Retaining negative gearing as part of the policy mix to improve housing affordability is definitely the right move, the Real Estate Institute of Australia (REIA) said this week in response to the Federal Labor Party's recent proposals to end the crisis.
REIA President Graham Joyce said that the primary concerns of investors are security and returns on their investment.
"Unless property has the same investment conditions as other asset classes, including negative gearing on expenses related to the investment, investors will not buy property and renters will have even greater difficulty finding a home and will pay higher rents", Mr Joyce said.
`Gearing enables people to borrow money to undertake investment opportunities that would otherwise have been beyond their reach financially.
The main users of negative gearing are not the super-rich, but rather the low to middle income Australians trying to save for their retirement, according to Mr Joyce.
"Eighty-seven per cent earn taxable income up to $80,000 pa and claim 81 per cent of losses" he said.
"Negative gearing helps to achieve self-funded retirement and provide housing supply for renters."
The proposal for a first home savings' account with low taxes and low overheads, similar to superannuation, was also welcomed by the REIA.
"The capacity for first home buyers to save a deposit has become increasingly difficult as house prices have moved upwards at a faster rate than incomes", said Mr Joyce.
"REIA has similarly proposed that first home buyers should have early access to the voluntary contributions they make to superannuation for a home deposit", he added.
The REIA proposal suggests strict limitations, including limiting withdrawals to voluntary contributions only and capping the size of the withdrawal, such that early access would not diminish the intent of superannuation savings.
Federal Labor's Housing Affordability Summit was being held this week to debate options and to draw on the knowledge and expertise of groups such as the REIA and the Housing Industry Association.
