Over the weekend, the Australian Labor Party appeared to commit harikiri. I mean, they clearly don’t want to be voted into power.
That’s the only conclusion I can come to after reading Bill Shorten’s announcement on Saturday. How else can you explain the proposed introduction of a housing policy that will seriously piss off almost every single Aussie?
If you’re one of the one million-plus people who own an investment property, their proposed changes to negative gearing have the power to immediately impact your wealth.
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If you’re one of the 30% of all Australian households who rent, this also has the power to impact your wealth.
Even if you just happen to own your own home, this policy will impact your financial position.
Why? Because, in short, Labor is planning to exclude existing homes from negative gearing benefits and make this tax strategy available only to new properties.
That means that come July 2017, if you’re an investor and you want to buy a property, you’ll have to purchase a brand new home in order to get negative gearing benefits.
Buy an existing home and you’ll need to pay all the costs of ownership without a tax break. Now, how do you think landlords will respond in this instance? Will they absorb the several thousands of dollars they’ll be out of pocket? Or pass that increase on to their tenants in the form of a rental increase?
If Labor is elected into power and this goes ahead, the policy would apply from July 2017 and it would ‘grandfather’ existing investments, so those who already negatively gear their properties won’t be affected.
But it doesn’t take a genius to figure out that investors will favour new homes over established homes after that date. Therefore, anyone selling their property after July next year will have a tough time, because investor interest will dry up overnight.
While Labor claims the policy would create 25,000 construction jobs a year thanks to the increase in demand for housing, Treasurer Scott Morrison has argued that it’s a “silly idea”, which will ultimately force new housing prices up for first homebuyers.
“Investors accessing negative gearing will now have only one option in the housing market, and if you’re a first home buyer looking to buy a new home, you’ll be competing with all of them,” he says.
“Supply would have to respond to any surge in prices but this could take years, given the delays in our planning and approvals systems. As a result, prices and rents would rise.”
For once, Mr Morrison, I wholeheartedly agree. It’s a stupid idea with stupidly serious consequences. If only stupid people couldn’t vote…
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