REIA response to Renovating Housing Policy

logoFollowing on from my post this week regarding the Grattan Institute Report on housing policy it’s not surprising that the Real Estate Institute of Australia (REIA) has responded quickly to the recommendations in the report. Published this week on the Your Investment Property website is the following article outlining the response from the REIA. Once again it’s always fascinating to see the debate it stirs up in the comments posted after the article. You can access the original article here, or, read below.

Hands Off Negative Gearing, Warns REIA

A report issued earlier this week slamming government housing policies has provoked a strong reaction from the Real Estate Institute of Australia (REIA), which said a recommendation to scrap negative gearing is ‘short-sighted’.

The REIA said it agrees with the Grattan Institute Renovating Housing Policy report in that a major overhaul of housing policy in Australia is needed, but disagreed with what needs to be done.

“We strongly agree with the report’s recommendations to eliminate stamp duties, however it’s essential negative gearing be retained in its current form for the purpose of property investment,” said REIA president Peter Bushby

“REIA has always supported negative gearing because it helps in the provision of rental accommodation. Negative gearing for property investment is complementary to the goals of the Government’s Housing Affordability Fund (HAF) in addressing the supply of rental accommodation.”

Bushby said removing negative gearing would show that Australians ‘haven’t learnt anything from history’.

“When negative gearing was abolished in 1985 it had disastrous consequences for the property market and for people trying to rent. Rents rose 37% across Australia and by 57% in Sydney.

“Thankfully, negative gearing was reinstated in 1987. It is far too short-sighted to link investor interest in housing to negative gearing alone. Negative gearing is only one of a range of factors that contribute to the level of investment in property. Other factors include interest rates, availability and accessibility of finance, share market performance, the unemployment rate, housing supply and consumer confidence.”

Bushby said the ‘myth’ that negative gearing is a plaything of the well-heeled also needs to be dispelled. He claims the majority of taxpayers with negatively geared property earn less than $80,000 per annum.

“Findings in the Renovating Housing Policy report are important and let’s hope they assist in kick-starting a debate on housing policy. With the new government, expectations that industry will be involved in finding workable solutions to these old issues are high.”

http://www.yourinvestmentpropertymag.com.au/article/hands-off-negative-gearing-warns-reia-180767.aspx

Renovating Housing Policy

mza_8623053361525323846.170x170-75The Grattan Institute was formed in 2008 as an ‘independent think tank’ intended to develop public policy for Australia. This week there has been a lot of media commentary about a publication by the institute addressing housing policy in Australia. Renovating Housing Policy was published on October 20th and states:

This report looks at our complex housing system as a whole. By quantifying the major government outlays on the private housing system, it reveals the cumulative impact of housing policies both on individual choices of where and how to live, and on productivity and inequality in our cities.

The initial part of the report examines some fascinating trends and demographics related to home ownership in Australia, there is interesting data presented on the change in home ownership rates over the last 100 years as well as examination of current ownership rates by age as well as earnings. It then continues on to look at renting in Australia and it is from here that the information presented starts to become increasingly relevant to property investors. There is also significant focus within the report looking at the different government support provided to property owners versus those who rent a home. The report states that support for residential property investors costs $6.8 billion a year,or about $4,500 per year for each investor household. If you want to skip to the really interesting part though I’d suggest heading straight to page 36 where the recommendations commence. There are three main recommendations looking at stamp duty and property tax, reform of tax incentives for property investment and also reform of the private rental sector.

Whilst I certainly don’t agree with all of the proposals there appears to be some strong evidence available to support the statements being put forward. What I have found interesting is the way that it has been portrayed in a range of media and particularly the comments that have been posted by readers. I’d be eager to hear people’s thoughts on this as it would have a significant impact on property investors should these recommendations be put into practice. Don’t be afraid to comment below! Click here to read the article.

You can also check out some of the following media articles, don’t forget to check the reader’s comments, it’s certainly stirred up some debate!

The Age property section – Domain

ABC News

The Herald Sun

Business Spectator

Your Investment Property Magazine