Reducing tax incentives for property investors would lower home prices by the same amount as increasing supply through current government plans.
A new report from the Australian Council of Social Service (ACOSS) found reforms to negative gearing and the 50 percent capital gains discount could help ease the housing affordability crisis.
ACOSS CEO Cassandra Goldie said the report found competition for homes from investors increased dramatically following the introduction of the 50 percent capital gains tax discount in 1999.
Dr Goldie said investors led two surges in home prices, by 13 percent a year above inflation from 2001 to 2003 and by 6 percent a year from 2013 to 2017.
She said since 1999, home prices had increased by 142 percent, while wages had risen by 44 percent.
“Contrary to the idea that encouraging investment is needed to generate new supply, 81 percent of investment loans are for existing properties.
“As long as our tax system encourages speculative investment in housing, the housing affordability crisis won’t be solved just by building more homes.”
Dr Goldie said independent modelling indicated that halving the capital gains tax discount and curbing negative gearing would reduce home prices by up to 4 percent.
“(This is) similar to the impact of the government’s target to build an additional 1.2 million homes over five years.”
She said claims that “mum and dad” investors were benefiting from the tax concessions were misleading as the report showed the wealthiest 10 percent of Australians owned two thirds of investment properties.
“These tax breaks disproportionately benefit the well-off in our society while millions struggle to pay the rent, let alone save a deposit to buy their first home.
“These unfair tax breaks fuel speculation by investors in housing stock and distort investment decisions, yet do little to increase the supply of rental properties, let alone affordable homes.”
Download the report: Housing for Living not Wealth Creation
