easier for first home buyers to get a foothold on the property ladder as well as increase the number of jobs by limiting negative gearing to just new dwellings.
Labor has confirmed that it is not looking to backdate or cancel any existing negative gearing structures in place as this would cause fear and panic, with investors looking to get out of the market, resulting in a property market crash. This means that any existing property investments are safe and now makes a great time to buy a new or off the plan property.
According to Mr Turnbull, if Labor had its way, “The changes that Labor is proposing to negative gearing will devalue every home in Australia”. He also added that “What they will also do is jack up rents. Labor has got a trifecta; they want to discourage investment, jack up rents and reduce home values”.
The Housing Industry Association also thinks that keeping negative gearing as it is will be a good thing. According to Graham Wolfe, the association’s chief executive of industry and policy,
"Negative gearing promotes private investment in the residential property market, stimulates economic activity and relieves pressure off social housing and ultimately the public purse."
He added that, "With an ageing workforce and mounting pressure on publicly funded services, retaining negative gearing will support the delivery of a larger stock of rental accommodation, increasing access to shelter, while promoting wealth creation and self-sufficiency in retirement for hundreds of thousands of mum-and-dad investors.”
With Sydney still seeing an undersupply in property and with many more renters than buyers on the table, there is the need for new apartments to be built and investors can help to encourage apartment growth in the market.
For those considering investing in property, then now is a great time to do so. Both parties have confirmed that they will not be touching negative gearing so buying a brand new property or one off the plan still allows you to enjoy the great benefits that negative gearing brings.
If the Coalition wins then property values are likely to increase, whilst if Labor wins then you can expect rental prices to increase. Either way, it is a win-win situation for investors of new property, so by not investing in property, you are missing out on capital gains or higher rentals.
To learn more about what negative gearing means for you or to view more about our current properties for sale, why not get in touch with iBuyNew today and speak to one of our friendly Property Consultants who is across all of this. Call us today on 1300 123 463.
Published on 26th of April 2016 by Marty Stanowich