The Property Council of Australia says noting reports of the Federal Government’s modelling via Treasury on the impact of any changes to negative gearing and capital gains tax, the supply of new homes would likely shrink.
As recently as 17 September 2024, Prime Minister Anthony Albanese stated that the key to solving Australia’s housing crisis is to increase supply, “every economist knows that’s the case”.
The Prime Minister referenced past Property Council analysis through Deloitte and acknowledged that any changes to negative gearing and capital gains tax “could potentially have a negative impact on [housing] supply “and that changing the current negative gearing regime “won’t boost supply”.
Australia is already tracking 300,000 homes short of the Federal Government’s own welcome 2029 target of 1.2 million new homes, despite a number of positive policy initiatives.
Current housing headwinds include high cost and hurdles of financing, years of rising material and labour inputs matched by decreasing construction productivity, low market capacity, labour market competition from historically large infrastructure builds and green/energy infrastructure construction, planning delays, looming ACCC acquisitions red tape, sluggish environmental and cultural approvals and ever-changing and disruptive state property taxes among other negatives.
Property Council Chief Executive Mike Zorbas said new housing supply is the main game.
“We have a huge housing gap across Australia and when modelled negative gearing changes widen that gap,” Mr Zorbas said.
“Previous Deloitte modelling shows negative gearing changes shrink the number of new homes by about 4 per cent and, according to previous work by the Grattan Institute, only reduce house prices by 2 per cent.
“Even if negative gearing changes didn’t model as poorly as they do for housing supply, why would you change now? We are already only building 160,000 homes against the 240,000 homes we need each year and housing supply conditions in states like Victoria are dire.
“Government taxes and charges are 30 per cent of the cost of your new home across the country. Let’s start by reducing government taxes and reforming planning systems to boost supply and avoid prioritising a discussion about a change that models as damaging investment in new homes across every Australian city and town,” he said.
2019 Deloitte research commissioned by the Property Council showed changes to negative gearing of the kind taken to the 2019 election would cause a 4.1 per cent hit on the already dwindling pipeline of new homes. Those changes would also be a $1.5bn hit to GDP and will cost 7,800 jobs.