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REIA: Renters Forgotten Victims of Negative Gearing Reforms

Changes to negative gearing policy would drive up rents and affect the most vulnerable people in the community, according to the Real Estate Institute of Australia (REIA).

REIA president Malcolm Gunning said political gamesmanship had seen the plight of first homebuyers, low-income earners and other renters forgotten in the debate around reforms to negative gearing.

“One of the primary beneficiaries of negative gearing are renters because it is proven to increase supply. Any changes made would have serious flow on effects,” Gunning said in a statement on Monday.

“The rate of increase in rents has plummeted since investment in housing started to pick up at the end of 2011. For Australia, rents rose by 0.7 percent for the year ending September 2016 which is the lowest annual increase since March 1995.

REIA president Malcolm Gunning.

In Sydney, the increase was 2.5 percent and in Melbourne 1.4 percent. Changes to negative gearing would see less rental properties, which would cause rents to go up.

“This could cause a dire situation for young people who are already renting for longer due to higher house prices. This creates a vicious cycle where higher rents mean fewer savings for their deposit, exacerbating the housing affordability crisis.

“The reality is that negative gearing is not an exclusive concession for the property. It is a legitimate deduction of expenses in the course of earning income from investment in all asset classes until the investment generates a positive revenue stream in the future.

“There is already pressure on investors looking at real estate with changes to APRA’s borrowing guidelines and average yields falling to another all-time low of 3.2 percent in February, some full percentage point lower than the 4.2 percent recorded five years ago by CoreLogic.

“Our latest Adelaide Bank/REIA housing affordability report, due to be released on Wednesday will support our ongoing stance on no changes to negative gearing policy as outlined in our 2017/2018 Pre-Budget submission, with rental affordability showing a trend improvement since mid-2012,” Gunning said.


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June Ramli

June Ramli was a in-house journalist for Elite Agent Magazine.