Negative Gearing Changes?
Treasurer sets scene for the Budget by defending ‘mum and dad’ investors and negative gearing as vital for housing affordability
Negative gearing “is an established and structural component of Australia's housing markets” which could not be removed “without a cost”, according to Treasurer Scott Morrison.
In a speech to the Australia Housing and Urban Research institute, Morrison claimed negative gearing played an important role in housing affordability: “you cannot make the reckless 'trust us' assumption, as the Labor Party have done, that making significant changes to negative gearing would not have a negative impact on rents and the availability of rental stock.”
In February the value of owner-occupier and investor lending fell, by 0.5% and 5.9% respectively, according to the ABS
Morrison also explicitly defended mum-and-dad property investors: “mums and dad investors are putting a roof over the head of around a quarter of all renting households in this country. Keeping them in our private rental market is important for ongoing rental supply.” He compared Australia to the UK, which does not have negative gearing, and rent on average costs 26% of income, compared to 20% in Australia.
Coming two weeks after APRA tightened policies on lending to investors and a month before the 2017-18 Budget, Morrison’s speech gives property investors and brokers reasons for reassurance.
Whilst accepting home ownership in Australia was falling, Morrison said housing affordability was more of a problem for renters and that the government and developers should work together to provide affordable rental housing. Rejecting Labor’s ban on negative gearing, Morrison argued that institutions, such as hedge funds, should be encouraged to go into housing to “diversify the base of ownership and inoculate risk”.
Morrison’s speech moved the conversation away from first home buyers and house prices and onto rental markets, adding that: “it is a statement of the obvious that you can't help first homebuyers save for a deposit by implementing policies that increase their rent.” Furthermore new figures from the Australian Bureau of Statistics that showed a 5.9% decrease in the value of investor loans in February – possibly driven by APRA’s recent restrictions – taking pressure off the Government to tackle house prices as a systemic economic risk.
Morrison will unveil the 2017-18 Budget on Tuesday 9 May in Canberra.