Gearing not negative, says analyst

Propertyology's Simon Pressley. Photo courtesy of the subject.
Some politicians and voters blame negative gearing for the current lack of housing affordability but analysts say there are many factors at play. Vincent Dwyer reports.

Labor’s plans to “tinker” with negative gearing are a useless experiment which will unfairly affect property investors, says the head of one of Australia’s leading property market analyst groups.

Simon Pressley, founder and executive director of Propertyology, says politicians and voters should not lay the blame solely on negative gearing for the current lack of housing affordability, but understand the many factors at play.

“It just shows how little people know about the property markets,” says Mr Pressley. “To say that negative gearing is the reason for property markets being the way they are is ill-advised.”

Mr Pressley’s dislike of the Australian Labor Party’s (ALP) affordable housing policy is shared by executive director of Housing Industry Association’s (HIA) Victorian branch, Gil King.

The ALP’s policy says negative gearing, which provides tax saving to investors who pay more for maintaining their property than the annual income generated from it, would be allowed only for new properties and investments made before its implementation.

Mr King says that will not make a “huge difference” to housing affordability.

“Tinkering with things like negative gearing and the capital gains tax will shift the dynamic a little,” says Mr King. “[But] there’s no evidence that it will open up the market and reduce housing prices.”

“We [HIA] support negative gearing, but we do not support [opposition leader] Bill Shorten and the ALP’s stance on it,” says Mr King. “We believe that’s a dampener on investment.”

Prime Minister Malcolm Turnbull has announced there would be no changes to the Coalition’s current policy on housing and negative gearing.

Mr Pressley says this commitment was welcome and that any changes to negative gearing in the future as suggested by the ALP would be “outlandish”.

“The last thing we need is to experiment,” says Mr Pressley. “You couldn’t call it anything other than an experiment, and a bloody big one.”

Mr Pressley says negative gearing is needed as Australia had a legacy of not teaching people to invest, resulting in pensions becoming a massive liability on government budgets.

“Negative gearing is saying we want to encourage people to invest so they can look after themselves later in life rather than saying, I want the taxpayers to look after me,” says Mr Pressley.

He also said most property investors are everyday Australians who just want to have a go.

“Don’t have a crack at people who are trying to be responsible with their money so they don’t become a financial burden to society,” says Mr Pressley.

Mr King says political parties should instead be focused on removing taxation on housing currently amounting to 40 per cent of housing and land cost.

“It’s one of the most highly taxed sectors of any industry in Australia,” he says. “You remove that and [it] makes it more affordable.”

He also shares the Turnbull government’s view that “mum and dad investors” are vital to the housing market, and would “struggle” if negative gearing was scrapped.

“The reality is that mum and dads are a major part of the investment market,” says Mr King. “[But] if you remove negative gearing mum and dads won’t be able to afford getting an investment property.”

Mr King says ensuring everyday Australians are given the opportunity to invest in property is vital for maintaining a stable economy and housing market.

“Rich people will always be able to afford an investment property,” says Mr King. “[But] it’s the ability to attract the lower-income earners which makes negative gearing such a positive for the investment sector.”