Retain Negative Gearing Says Real Estate Body

negative gearingAn article on Your Investment Property sheds light on the request made by the Real Estate Institute of Australia (REIA) to the government to retain negative gearing. The supply-side pipeline is aided decisively by negative gearing and capital gains tax discounts and this can be marathon help in times of chronic undersupply of houses.

Abolition of negative gearing

If negative gearing is abolished, government would need to spend more in social housing thus resulting in an increase in rent. The recommendations made by the REIA focus largely on enhancing the economy of the nation and making houses more affordable.

Detractors of negative gearing shout about how it increases tax incentives for the rich thus raising house prices and making home ownership more difficult for first home buyers.

You can read the original article here.

It is a moot point

The negative gearing debate will run at an unbridled pace and this is because both sides will have enough in the tanks to stick to their conviction. It is true how prices peaking due to ‘gearing’ tax incentives elbow out the first home buyers. At the same time, the FHBs can be aided by government in getting back into the real estate game. Negative gearing need not be wiped to meet this end.

The leverage

I know the sentiment- you cannot buy a home because it is far too expensive and now you have to pay taxes to support someone else who has bought the home that should have originally been yours. While this is the case to some extent, there is no denying the economic leverage of negative gearing on a macro level.