According to the rental component of CPI data, rents across the capital cities rose by 21.8% over the two years to September 1987 (the period during which negative gearing laws were changed). The increase in rents was most pronounced over the period in Sydney (26.1%) and Perth (31.1%). As a comparison, over the two years to September 1985, rental costs rose by a lower 17.0%.
The reason why negative gearing was reinstated in September 1987 was that it was proclaimed that rents rose sharply on the back of a fall in housing market investment. However, it doesn’t look as if investment in the housing market dried up throughout this period.
