Changes ‘dropped into system that can’t deliver’

CHANGES to the capital gains tax discount and the removal of negative gearing for existing properties from July next year will decimate future rental supply and push rents even higher.

This is the view of the Property Investment Professionals of Australia, which also suggested prime minister Anthony Albanese has deceived about the reasons for breaking his election promise.

PIPA chair Cate Bakos said that, while existing investors were spared from changes to negative gearing, the reforms would torpedo future investor activity at the very moment Australia needs more rental housing, not less.

“The real issue is that these changes are being dropped into a system that already
can’t deliver homes at the speed or scale that Australia needs,” Bakos said.

“Productivity has stalled, labour is stretched, approvals are painfully slow and every
level of government has added significant costs to each new dwelling.

“When you add these CGT and negative-gearing changes on top, you don’t just slow
investment – you tighten an already constrained supply pipeline to breaking point,
which is the opposite of what the housing market needs right now.”

Bakos said the CGT changes were particularly concerning for rentvesters who planned to sell their investment property to purchase a home.

“For many young people, the long-term plan is to sell their investment and use the equity to buy their first home,” she said.

“With the CGT discount reduced, the tax bill they face becomes significantly larger, which is a direct penalty on the very cohort the government claims to be helping into home ownership.”

She said policymakers needed to recognise that rentvesting had become one of the only viable entry points for many younger Australians priced out of buying where they live.

“Undermining the financial viability of rentvesting doesn’t just effect investors, it effects future homeowners,” Bakos said.

“The CGT tax increase will shut down one of the few remaining pathways young Australians had to get a foothold in the market via rentvesting.

“Serviceability will also be significantly impacted given younger investors will not be able to offset losses until the asset is sold or it is positively geared, which generally takes up to a decade of ownership.”

Bakos also questioned the prime minister’s justification for breaking a key election promise.

“The prime minister said he broke his promise because young people were ‘giving up’ on home ownership, but the official data tells a very different story,” she said.

“According to the latest lending indicators from the Australian Bureau of Statistics, new first-home buyer loan commitments increased 9.1 per cent in the year to December.

“In fact, the number of new first-home buyer loan commitments in the December quarter was the highest in more than a decade – outside of the HomeBuilder-driven spike during the pandemic.

“This is the opposite of young people giving up on home ownership and shows that the prime minister has been untruthful with voters to push through these policies at the worst possible time for renters.”