Home News Labor’s negative gearing policy can make rents rise and house prices fall

Labor’s negative gearing policy can make rents rise and house prices fall

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An independent analysis done by SQM Research mulled over the best and worst-case scenarios that could happen when Labor’s proposal to limit negative gearing is implemented. At best, it could lead to a combined four per cent house price fall over 2018, 2019, and 2020, provided the RBA compensates with a half-rate cut. At worst, property prices could fall up to 15 per cent and rents could rise by six per cent if the RBA does not cut rates.

“While we take the view that negative gearing reform is a good thing, such reform should be done as part of a wider property tax reform that should include a broad-based land tax and the elimination of stamp duties,” said SQM Research managing director Louis Christopher. “More affordable equals low property prices.”

Meanwhile, treasurer Scott Morrison highlighted a separate Adept Economics report that states that the value of homes will go down by four per cent on average. “These sorts of figures have been dismissed by the Labor party and other commentators.”

Prime Minister Malcolm Turnbull is likewise vehemently opposed to Labor’s negative gearing policy, saying in his campaign in Darwin, “What Labor is proposing with negative gearing has got nothing to do with housing affordability. What Labor is doing is imposing a massive restriction on economic freedom by banning negative gearing in a way that will drive down house values and drive up rents.”

A previous report from BIS Shrapnel also showed that negative gearing changes could make rents rise up by 10 per cent and property prices fall by six per cent.

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