Crunch time for election property promises for first home buyers
QUEENSLAND’S peak real estate body has come out swinging ahead of Aussie’s going to the polls this weekend, and has wielded a giant auction-style gavel at Labor’s property policies.
The Real Estate Institute of Queensland has warned that Labor’s negative gearing and capital gains tax changes will have a devastating effect on the property market, with buyers, sellers and renters alike predicted to feel the burn.
“This is how Labor is hoping to help first-home buyers (by reforming negative gearing and capital gains tax), by decimating the rental sector with a ham-fisted blunt swing at the market,” REIQ CEO Antonia Mercorella said.
“They want to limit private investors so that first home buyers, theoretically, can buy without competition.
“Our concern is that limiting the number of investors in the market will decimate the rental market, pushing up rents and driving down the level of supply.
“More than 34 per cent of Queenslanders rent their home, among the highest levels of the most populous states.
“Our market relies on a steady supply of investors providing rental accommodation for our rental population and Labor’s proposed reforms will diminish that crucial activity.”
But REIQ has thrown its weight behind the Coalition’s plan to help first home buyers get a leg up on the real estate rungs, a policy matched by Labor within hours of it being announced.
“We need positive policies that help the target group and don’t wreak wholesale damage on the entire property market and the broader community, as Labor’s proposed negative gearing reforms will do,” Ms Mercorella said.
“The Liberal Party initiative offers help in a meaningful way to those seeking to get their foot in the door of their first home and doesn’t cause detriment to other sectors of the market.
“This is a policy that was drafted with the many moving parts of the property market in mind.”
Under the plan, The First Home Loan Deposit Scheme will allow new buyers to purchase a home with a deposit of just 5 per cent, and will based on a similar scheme operating in New Zealand.
It will mean first home buyers won’t need to save for a full 20 per cent deposit, and will save those buyers around $10,000 in Lenders Mortgage Insurance.
The Westpac Home Ownership Report, released in November last year, revealed that 62 per cent of first home buyers were more optimistic about getting a foot on the property market in the wake of the drop in house values, particularly in Sydney and Melbourne.
But saving enough money for a deposit and the upfront costs remained a significant barrier, the report found.
In Queensland, first home buyers can access the $15,000 Queensland First Home Buyers Grant, a state initiative, but can only buy a brand new property under $750,000.
If elected, federal Labor plans to limit negative gearing to new properties only after January 1, 2020. Capital gains tax discounts would also drop from 50 per cent to 25 per cent.
Properties purchased before January 2020 will be grandfathered, with Labor claiming that the changes will help more first home buyers get in to the market by levelling out the playing field.
But opponents of the plan have different views.
Ms Mercorella warned that the rental market and the sales market did not operate independently of each other, saying the biggest threat to the health of Queensland’s housing market was the proposed negative gearing reforms.
She pointed to modelling by SQM Research, which suggested that Labor’s negative gearing reforms would devalue people’s homes, driving down the value of their biggest asset.
In his recent column, Brisbane auctioneer Haesley Cush also questioned the rationale behind the proposed reforms.
He said he too believed that property values would drop due to there being fewer investors in the market, meaning less competition and ultimately a downward pressure on prices.
Brisbane real estate agent Jack Dixon of Dixon Family Estate Agents has taken it a step further, saying that the reforms would create a new chasm between the haves and have nots.
“The system would differentiate between virtually identical properties owned by different people and give some a distinct advantage over others only virtue of a point in time,” he said.
“Labor spokespeople often remind us a ‘privileged’ baby boomer generation saw huge capital growth and enjoyed generous tax concessions, while Millennials have no such advantages. “Commentators say such rhetoric fuels intergenerational conflict. Yet, here is the Labor Party with a policy that will impose new taxes on Millennials, who won’t be offered incentives to save and build wealth through real estate while, at the same time, locking in generous tax deductions for Baby Boomers.”
Another consequence of the reforms would likely come after millenials come to sell those properties purchased after the 2020 cut-off, Mr Dixon said.
“They’ll be in for a rude shock when they realise they have to discount the price to compete with new stock entering the market,” he said.
“After all, the next wave of investors will want to negatively gear too.”
Mr Dixon said the elimination of negative gearing could be a productive move for the broader economy, but only if it was equal to all.
“All Australians must be treated equally under the taxation system,” he said.
“Those who seek to lead Australia always seem hell bent on making things complex and complicated.”