As seen in The West Real Estate
The negative gearing debate has reared its ugly head again, with Prime Minister Anthony Albanese failing to explicitly rule out changes as an election policy.
The threat of changes to negative gearing always hangs like the sword of Damocles over rental property owners - the very same owners that governments rely on to supply the rental market – and they fear one day the hair that sword hangs by will break.
I often wonder why the various political parties constantly want to make investing harder. Investors provide an important service that governments cannot.
In WA they supply about 85 per cent of our private rental stock, without them where would the market be? That’s a rhetorical question, we have clearly seen in recent years where the market would be without investors.
Close to 20,000 rental properties were removed from the rental market following the COVID rental moratoriums and we’re still dealing with the effects, with the rents rising to record highs and vacancy rates falling to record lows.This has been challenging for most renters, but even more so for the more vulnerable in our society, with many becoming homeless.
Investors aren’t just sensitive to legislative change, the threat of change could spook them into selling. That property may not be bought by another investor, it’s very likely it will be bought by an owner occupier, which we have also seen. While people like to invest in bricks and mortar, we need to remember that capital is mobile and investors can and will take their money elsewhere. Some people say that’s not a problem, if investors sold there would be more homes for people to buy and prices would fall, but that is naïve.
Firstly, these homes wouldn’t all hit the market at the same time resulting in a sudden boost to supply. Secondly there is enough demand out there at the moment to meet an increase to supply. Perhaps prices would moderate, but we couldn’t expect a massive drop. We certainly didn’t see that happen when all those rental properties came to the market after the COVID moratoriums. We also need to be practical and remember that not everyone can purchase a home and not everyone wants to.
For example, if you are teacher in a regional area, you might not want to buy a home that you may sell in a few years to move elsewhere, it’s not cost effective. Some people prefer to rent in the area where they want to live but cannot afford to buy. They might rent-vest and purchase an investment elsewhere that provides a home for someone else.So, until they can provide an alternative to private investment, governments need to ensure the legislative environment encourages and supports investors.
Joe White
REIWA President
REIWA President
