Survey finds widespread scepticism that negative gearing changes will boost housing supply
Three in four property professionals expect a significant number of residential investors to sell or cease investing as a result of the federal government's recently legislated tax reforms, according to new research by valuation firm Herron Todd White.
Seventy-five percent of respondents said they expected investor activity to contract materially under the reforms. Separately, 78% anticipated a decline in residential property values over the following two years.
When asked to quantify the expected price impact, 37.7% forecast a decline of between 5 and 10%, 28.4% anticipated a fall of up to 5%, and 11.8% expected values to drop by more than 10%. A further 14.7% foresaw no material change, while 7.4% expected values to rise.
"These findings reflect the views of professionals who advise, finance, value, and regulate property transactions every day," said Peter Maloney (pictured right), chief executive of Herron Todd White. "The overwhelming view among respondents is that the tax reforms will reduce investor participation and do nothing to lift housing supply, which remains one of Australia's most pressing economic challenges."
On the question of investor behaviour, Maloney pointed to the removal of negative gearing concessions on established properties as a key concern.
"When investors are prevented from purchasing established properties, with the benefit of negative gearing, there is genuine concern the impacts could extend to downstream rental supply, housing confidence and broader market activity," he said.
"There is nothing to suggest that investors will suddenly pile in and take advantage of negatively gearing new dwellings to help fuel supply, and if they did, we now have the perverse equation of first-home buyers having to directly compete with investors for new dwellings. The irony of this is that the tax reforms may well have created more competition for new dwellings, the category in which first-home buyers are more likely to start their home ownership journey."
"Reduced investment activity also has the potential to flow through to rental supply, housing confidence and broader market stability."
On property values, Maloney acknowledged the degree of any adjustment remained unclear.
"While the extent of any market adjustment remains uncertain, there is a clear expectation among industry participants that the proposed reforms would place downward pressure on residential property values," he said.
The survey also found little confidence that the reforms would ease the country's housing supply constraints. Nearly three in four respondents — 74.55% — said the changes would either worsen supply or produce no material benefit. Of those, 43.5% said the reforms would worsen housing supply shortages, 31% expected no material impact, and 16% were unsure. Only 9.4% believed supply would improve.
"Less than one in 10 professionals surveyed believe these reforms will improve housing supply outcomes," Maloney said. "That is a significant finding given housing supply and affordability remain central to Australia's economic and social policy agenda."
"These findings provide an important insight into how the professionals who work across Australia's property and financial systems believe the reforms are likely to impact investment, housing supply and market confidence."
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