Negative gearing: Don't panic, it is here to stay
- Written by Greg Rogers
Melbourne 23 February 2016. The Prime Minister, Malcolm Turnbull, in answer to a question from Labor, told the House of Representatives that negative gearing will remain.
Mr Turnbull said that nationwide, the percentage of property buyers who are in the real estate market as a part of a tax reduction strategy, was 35%. The PM went on to say that in Melbourne and Sydney, the percentage of negative gearing purchasers was even higher.
The government's Ministers know that the property market is the prime driver of personal wealth in this country. The coalition government will not follow Labor's idea of altering negative gearing to only cover new property, as that would effectively take 35% of the buyers out of the market.
Mr Turnbull said that he was aware of how important the family home was to the financial security of many Australians and that the consequence of Labor's policy of excluding existing property, would be to drive down the price of existing houses. Mr Turnbull said that taking negative gearing from existing homes would drive down prices and that his government will not do anything to affect the demand for residential property.
Labor's current strategy is to appear to be the driver and leader in monetary policy and it uses Chris Bowen to deliver the spin that only Labor has a financial plan. Slick speeches for media grabs are getting attention. Labor is getting media coverage as opposition parties do prior to every new Budget and that extra coverage is scaring the property market. Buyers, builders and real estate agents are afraid of Labor's plan to change negative gearing. The Labor property proposal is only getting traction this month as the government is preparing for its budget and is unable to release policies until then.
The Shorten opposition is attempting to present Labor as a viable government and Shorten as a presidential style leader with video grabs of his wife by his side in media opportunities. Labor is aware that Shorten is popular and public perceptions of his character, as a result of reports by the Trade Union Royal Commission, and is trying to rebrand itself as financially competent. Scaring the public with proposals to change negative gearing is a way to get attention from the media: and it is working in the temporary policy vacuum leading up to the Budget due to be released in May.
Labor learned a valuable lesson when it eliminated negative gearing in the 1990's with disastrous results. Shorten, deeply perceived as incompetent at best, will not destroy his chances of election by following through on changes to negative gearing. Scary policy announcements are a part of Labor trying to rehabilitate Shorten's image by getting media coverage for "thought bubbles".
The property industry is currently the driver of the Australian economy and the industry is concerned that every day wage and salary earners are being frightened off by Shorten and Labor's policies towards negative gearing.
Jeff Grochowski, a Melbourne property expert and licensed real estate agent, said yesterday, in a media conference, "Negative gearing will remain in some form. It is too important for the economy to be eliminated."
The message that Jeff wanted to convey is that even if there were changes to negative gearing, the alterations would not be retrospective.
"Buyers can look at reducing their tax with an investment property under the current rules before the federal Budget with confidence that the Prime Minister will not make changes that will harm the property market."
"Australia's immigration policy is bringing record numbers of new residents to Melbourne and property investors will be the people who provide their homes."
