Australian Property Bubble, page-8

" we'll see wagesskyrocket and inflation taking care of business to correct it "


I don't share your vision, one ofthe major underlying problems, is wage stagnation.

It is now widely accepted that negative gearing, as itapplies in housing, performs poorly on conventional tests of efficiency andequity. As a housing subsidy, negative gearing is entirely untargeted. Whilethe rationale for negative gearing centres on the claim that it encourageshousing investment, the vast bulk of rental property acquisition involvesexisting properties. In 2017, less than 10 per cent of investor property loanswere for newly-built homes. The overwhelming impact of negative gearing istherefore to distort the market by inflating demand for a fixed supply ofdwellings, with only a negligible contribution to new housing supply.

Drawing on the work of David Harvey to reconsiderthe forces shaping housing demand, my research suggests that thecontemporary durability of negative gearing stems in part from ‘structuralroots’. Negative gearing has remained in place – at least in part – because ofthe way in which housing demand has grown central to economic growth inAustralia, supporting the construction industry and underpinning rising priceswhich prop up spending amidst stagnant wage growth. Seen in this light,negative gearing is part of a broader system of concessions that underpin theaccumulation of savings in housing and inflate prices by encouragingcompetition between investors and first-home buyers. The long saga of thenegative gearing debate therefore reflects how housing tends to function incapitalist society as a site for capital accumulation, a trend which butts upagainst the eminently reasonable goal of affordable housing for all.

https://www.austaxpolicy.com/crowding-evidence-based-policy-case-negative-gearing/

Raider