NEW MOVES AGAINST NEGATIVE GEARING BUT THEY OVERLOOK SIMPLE SOLUTIONS
Rob Stokes the NSW Planning Minister broke ranks with the Government’s policy of supporting Negative Gearing in a speech to the Committee for Economic Development on 24 November. He said the government should not be giving such big tax concessions to a small part of the market but instead should focus on the housing affordability crisis in Sydney.
These same arguments come up at regular intervals only to get knocked down until next time so this latest attack is nothing new. Mr Stokes, however, was concentrating particularly on the Sydney housing market which everyone knows has a huge affordability crisis for new home owners.
His arguments are too parochial because they focus on Sydney which has a particular Sydney problem of unaffordability. He prescribes a remedy of curtailing Negative Gearing to the whole nation even though the whole nation arguably does not have an unaffordability problem.
True, the three major population bases in the eastern states are becoming unaffordable for first home buyers but it’s about time that policy makers realised the rest of Australia might not be in the same boat. Losing Negative Gearing in South Australia would hinder our investor market whilst hardly affecting affordability for home buyers.
Getting rid of Negative Gearing would also lead to a rise in rents as investors try to recoup losses from their tenants.
HERE’S A POSSIBLE SOLUTION
If the government were serious about helping first home buyers they might consider giving first home buyers a progressive refund of Stamp Duty over the first 12 months of ownership. Refunding the amount of stamp duty in 12 equal monthly portions would directly assist in making repayments.
The problem with the current crop of First Home Buyer Grants is that they contribute to rising house prices. These grants put more money into the hands of buyers that they simply use to buy more expensive houses.
What they may not realise is that the house they bought was probably cheaper just before the government announced the availability of the grant. Prices spike most noticeably as the grant is about to be withdrawn as buyers rush out to buy anything before the deadline. Real Estate agents and owners realise they have a captive market and take advantage of these desperate people by pushing prices up.
If governments were worried about the loss of stamp duty revenue repaid to First Home Buyers they could increase it for investors, it would be minimal but not insignificant. They could then remove or largely reduce Land Tax for multiple investment properties for up to three investment properties as compensation.
This would have the effect of increasing first home ownership and bring more rental properties onto the market which will in turn assist more people to supplement their retirement income. The increased home purchases would have the net effect of increasing stamp duty revenue and so the scheme could be fine-tuned to give the best result for all.
Tell us what you think.