Negative gearing is a positive taxation measure that helps encourage private investment in property for rental. It’s a good idea and should be retained.
ABS figures reveal that Melbourne is experienced an extraordinary population boom which resulted in the population increasing by 270,000 people between 2001 and 2006. The outcome of this was that the number of new households in Melbourne grew by over 86,000.
This demand for housing has resulted in a record high median house prices and a historically tight rental market. For over two years vacancy rates have remained below the three per cent level that REIV believes represents a balanced market.
It has been suggested that by removing negative gearing, affordable property owned by investors would be freed up for first home buyers and that with increased supply in this market sector, prices would fall. This is wishful thinking and any such movement would only be short-term, as the total amount of housing stock would remain constant, the number of dwellings for rent would decrease, and investors would be discouraged from building new homes, only exacerbating the current problems.
If negative gearing was removed, or restructured, it would drive investors out of the rental property market at a time when Melbourne needs additional, not fewer, rental properties.
With demographers forecasting Melbourne will overtake Sydney as Australia’s largest city by 2028 the rental situation is at crisis point. Incentives, not disincentives, are the fastest, fairest and most practical means of addressing this issue.
If interested in learning more about this update please contact me today!
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