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Investors cautioned on imminent property purchases

Property investors relying on the current negative gearing rules to remain in place have been told to refrain from making property purchases until after the federal election.

Speaking to nestegg.com.au, Nyko Property director Bill Nikolouzakis said if investors are considering the purchase of an existing property and were relying on negative gearing, they should delay the purchase until the election is over and they know exactly what is happening on the policy front in relation to negative gearing and the changes to capital gains tax.

“Certainly for existing properties, if [the investor] thought it would be a deal breaker for them and they wouldn’t buy with the changes, then I would certainly wait,” said Mr Nikolouzakis.

“If they are thinking about buying a new property, then none of the changes that Labor is putting in are an immediate issue. Of course, CGT will be at some point, when they go to sell, but as long as they’re comfortable with that happening at some point, then I wouldn’t wait.”

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Mr Nikolouzakis said a lot of investors in Australia rely heavily on negative gearing, particularly to assist them with cash flow following the purchase of a new property.

“A lot of investors come to us and the number one reason they want to invest in property is because of tax, which is obviously not the reason why we invest and the reason why we recommend people to invest, but a lot of people have that at front of mind,” he said.

“[It] is the most effective way to reduce tax in Australia and also create some wealth, so I think negative gearing is very important to the average investor in Australia, especially for higher-income earners who get the greater benefit from the negative gearing.”

He also noted that a lot of lower-income earners who are buying negatively geared property are relying on the negative gearing benefit to cash flow their investment.

Investors cautioned on imminent property purchases
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