LABOR’S plan to alter negative gearing would have a crippling effect on the Gold Coast’s biggest investor suburbs, experts warn.
The issue is shaping as a key election battle with Opposition Leader Bill Shorten promising to restrict all future negative gearing to new homes from July next year while Prime Minister Malcolm Turnbull promises no change to the system.
Real estate figures say Labor’s policy could have a “devastating impact” on home prices in areas such as Coomera, Pimpama and Paradise Point, where 64-82 per cent of investment property owners use negative gearing.
“An REIQ survey found 79 per cent of property investors would abandon property as an investment strategy if Labor’s negative gearing changes were brought in,” said REIQ Gold Coast chair John Newlands.
He said there would be a negative impact on property prices, the supply of rental properties and jobs in the trades and services sector.
“A lot of jobs depend on maintaining investment properties — laying carpets, hanging curtains and other work. This flows right through the economy so it doesn’t just have implications for the market. Changes to negative gearing would have a devastating impact.”
Professionals Paradise Point principal David Vertullo said any changes would rattle confidence in the property sector.
“It can only have a negative impact. It would decrease the pool of buyers,” he said.
If negative gearing were altered, Mr Vertullo said investors would reassess where they put their money.
House prices in Paradise Point soared 10.1 per cent in the 12 months to January to an average $920,000, according to CoreLogic-RP Data. But the suburb’s 3.3 per cent rental yields lagged behind the Coast average of 4.6 per cent.
Australian Taxation Office statistics show investors with properties in Paradise Point recorded an average net rental loss of $10,724 for the 2012/13 tax year. In Broadbeach it was $11,993.
Fadden MP Stuart Robert said changes would have a significant impact on his constituents.
“Of those people who use negative gearing, at least two thirds have a taxable income below $80,000 so we are talking about Middle Australia,” he said.
Gold Coast property investor Craig Preston says the supply of affordable housing would fall if there were changes to negative gearing.
Mr Preston, who recently moved from Sydney, bought his first Gold Coast investment property in Bayview St, Hollywell, in January for $505,000 with wife Julie and family friend Lee Braz.
Mr Preston said he wouldn’t have purchased the house if negative gearing was not available. He said by using the system, he was able to fix the weekly rent at $450, rather than the suburb’s median of $550.
“There is still going to be people who are unable to save enough money to get a home deposit, so creating affordable housing is really important,” Mr Preston said.
The 46-year-old said he bought the home to build wealth for his family over the long term.
“I’m concerned about my retirement. You can only earn so much money and put so much away in super (so) this is the opportunity to capitalise on growth long term.
“I’m one voice saying it works for me, my family and my future. As a working-class family this is what we need from our government to help us with our future,” he said.
Mr Preston, who is a director of Risen Developments, said he was planning to buy more investment properties.
“I would hate to see new restrictions (on negative gearing) because with the correct financial planning and the right investment strategy anyone can buy a property,” he said.
Buyers’ agent and valuer Tony Coughran said many people were buying properties in Hollywell as an investment.
“Why wouldn’t you negative gear and invest today for future capital growth on the Coast?,” Mr Coughran said.