Labor's controversial negative gearing policy continues to be scrutinised by the real estate sector, with REIA President Adrian Kelly and Ray White Managing Director Dan White throwing their support behind new research from SQM showing rents could spike under the plan.
Prominent members of Australia's real estate community have come out in support of new research detailing the potential impact of Labor's negative gearing policy.
Opposition Leader Bill Shorten's plan to reform negative gearing if elected in this year's federal election has come under fresh scrutiny from property investment research house SQM Research, which released the report Labor's Negative Gearing Policy - A Market Update this week.
SQM Research managing director Louis Christopher predicts the best-case scenario will see housing prices ease by 4-8 per cent over a three-year period from 2020 to 2022, assuming an interest-rate cut of 50 basis points by next January.
The report also forecasts market rents to jump between 7 per cent to 12 per cent from 2020 to 2022, assuming the same 50 basis points interest rate cut.
REIA President Adrian Kelly said the report was a "valuable contribution" to the public debate.
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“The analysis in the report provides evidence of the impacts of the policy, identifies the losers and the extent of their losses," he said.
“The losers are mum and dad investors, homeowners, renters, the construction industry, state governments and the economy.
Ray White Group managing director Dan White. Source: Ray White
“An additional drop in house prices over and above the current declines of between 5 per cent to 12 per cent on a weighted average for the capital cities for 2020 to 2022, ranging from a drop in Sydney of between 9 per cent and 14 per cent to up to 2 per cent in Adelaide.”
Mr Kelly said rents are expected to increase by between 8 per cent and 15 per cent on a weighted average for the capital cities for 2020 to 2022, ranging from an increase in Brisbane of between 13 per cent and 22 per cent to up to 4 per cent in Darwin.
“This is in contrast to the current situation where we have the lowest annual increase in rents for two decades,” Mr Kelly said.
“Housing construction activity will fall over and above the existing declines that have occurred. SQM Research forecasts the fall in housing construction activity will amount to a 25 per cent to 30 per cent decline from 2019 levels which will have employment and GDP impacts.
“Property sales turnover is forecast to fall by a further 12 per cent to 15 per cent with most of the declines in sales to occur in 2021 resulting in a drop in state stamp duty revenue of approximately $2.3 billion – money which could be spent on schools, hospitals and roads.
“There are no winners. Even first home buyers will face a faltering economy with lower employment prospects.”
Ray White Group managing director Dan White also welcomed the SQM report and said it confirmed anecdotal evidence from the last time negative gearing was changed in 1985 by the Hawke Labor Government.
“Many of our members, and my own family, witnessed the disastrous impact of radical changes to negative gearing in 1985," he said.
"Since Chris Bowen first introduced Labor’s negative gearing policy at the last election, there has already been a significant correction in many of the country’s key property markets.
“It’s difficult to understand why anyone would seek to add additional pressure to an already softened market."
Click here to read the full report.
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