Property industry slams Labor’s housing policy

Labor’s policies on negative gearing and capital gains tax (CGT) will not increase the supply of new housing or create new jobs in the building industry, according to new independent economic modelling commissioned by Master Builders Australia.

The modelling, prepared by Cadence Economics, found that if Labor’s policies are implemented, they would result in:

• up to 42,000 less new dwellings being built across the country
• up to 32,000 less full-time jobs
• up to $11.8 billion less building activity
• up to $210 million less renovation building activity

“Labor’s policies on negative gearing and CGT fail its own test,” CEO of Master Builders Australia Denita Wawn said.

“Master Builders calls on the ALP to rethink its policies in the light of this new research and a changed housing market. Australia cannot afford for housing supply, building activity and employment to go backwards.

“Cadence Economics was commissioned by Master Builders Australia to test Labor’s claims that its policy to restrict negative gearing to investments in new housing and halve the capital gains tax discount to 25 per cent of all properties will increase the supply of new housing and employment in the building industry.”

Further, the study found that within five years of Labor’s property policy being implemented, the construction of new housing would fall in all states and territories, with employment also falling over the same period.

Ms Wawn added: “Labor has previously stated its policies would boost new dwelling construction ‘by thousands of new homes each year’.

“On the other hand, independent modelling by Cadence Economics shows that Labor’s policy would mean up to 42,000 fewer new homes would be built over the five years following the implementation of Labor’s policies, resulting in a reduction in the value of residential building activity of between $2.8 billion and $11.8 billion.

“Home renovations would also be hit by an expected reduction of between $50 million and $210 million in activity over a five-year period. Inevitably, this would mean a fall in employment, which is expected to be between 7,200 and 32,000 less jobs across the country.”

Ms Wawn also claimed that Labor’s policy was developed in the context of an “overheated” housing market, which she said “no longer exists”.

Ms Wawn’s sentiment was echoed by the Property Investment Professionals of Australia (PIPA) and the Property Investors Council of Australia (PICA).

PIPA chairman Peter Koulizos claimed that the policy demonstrated that the Labor opposition “failed to understand and appreciate the vital part investors play in the property sector”.

“Property investors provide housing for 30 per cent of Australians at a time when spending on social housing is at an all-time low,” Mr Koulizos said.

“Also, contrary to media headlines, only about 70 per cent of investors own one property, so the concept of ‘greedy investors’ is not supported by the facts.”

PICA chairman Ben Kingsley added that it was “imperative” that all levels of government “stopped using investors as a never-ending cash cow”.

“The financial impost on investors, who are just trying to improve their futures by generally buying one or perhaps two properties, is out of control,” Mr Kingsley said.

“Between council, state and federal government taxes, investors pay back far more than they might receive in the short period of time that they claim negative gearing.”

Mr Kingsley continued: “Not only will thousands of jobs be lost, investors will retreat from the market at a time when more housing is needed the most.

“The end result will likely be worsening housing affordability and rents skyrocketing as our growing population compete for a limited supply of accommodation.”

Mr Kingsley urged that Labor needs to listen to industry professionals warning of the dire consequences of its proposal.

“There seems to be a fundamental misunderstanding of the laws of demand and supply in Labor’s approach to property taxation,” Mr Kingsley said.

[Related: Labor’s negative gearing policy would test low-income earners, warns CEO]