The ALP recently announced further proposals for reining in the escalating price of real estate in Australia, and the eastern seaboard capital cities in particular. These proposals add to the changes to negative gearing and capital gains tax announced prior to the 2016 election, and introduce much higher fees for foreign property investors, and outright banning of borrowing for investment in real estate by self-managed super funds (SMSFs). There was also talk of “bond aggregators” for housing construction (meh), and the opening of a discussion with state governments about vacancy taxes on properties.
I’m not sold on the bond aggregator idea, but the rest of the proposal seems meritorious, and good on the Labor Party for getting ahead of the May budget with some concrete policy.
All that said, it’s no surprise whatsoever that the government have come out hard against these ideas. The Assistant Treasurer Michael Sukkar was quoted in The New Daily:
But Assistant Treasurer Michael Sukkar said Labor’s housing plan, including its policies around negative gearing, would actually make it harder for first home buyers to enter the market.
“We also know Labor’s tax will make it more difficult for renters,” he said.
“If you increase taxes on investment into the residential housing market, you ultimately push up rents.”
In a media release, Mr Sukkar said: “Labor’s attack on Self-Managed Super Funds shows they are once again reaching for the chainsaw.”
“Labor just don’t understand the need for finely tuned measures on housing,” he said.
He also accused the opposition of “plagiarising” the Turnbull government’s policy work on a social housing bond aggregator.
The outright case of the sooks about plagiarism can be safely ignored. The man is just being childish. But the rest of his argument about pushing up rents is simply rubbish, for one very simple reason. The renters and the prospective first home buyers are the same people. Virtually everyone trying to become a new owner occupier is currently renting a house or unit. Every property sold to a new owner-occupier reduces demand for rental property, so they largely even each other out. To put that another way, supply of rental properties may fall, but so will demand at roughly the same rate. The proposition that these changes, (and the negative gearing and capital gains tax changes announced previously), will push rent through the roof must be challenged. It’s a failure to appreciate the macro aspects of renting versus home owner-occupancy.