Property Investors Beware: You Won’t Believe What the Greens Are Proposing for Negative Gearing!

Are we about to make it even harder for Australians to own a home?

Just when you thought the path to homeownership couldn’t get any tougher, a new proposal from the Greens Party threatens to push that dream even further out of reach for many Australians.

Note: The proposed changes to Negative Gearing won't boost home ownership rates!

In a recent proposal, Adam Bandt, leader of the Greens, announced plans to reform negative gearing and the capital gains tax discount as part of their platform in the upcoming election.

The Greens argue that these changes will help address housing affordability and make home ownership more accessible for Australians.

However, this perspective overlooks critical aspects of Australia’s housing market dynamics.

What the Greens Propose

According to the Greens, the current policies surrounding negative gearing and capital gains tax discounts disproportionately benefit wealthier Australians and investors, contributing to escalating house prices.

Greens leader Adam Bandt says Anthony Albanese will have to ‘play well’ with others in a hung parliament, as he pushes his party’s hard-left wishlist.

Primary places of residence will not be subjected to CGT under the Greens plan and a single investment property will also remain covered by negative gearing arrangements and the 50 per cent CGT discount.

“Our proposal is a serious attempt to restore everyone’s economic rights, giving younger generations and renters a chance at home ownership while protecting ‘mum and dad’ investors,” Mr Bandt said.

Their proposed reforms are supposedly going to make it easier for first-home buyers to enter the market.

By limiting negative gearing to new housing stock only and halving the capital gains tax discount, the Greens believe they can temper speculative investing and reduce competition for available homes.

The Flaw in the Plan

While on the surface, these reforms might seem beneficial for boosting home ownership rates, the reality is more complex.

In my mind, these changes could actually hinder efforts to meet national housing targets rather than help them.

Supply, Not Negative Gearing, Is the Issue

Mike Zorbas, Chief Executive of the Property Council, argues that the focus needs to shift towards policies that directly impact housing supply and market confidence.

We are currently experiencing a housing crisis, one that requires an increase in home construction to bridge the gap between supply and demand.

Tampering with negative gearing, Zorbas explains, would likely decrease the supply of new homes instead of increasing it, as it could deter investors from funding new housing projects.

The Real Distraction

Changing negative gearing is essentially a distraction from more pressing issues that directly influence housing affordability and availability.

These include labor shortages, high construction costs, and a convoluted tax system that together contribute more than 30% to the cost of a new home.

Without addressing these foundational problems, simply adjusting negative gearing and capital gains tax discounts might do little more than unsettle the market.

Investment Certainty and Housing Policy

Investors, both individual and institutional, seek stability and certainty.

The proposed changes threaten this stability, potentially leading to a reduced interest in housing investments at a time when boosting supply is crucial.

The need for comprehensive housing policy reform that tackles all facets of the issue—from planning and zoning to taxation and infrastructure—is more critical than ever.

Conclusion

While the intentions behind the Greens' proposed changes to negative gearing and capital gains tax are aligned with making housing more affordable, the strategy misses the mark by not addressing the root cause of the crisis—insufficient housing supply.

Effective solutions should enhance the construction of new homes and improve the efficiency of the housing market, not just reshuffle taxation policies.

Only by implementing a broad spectrum of reforms will we see a true increase in homeownership rates and a resolution to the housing affordability crisis.

About Adam Hubbard Adam Hubbard is a senior Wealth Strategist at Metropole and his many years of real estate and wealth creation experience gives him a holistic perspective with which he helps his clients safely grow their wealth through property.