Property market information: What's going on with negative gearing?

By the resi financial blog team, 23 April 2015

Property market information: What's going on with negative gearing?

There are a lot of ways you can go about saving for retirement. You might put away your pennies religiously or invest in a few shares here and there but, in recent times, one of the most popular ways for everyday Australians to grow their wealth has been property investment - and not without a bit of discussion. Lending to investors has been on the climb, with low interest rates and soaring house prices encouraging many to purchase a rental. 

The Australian Council of Social Services (ACOSS) threw a spanner in the works with its report on negative gearing. The whitepaper proposed that the government should limit the popular tax break, suggesting that is one of the big drivers behind unaffordable housing across the country - and only wealthy investors reap the rewards. 

However, while debate is likely to rage on, the Prime Minister Tony Abbott has closed the door on any changes to tax deductions and discount on capital gains in this government's term.

It's proven a divisive topic. The Housing Industry Association (HIA) rebuked the ACOSS claims in an April 17 statement, pointing out that it allows everyday Australians to take their first step into the property market. It also highlights that everyday investors make up the bulk those who negatively gear, not just the top 10 per cent. 

"Negative gearing promotes private investment in the rental market, thus stimulating economic activity and taking the pressure off social housing and the public purse," said Graham Wolfe, HIA's Executive Director of Industry Policy and Media.

The Property Council of Australia have also weighed in on the issue. In an April 17 statement, Executive Director of Residential Nick Proud said negative gearing is an important link in boosting the supply of new homes, as it unlocks the finance to allow people to invest. 

"New housing supply needs capital to get off the ground, and investors (both foreign and domestic) as well as owner occupiers are a critical source of that capital," Mr Proud said. 

Whatever side you fall on this discussion, you can talk to a resi loan specialist about the selection of investment finance that could suit your strategy. 

Categories: Property Investment