Changing tax rules for investors won’t shrink housing supply or raise rents. Just look at Victoria
Summary
The Australian government plans changes to tax rules on property investors, aiming to make housing more about living than making money. Experts say these changes will not reduce housing supply or raise rents much, based on experiences in Victoria where similar reforms did not cause major problems.Key Facts
- The government will change negative gearing and capital gains tax (CGT) to make property investment less attractive for future purchases.
- Current investors will be protected by "grandfather provisions," which means existing investments won’t face new rules immediately.
- Since 2020, investors’ share of new home loans in Australia rose from under 30% to over 40%, while owner-occupier loans dropped.
- Tax incentives, including a 50% CGT discount, have encouraged investors to buy multiple properties, competing with first-time home buyers.
- Predictions that these tax changes will cause major rent increases or housing shortages assume many investors will sell, but homes will likely be bought by others, not disappear.
- New properties bought after the budget changes will be exempt from these tax changes, possibly making investors more interested in new builds.
- Victoria raised land tax on investors in 2023 and saw only a small (3%) drop in rental properties and no big rent hikes.
- The reforms aim to create a fairer property market, even though more housing supply is still needed.
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