NG debate, page-25

great link tarvie.

to my mind the property council's claim that abolishing NG would cause rents to rise is the point at the present. below from your link.

The industry also claims that if negative gearing is restricted, landlords will try to pass on some fraction of their higher tax costs by pushing up rents. But will they succeed?

Rents are ultimately determined by the balance between demand and supply for rental housing. In property markets – as in other markets – returns determine asset prices, not the other way around. Rents don’t increase just to ensure that buyers of assets get their money back.

Many other landlords with investment properties that are profitable won’t be paying higher taxes. Tenants will try to beat rent rises by threatening to move. So competition in rental markets will limit material rent rises.

Some investors may sell their properties if tax concessions are less generous. This might reduce house prices, but it will not increase rents. Every time an investor sells a property, a current renter buys it, so there is one less rental property and one less renter, and no change to the balance between supply and demand of rental properties. Indeed, one of the benefits of changes to negative gearing is that it makes housing more accessible for first home buyers.

The Labor party was brave to propose changes to negative gearing and capital gains tax concessions. But until changes like these are made, the property industry will continue to try to muddy the debate with myths and half-truths, and most ordinary Australians will be the losers.