RBA negative gearing memo warns of risk to rents – Australian Broker

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As read in Australian Broker

A Reserve Bank memo discussing the impact of changing negative gearing confirms that abolishing the practice would raise rents, a property association has claimed.
According to the CEO of the Property Council of Australia, Ken Morrison, the RBA’s internal briefing note made public after the ABC obtained the note under freedom of information laws, proves Labor’s proposal to limit negative gearing to new housing will put pressure on rental prices.
“We accept that the Reserve Bank were not modelling the Federal Opposition’s policy – but this memo clearly flags that changing negative gearing would impact rents,” Morrison said.
“This memo confirms that policy makers have real concerns about how renters would fare under policies that make negative gearing less effective.
“We again call on the Opposition to release its modelling on the impact of its proposed tax changes on rents and the property market.”
According to the ABC, the RBA noted there would be a “potential increase in rents” from making the practice less attractive. However, the briefing note also claimed that “any change which discourages negative gearing may be good from a FS [financial stability] perspective.”
Addressing this, Morrison said that levels of property investment had fallen substantially since the memo was written by the RBA in 2014.
“Since 2014 ATO figures show the cost to the budget of negative gearing has halved and the level of investor loans has fallen to 29%,” he said.
He said the concerns of the RBA that were stated in 2014 also related to the interaction of negative gearing and capital gains tax.
“It should be noted that since this memo was written, APRA has made changes to deposits on loans. As well, the Reserve Bank’s recent financial stability report noted the possibilities of risk associated with foreign investment in property, stating ‘there is little evidence of either occurring so far’.”

John can be contacted on 0749722081 or 0410433919. or email him at jwhitten@ihl.net.au or net www.ihl.net.au. John Whitten is a credit representative (CRN 399796) of BLASSA Pty Ltd (Australian Credit Licence No 391237).