Getting rid of negaitve gearing is a LONG TERM idea..
"Investors will shy away from property, which will lead to a rental property shortage and increasing rents. The increase on public housing, which is already strong, will be damaging for state governments."
The people who look to minimise their tax payments or avoid tax will shy away from postively geared property. Someone who likes a regular real inflow of income would jump at the opportunity to buy an investment house they know will in future provide a regular income and not a (tax reducing) regular expense (in the hope that they can realise a one of tax reduced bonaza).
Should the abolishment of neg gearing drives away neg gearers..rising rents will attract positve gearers which would result in increased positvely geared supply and moderate rents. Currently it just helps to inadequately increase negative gear supply.
Sure getting rid of Neg Gearing will create temporary fluctuations in rental stock but the benefits to the govt. is that they have a potential stronger tax grab if they abolish it, thats why they have been and is, I suspect, considering it..seeing the future direction of the Fed tax take & budget bottom line.
Driving away or discouraging 1 million plus neg gearers will always result in a shock to the system and will take some time for a rebalance, it can't happen overnight or even in two years..
