Proposed tax changes will result in fewer homes being built at a time when Australia desperately needs more, a peak property group said today.
The Property Council, in its submission to the Senate Economics Legislation Committee, says changes to negative gearing and capital gains tax will disrupt new housing supply and sap market confidence.
Modelling commissioned by the Property Council, Master Builders Australia, Housing Industry Association and the Real Estate Institute of Australia showed the combined budget package would reduce dwelling starts by almost 9000 homes over four years.
Property Council Chief Executive Mike Zorbas said Australia’s housing challenge was a supply challenge and the simple test for the proposed changes was whether more or less homes would be delivered.
“On the evidence available, these proposed changes deliver fewer homes at a time where Australia desperately needs more,” Mr Zorbas said.
“Established and new housing are directly connected. Projects are financed against confidence in future market conditions and expected exit value. If those price outcomes weaken, project feasibility is diminished before construction starts.”
Mr Zorbas said the impact of the tax changes was magnified in a system already under pressure.
“Housing is already highly taxed, with up to 40 cents in every new home dollar blown away by taxes and charges,” he said.
“Beyond that, the property industry is dealing with elevated construction costs, financing constraints, infrastructure bottlenecks and slow post-approval processes. That all but guarantees fewer homes, fewer jobs, and more pressure on affordability.”
Mr Zorbas said broader Budget tax changes make for a “perfect housing storm”.
“Proposed changes to discretionary trusts and retrospective measures affecting foreign investment are going to hurt investment and jobs,” he said.
“Many small and medium developers, family businesses and private capital rely on these structures to finance projects. With this level of uncertainty, capital will step back and everyone loses.”
The full submission is here.
