What impact will Labor’s changes to negative gearing have on tenants?

If you are currently renting, you may have dismissed the heated political debate over proposed cataclysmic changes to negative gearing ahead of the 2019 federal election. After all, you are not currently a property owner so the changes won’t affect you, right?

Not so fast. The truth is federal Labor’s plan to limit negative gearing to landlords who invest in new-build properties will have a massive impact on renters. Negative gearing allows property investors to write off losses incurred each financial year against their annual taxable income. While existing landlords will still be allowed to take advantage of negative gearing’s significant tax benefits, industry experts predict the changes will drive property prices down and rents up across the country.

If you are planning to purchase your own home in the future, you might even see falling prices as a good thing. But industry experts predict renters will be hit hard if the Australian Labor Party (ALP) wins office and implements the controversial policy from 1 January 2020 as planned.

The Real Estate Institute of Australia recently warned average rents are expected to rise across the capital cities by between 8 and 15% from 2020 to 2022. According to a report recently released by SQM Research, Brisbane renters would be hit hardest with an increase of between 13 and 22%. That is a $95 a week increase for a family leasing a three-bedroom house in Brisbane, based on the current average price of $435 a week. Meanwhile, Darwin rents are forecast to rise by up to 4 per cent.

Higher rents would also make saving that elusive deposit for your own home even more challenging, especially with the banks already imposing tough lending criteria that is putting pressure on first time buyers despite record low interest rates. Moreover, economists warn the dire consequences of the ALP’s policy will be felt right across the Australian economy. State government revenues are forecast to fall by up to $2.3 billion, jeopardising essential funding for hospitals, schools and other essential community services. The retirement nest eggs of 18 million Australians will also be negatively impacted, with super funds forecast to drop in value.

To learn more about how the ALP’s proposed changes to negative gearing might impact rental costs in your area, contact your local Raine & Horne agent today.