Negative Gearing Misinformation

One of the reasons we seldom find solutions to serious problems in Australia is that we never seem able to have a calm, honest and rational debate about any of the issues.

This is particularly true in the housing market, where housing affordability has been an ISSUE OF ENDLESS DEBATE for decades, without any improvement in the situation.

The rental shortage crisis has been building for years, and there is daily media coverage of the problems, but no one among the political leadership anywhere in Australia has presented any solutions.

The problem is that when politicians get hold of an issue, honesty and integrity goes out the window.

The standard of debate quickly descends to the gutter, as politicians concentrate on point scoring, indulging pet philosophies and finding scapegoats.

Stake-holders in the housing markets don’t help either, by arguing for their vested interests rather than win-win solutions that take into account the needs of all parties.

Within this climate, every year or two the issue of negative gearing is raised as an issue – and for some this is the bogey man that is the source of all evil in the housing market, causing rising prices, high rents and every other thing that people like to complain about.

Negative gearing is arguably the most misunderstood concept among all the things that happen in real estate markets.

This is largely because politicians, particularly the Greens and sometimes the ALP, like to muddy the waters with misinformation, as part of their political tactics.

In the mindset of Greens politicians, anything to do with property investment is the embodiment of evil and needs to be stamped out.

One of the myths about negative gearing is that it’s a tax benefit exclusive to property investors. It’s not – it’s available on other types of investments as well.

Another myth is that everyone who owns an investment property gets tax deductions through negative gearing. That also is very untrue – and I’m an example. I’ve been buying properties since the 1980s and I have never claimed negative gearing tax benefits.

Another furphy about negative gearing is that it’s an Australian thing – that we’re the only country that provides this tax break to investors.

That’s one of the biggest lies perpetrated by those who regard property investors as the source of all evil in the residential property industry.

The reality is that many first-world nations have similar systems to the one in Australia, including Germany, Japan, Canada, Norway, France, the United States, Ireland and Finland, among others.

Other misinformation about negative gearing relate to how much it costs the Federal Budget – always exaggerated quite dishonestly by the Greens and others – and the claim that ALL property investors claim negative gearing benefits.

Perhaps the biggest lie is that negative gearing is responsible for rising prices and poor affordability.

There have been many independent studies by reputable organisations which disprove this throw-away line from those who oppose property investment.

The reality is that MOST buyers in the market, overwhelmingly, are HOME BUYERS - and that they comprise the MAJOR force for competition for dwellings and therefore for upward pressure on house prices.

My estimate is that, currently, less than 15% of buyers in the market are negatively-geared property investors – and it’s difficult to argue that they somehow overpower the other 85% and cause prices to rise.

There are more first-home buyers in the market than there are negatively-geared investors.

But those investors are often blamed for the high prices paid by first-time buyers – but, in reality, expensive housing is caused by the politicians who are adept at blaming others.