Labor's proposed changes to negative gearing bad news for Canberra: property experts

Canberra’s property experts fear restricting negative gearing to newly constructed homes will distort the capital’s housing market and force first home buyers and renters to the city’s fringes.

Under Labor’s election policy announced on Saturday negative gearing would only apply to newly constructed homes – a move Opposition Leader Bill Shorten says will save $32 billion over a decade and “level the playing field for first-home buyers” competing with investors.

Real Estate Institute ACT director Craig Bright feared the policy would see first home buyers compete more fiercely with investors for more affordable homes in Canberra’s outer suburbs.

“I can’t see how it’s going to help first home buyers,” he said.

“If you abolish negative gearing on established properties obviously investors will start moving towards newer suburbs to get that tax advantage.

“It will throw the market out of equilibrium because the stock will continue to dwindle in those areas.”

Mr Bright said this scenario would push rental costs up and force renters further away from the city where there was less infrastructure, facilities and public transport.

Labor’s proposal also includes cutting capital gains concessions from 50 per cent to 25 per cent.

The Australian Property Council fears increased taxes on housing as a result of the policy could turn investors away, drying up supply.

ACT Property Council acting executive director Mary Wood said 46,800 Canberrans owned an investment property, including 30,700 who used negative gearing. 

She said most investors earned less than $80,000 a year.

“These are not rich people, they are just working Australians saving for the future and hoping to have income in addition to superannuation when they retire,” she said.

Master Builders ACT executive director Kirk Coningham said the policy would distort the housing market.

“There’s obviously an upside for the construction industry but quite clearly this is not the answer,” he said.

“As a fundamental principle it’s not a good tax because it distorts the market: it treats one house quite differently from the next.”

Mr Kirk said the major issue affecting housing affordability in the ACT was land supply rather than the age of houses available.

He said the proposed change to negative gearing lacked key details.

“This policy isn’t clear on knock-down rebuilds, how much of the house is going to go before it can become negatively geared, how long do you have to live in it before it becomes an old house.”

Treasurer Scott Morrison is understood to to be considering changes to negative gearing and superannuation tax breaks.