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WBP Property Group and buyer’s agent Greville Pabst has urged residential investors to focus on property fundamentals when purchasing properties, rather than side issues such as negative gearing and associated taxes.
“That is what drives wealth creation and growth – is make a property decision, not a tax or an investment decision,” he said, speaking to Australian Property Journal after presenting at the Australian Property Institute’s National Property Conference.
Pabst said the Labor party’s proposed negative gearing reforms had three key elements that required closer scrutiny.
“The first one is that the proposal is to make negative gearing only applicable to new property.
“This is actually corralling investors, many of them first-time and experienced investors even, into new property, which I’m not sure that is a great investment strategy,” he said, explaining that depreciation needs to bleed out of a property before it starts to perform as an investment.
“Another reason that I think that it’s flawed as a policy is that it will drive up prices of that new stock, but when those properties are sold and they become second-hand, the next buyer is not going to those same tax advantages as the first buyer,” he added.
Pabst said the grandfathering of the proposal would mean negative gearing would not be applicable to properties bought after July 1st, 2017, which would bring forward demand in a way seen with changes to first home buyers’ grant, with investors rushing into the market so they could enjoy the negative gearing benefits.
He said another key Labor proposal, for capital gains tax concessions to be halved from 50% to 25%, hadn’t been fully factored into the market as of yet, an important point given the strong growth in property values in Sydney and Melbourne particularly.
Read and watch more special coverage of the Australian Property Institute’s 2016 National Conference:
- Focus on fundamentals not financial wizardry
- Future of real estate offers challenges and opportunities
- Residential oversupplied but no property bubble
- Recent changes to API a positive move
- Valuation industry encouraged to cap downside risk
- Disruption in property industry here to stay
- DoD land contamination to test property prices
- Value uplift drives repurposing of industrial land
Australian Property Journal
