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Is there a blunder in Labor's negative gearing model?

Houses and Chris Bowen

Property experts are questioning the modelling of Labor's negative gearing policy, as new data suggests the breakdown of purchases for new and existing properties are far removed from the figures the policy is centred on. 

The policy

If elected, the Labor Party will limit negative gearing to new housing from 1 January 2020.

Further, the Labor Party plans to halve the capital gains discount for all assets purchased after the same date. In effect, this will reduce the capital gains tax discount for assets that are held longer than 12 months from 50 per cent to 25 per cent.

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On both measures, all changes will be grandfathered, which means they won’t apply retrospectively.

You can read about the policy in more detail here. 

The questions

Labor’s policy fails to include off-the-plan and house-and-land packages in its estimation that more than 90 per cent of new investment loans are to people purchasing existing housing stock, according to the Property Investors Council of Australia's chair, Ben Kingsley.

"Australia’s biggest aggregator, AFG – with over 2,900 mortgage brokers – confirmed its mortgage application data for new investment purchases vs existing property was 43 per cent new and 57 per cent existing,” he said.

“This seriously puts into question Labor’s logic in crafting the policy and absolutely challenges their revenue assumptions.”

The implications

Mr Kingsley added that Labor’s taxation policies could potentially alter the property market significantly, so their policies must be reliant on accurate data.

“We need to address this immediately, as it is very much in the interest of the 10 million plus property owners that are going to see the values of their property fall to pieces across Australia.”

Is there a blunder in Labor's negative gearing model?
Houses and Chris Bowen
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