Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

WM Residences fills gap in Mordialloc townhouse market

Negative gearing

<html><body><div class="row">
GUEST OBSERVER
Federal Opposition Leader Bill Shorten has announced plans to change negative gearing and the capital gains tax discount if Labor wins the next federal election.
Under costings released from the Parliamentary Budget Office, Labor’s proposed changes could save the budget $32.1 billion over 10 years once they come into force.
Key measures include:
<ul>
<li>Negative gearing to be restricted to "newly constructed homes"</li>
<li>Capital gains tax discount reduced from 50% to 25%</li>
<li>Both measures would come into force from July 2017</li>
<li>All existing investments under the scheme would be fully "grandfathered" and protected against the changes</li>
</ul>
With pressure on the current government to reduce the growing Budget deficit, and Treasurer Scott Morrison's refusal to rule out any changes in policy across the board, negative gearing would seem to be the one area squarely in the sights of both the government and the opposition, especially when you look at the statistics…
<ul>
<li>There are currently 1.2 million people who have negatively geared property, and most of these people are middle class Australians.</li>
<li>Australian Tax Office statistics show negatively geared property investors claim over $13 billion in losses each year, and the average loss per negatively geared investor is over $11,000</li>
<li>The average loss per negatively geared property doubles for people earning more than $180,000, to over $24,000.</li>
</ul>
Should our governments look beyond the numbers? Is it a false economy just to think that by tinkering with negative gearing it will solve the budgetary problem?
5 Reasons Why the Government Shouldn't Change Negative Gearing
1. Growing Population
With Australia's population set to grow significantly over the coming decades, our governments should be asking "How will we house these people?"
The government does not have the capacity, nor the finance, to provide public housing for the growing population so this is left to the private sector.
Negative gearing allows more Australians to invest in property, as the tax benefits assist with the cash flow to invest and hold onto that property. If negative gearing is changed and CGT concessions are reduced, it will mean less investors, less demand and less houses, and it will place further pressure on the government to fund and provide housing.
2. Financial Pressures of the Ageing Population
There are currently 1.2 million middle class Australians investing in property to generate a capital gain and increase their asset base for retirement, to subsequently ensure that they can maintain a standard of living in their retirement without having to solely rely on the aged pension.
If the government creates a blockage into entry for property investment by chipping away at the tax benefits or reduce capital gain concessions, property investment becomes less attractive. In the long term, this will see more Australians relying on government pensions, meaning less self-funded retirees and therefore further pressure will be placed on future budgets.
The government needs to take a long term view and look beyond today. A change to negative gearing and capital gain concessions will only make matters worse in the future.
3. A Drop in Property Prices
Will a change in negative gearing and capital gain concessions disincentivise investors and, if so, what impact will this have on property prices?
In the short term, we may see a dip in property prices due to lower demand and increased supply – which will impact on the economy across the board. State governments will miss out on a large chunk of revenue (via loss of stamp duties), which could mean less funding to spend on things such as education, hospitals and infrastructure at a state level. The federal government will then have to fork out more to state governments to compensate.
4. Knock On Effect to the Economy
Will the changes deter people from investing in property?
Due to the loss of the tax benefits, people will not be able to fund the cash flow of an investment property, meaning they simply won’t buy investment properties. This will cause a knock on effect similar to what we have seen in the mining industry after the boom.
It could also mean a rise in unemployment in the building sector and associated industries such as white goods, electrical and service related industries like real estate and everything that goes with it. As previously mentioned, state governments will be impacted with less revenue from stamp duties to spend on state infrastructures – which would also mean less jobs.
5. Short Term Thinking
For all of the reasons above, I can understand why the government might look at the numbers in front of them and think changing the rules around negative gearing and capital gain concessions is a win for budgetary reasons, but it is simply a case of short term thinking. The government really needs to take a deep breath, sit back and carefully consider what impact this will have on the economy long term.
Any changes made may increase revenue today, but they – or should I say we – could end up paying for this 10, 20 or 30 years down the track. To put it bluntly, a short term gain for long term pain is not good business.
With 1.2 million middle class Australian property investors impacted, changing the rules are negative gearing and capital gains concessions would be highly unpopular – and it could be a game changer for either political party.
David Naylor is co-founder &amp; non-executive director, Chan and Naylor National Accounting Group and can be contacted <a href="https://www.chan-naylor.com.au/" target="_blank">here</a>.
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jchancellor-FAypfDUnLy

Property 101: Five reasons why the government shouldn't change negative gearing

<html><body>
Australians' love affair with property investment could be tested by the continuing slowdown in home prices, and that investors may be second-guessing the validity of negatively geared investments, according to Bank of America Merrill Lynch.
According to the bank, this may be the last property price boom Australians will see for many years, according to a recent article in the Australian Financial Review.
March data shows that median capital city prices rose just 0.2 percent, with annual growth decelerating to 6.6 percent year-on-year. These figures are down from a July 2015 peak of 11.6 percent year-on-year and 11.9 percent in April 2014.
"A period of weaker price growth or outright modest declines is likely to become entrenched over coming years," Merrill Lynch said in a note to clients. 
"We'd expect that such a period could severely test Australians' long love affair with property investment."
Record low interest rates, while initially prompting new entrants into the property market, has left few marginal buyers following the extended period of these conditions.
While diminishing house price growth has not overly knocked household spending or confidence, the bank sees significant oversupply exacerbating the apartment sector in the next 12-18 months, particularly in Brisbane and Melbourne's central districts.
"This will likely be of concern to new investors in this market," the note reads.
"Yet this development is not expected to materially [affect] price performance of detached housing but may [hurt] sentiment towards the property market overall."
Though the bank expects these pockets of apartment price weakness to lead the further deceleration of price growth and building approvals, it doesn't expect this to spill over into the detached housing market, although prices will continue to decelerate over the course of the year.
That said, the over-supply issue could take years to resolve, particularly as falling Australian immigration numbers slow population growth.
Those with negatively geared investment properties may find they need to hold onto these properties for longer to realise adequate capital growth.
"In addition, over this period, they are likely to face regulatory risks from both sides of politics," said the bank, referring to taxation statistics suggesting that, among the 2 million landlords in 2013-2014, one in six individuals were eligible to pay tax, a potential target for government tax policy.
However, thanks to the low interest rate environment, the average rental loss per landlord has declined from $11,000 in 2010-11 to $8,700 in 2013-14.
RBA governor Glenn Stevens recently said that a moderation in house prices was helpful.
The last time the RBA cut rates was in February and May of 2015, and Merrill Lynch argues the property market was one of the only beneficiaries, as price growth leapt in the following months.
Merrill Lynch thinks it unlikely the RBA will cut rates soon, unless a material rise in unemployment jolts the Australian economy.
"It is our view that only a material rise in the unemployment rate should force the RBA's hand - not a, likely transitory, deceleration of inflation or as an attempt to manage the exchange rate," the note reads.
But it's the promise of a slowing growth asset that weighs on the bank's thinking.
"If dwelling and in particular apartment price appreciation is difficult to come by over coming years, new investors may increasingly question the validity of their negatively geared investment," the bank says.
As such, Merrill Lynch remains wary, citing high indebtedness combined with extraordinary monetary policy globally as the reason appetite for property may be diminishing.
"With household income growth soft, the reduced ability to borrow, or at least no further extension of it, will weigh on prices," the bank says.
"This most recent boom in dwelling prices is likely the last one we will experience for some time."
</body></html>

prateek24-ezbwHMbNAk

Merrill Lynch says property slowdown will hurt negatively geared investments

<html><body>
GUEST OBSERVER
Negative gearing and capital gains tax are a looming battleground in the federal election.
The debate was heightened last month by the release of modelling by consultants BIS Shrapnel purporting to show that reforms would lead to rent increases of between 4 percent and 10 percent. If correct, this would scare any political party.
An article in The Australian on Tuesday revealed that the ALP had seen this modelling before it released its policy to wind back the tax breaks on negative gearing and capital gains,
The ALP should be applauded for proceeding nevertheless. The report was clearly going to be inconvenient. But it was also not worth the paper on which it was printed.
The report implied that a<a href="https://grattan.edu.au/news/a-low-cost-way-to-derail-the-housing-debate/"> </a>$2 billion increase in tax would reduce economic activity by $19 billion a year. The report’s model also suggested that every additional house or apartment would increase the size of the Australian economy by $2.6 million.
None of this is remotely plausible, and consequently, it is difficult to believe anything else that the modelling or the report has to say.
Nonetheless, this report is still being discussed a month later – so it clearly needs some more critical analysis.
Tax changes will clearly reduce the after tax benefits for property investors. The key question is whether the market responds by reducing the price of housing, or by increasing rents, or by absorbing a reduction in returns.
Most likely, the price of housing will fall somewhat, investor returns will reduce a little, and rents will barely move. This is why.
Changes to negative gearing and capital gains tax will increase taxes for investors and lower their returns. Normally this would lead to lower asset prices.
But the outlook for home-buyers is different. The benefits for a home-buyer (of living in the home) won’t change. The price of the home will be a little lower due to the changes in negative gearing and capital gains tax. Therefore the return on assets (the benefits divided by the price) will be a little higher for home-buyers.
Combining the effects of the changes for investors and home-owners leads to an average after tax return on housing that is about the same as today. There will be more home-owners and correspondingly fewer investors – but higher rates of home ownership are the political goal.
The outcome might be different if the supply of new housing dried up. If there were fewer incentives to develop new homes, then eventually rents would increase.
However, our best guess is that tax changes will have little effect on housing construction. The supply of new housing is mainly restricted by planning rules rather than a lack of returns. In any case, reforms to negative gearing are likely to reduce the price of developable land, but they won’t change the returns on development.
BIS Shrapnel assume otherwise. They believe that changes to negative gearing rules will reduce the price and therefore the profitability of property developments, but not the price of developable land. And so they assert that tax changes will lead to less residential development, and therefore higher rents in the long run. Their report assumed that the price of developable land wouldn’t change based on three claims.
First claim: if the price of developable housing land fell, sites would instead be used for commercial purposes. But as a firm that advises clients on property development, BIS Shrapnel should know that in most localities land provides a much higher return per square metre when turned into residences than when used for commercial purposes. Indeed, there are concerns that too much of the Melbourne and Sydney CBDs is being converted to residential rather than commercial uses. There isn’t much evidence of enormous pent-up demand for commercial development.
Second claim: landholders will be reluctant to sell at lower prices. This is simply wishful thinking. Prices don’t rise just because sellers would like them to do so.
Third claim: it will be more expensive to aggregate sites for development. But lower prices as a result of negative gearing reform will affect all residential properties, irrespective of whether they have already been developed, or have potential to be aggregated further.
Instead of assuming that tax changes will only affect the price of development, it is much more plausible that changes in after tax returns to investors will primarily lead to lower land prices. This won’t hurt the profitability of development, the supply of rental property will continue, and the impacts on rents will be minimal.
Even if tax changes did affect the profitability of development, it’s all small beer. Quick sanity checks (the kind of things that property developers do to ensure that their modellers don’t lose them a fortune) show that the effect of negative gearing changes on property prices will be less than 2 per cent across the Australian market.
One way to think about it is that negative gearing and capital gains tax provide investors in real estate with a tax benefit of about $3 billion a year; that annual benefit converts to an asset value of about $55 billion; and all Australian residential property is worth a little over $5 trillion. If negative gearing were abolished entirely the lost value would be $55 billion, just over 1 per cent of $5 trillion of property value.
Another way to crunch the numbers shows that negative gearing and capital gains tax changes would reduce the after tax returns on real estate investment assets by about 7 percent. But this wouldn’t affect all housing assets – only 30 percent are investment properties, and the rest are owner occupied. So across the market, return on assets – and therefore asset values –would fall by about 2 percent. Or in the unlikely event that investors succeed in passing on tax costs, rents would rise by at most 2 percent.
BIS Shrapnel presented the ALP with a claim that tax changes would increase rents by 4 to 10 percent. But that claim was several times larger than fundamentals would suggest. It used a model that was not publicly available. It was allied with a series of manifestly ridiculous economic results. And it all rested on an unjustifiable assumption that tax changes won’t affect land prices.
The ALP was right to ignore such flawed analysis. It is a relief to discover that – sometimes – a political party’s policy cannot be bought off just by commissioning a flawed report with scary numbers.
<a href="https://theconversation.com/profiles/john-daley-1870" rel="author">John Daley </a>is chief executive officer, Grattan Institute and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/john-daley-1870" target="_blank">here</a>.
 
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Why it is good policy, not bad politics, to ignore bad modelling on negative gearing

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The negative gearing debate is back to haunt Labor again, with The Australian newspaper reporting that the party stuck with its policy of limiting negative gearing to new homes despite opposition Treasury spokesman Chris Bowen being warned last year that it could hurt house prices and hit economic growth. 
Accounting and financial advice firm Bongiorno &amp; Partners last year secretly commissioned BIS Shrapnel to analyse the effect of limiting negative gearing to new houses.
It communicated its findings to Bowen’s staff and then Labor ­financial services spokesman Bernie Ripoll, according to a <a href="https://www.theaustralian.com.au/national-affairs/treasury/labor-ignored-property-negative-gearing-warnings/news-story/3fb63715d3f6ddd3e0798c22c65b6ab3" target="_blank">report in The Australian</a>. 
BIS Shrapnel’s report — which found limiting negative gearing to new houses could lead to lower house prices, rent rises of up to 10 percent, cost the budget more than it saved and cause unemployment to rise — sparked a political furore when it was publicly released last month.
The identity of the firm that commissioned the report was not released at the time, prompting Bowen to claim it was by “an anonymous vested interest”.
In attacking the document, Labor did not reveal it had received the advice last year from Bongiorno &amp; Partners while it was developing its negative gearing policy.
“Whoever’s commissioned it, they know who they are, but then they’ve put it out on the newspaper anonymously, you’ve got to have the courage of your convictions when you’re in these policy debates,’’ Bowen told ABC Radio National on March 3. He claimed that “whoever paid for it” should get their money back.
The report was intended to be an economic document rather than a political document to inform policy development on the negative gearing issue, The Australian said.
Bongiorno &amp; Partners is the same firm that commissioned research in 1983 as then Labor treasurer Paul Keating considered disallowing negative gearing. The report was ignored and negative gearing was abolished in 1985. In 1987 the then Labor government reinstated negative gearing.
Both Staff working for Bowen were briefed last July on the findings, while Ripoll was sent the report after a meeting with Tony Bongiorno, a partner from the accounting firm, at the ALP national conference last July.
After the report was publicly released last month, Labor seized on its finding that neither rents nor dwelling prices displayed any notable change of behaviour or deviation from trend during 1985-87 during Keating’s abolition of negative gearing. But Bowen dismissed its warnings that it could push down housing prices and increase rents.
“It is a poor excuse for analysis,’’ Bowen said on March 3. “It was commissioned by an anonymous vested interest who won’t even put their name to it. I mean that’s how much faith they have in it. And whoever paid for it she (sic) would get their money back because it is an atrocious piece of political propaganda, it is not analysis. It does not bear any scrutiny.’’
“From the start, media reporting of this BIS ‘analysis’ should have included a discussion of who commissioned it. Failure to do so is irresponsible.”
Labor plans to limit negative gearing to new dwellings from July 1, next year with existing investments grandfathered. After that date existing houses and share income could be offset against investment income but not against wages and salary income.
It also proposed halving the capital gains tax discount on assets held for more than 12 months to 25 per cent.
Property Observer earlier reported how Labor's policy and the government's seeming abandonment of any change, at least for the time being, could trigger diverse consequences. 
Like the balloon effect: squeeze a balloon in one place, and it inflates elsewhere, some vendors might bring their sales forward while others will bring their purchasing forward. Other owner occupiers and investors will delay.
It will be much more about the future value of people’s houses given Labor’s plans and the Government's seeming abandonment of any changes. 
It seeks to restrict the use of negative gearing in the property market to new homes, and to also halve the discount applied to capital gains tax.
Property Observer had also reported on BIS Shrapnel's report, Economic Impact of Limiting the Tax Deductibility of Negatively Geared Residential Investment Properties which said changes to the current negative gearing setup would go well beyond any saving of the income tax concession, to a multitude of unintended consequences.
It suggested new home building will shrink by around 4% nationally, or 7,200 dwellings a year and GDP would shrink by around $19 billion per annum on average, or 1 percent of Australia’s $190 trillion annual income.
The BIS Shrapnel report assumed the change was restricted to limiting negative gearing to new houses and assumed a start date of July 1, this year. It did not factor in the capital gains tax change.
It predicted higher rents would push 70,000 households into “rental stress’’, where they are paying out more than 30 per cent of their incomes on housing costs.
Median rents of $510 a week would need to rise by $73 a week in Sydney to provide an investor who had lost the benefits of negative gearing with an equivalent return.
Melbourne’s median rent of $370 would have to rise $56, Brisbane’s ($375) by $32, Adelaide’s ($280) by $29, Perth’s ($415) by $30, Canberra’s ($375) by $28, Hobart’s ($280) by $10 and Darwin’s ($465) by $20.
BIS Shrapnel found limiting negative gearing would result in “a short-run correction in real prices due to lower investor demand”.
“However, it will result in higher rents than would be expected with negative gearing,’’ the report said. “Landlords will require higher yields to compensate for the lost negative gearing concessions.”
The report said it was unlikely prices would fall enough to restore rental yields to compensate for lost negative gearing concessions. But a fall in prices would reduce the feasibility of development, causing construction to fall and rental supply to dry up.
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jonathanchancellor-7SQnKwU6yx

Labor ignored warning of economic impact in its negative gearing structure: The Australian

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Thinking about buying your first home because you've saved for that big deposit? Or are you contemplating instead becoming a first home investor because of the current advantages of negative gearing?
Thanks to negative gearing, buying an investment property may present a better financial proposition than buying a home to live in, particularly if you and/or your partner pay income tax at a relatively high marginal rate. 
Negative gearing involves claiming a tax deduction against your taxable income from all sources for the interest and other expenses which exceed the income from a rental real estate investment.
Owner-occupiers, which includes first-home buyers, get no such incentive.
Thus for an investment property, a rule of thumb is to consider it as a business, meaning any costs running the property can be deducted from your taxable income.
Many young, and not so young, Australians are now taking to what's been dubbed rent-vesting, a trend where buyers – typically Gen Y, purchase their first property for investment purposes rather than living in it.
According to Mortgage Choice research, around 37 percent of property investors are first home buyers, compared to just 21 percent in 2014. 
Estate agent John McGrath noted the logic: buy in affordable suburban areas, while you perhaps stay at home saving or rent in inner city locations that are out of reach but offer a better lifestyle.
It is the case in many markets of Sydney where the rent on a newly acquired investment property will not cover repayments and other costs in their entirety, so an investor will have negatively gearing, and that means tax savings.
So, what are other issues to consider? Certainly the future of negative gearing will be a big federal election issue, so pay close attention on the debate on possible changes to the scheme.
Property investment needs a long-term approach, and the real benefit will likely come from the capital growth, rather than negative gearing, but strong price growth can't be taken for granted especially after the past three years.
Beware that the lenders will be closely tabulating all your actual expenditure and income assumptions in your loan applications, so its best to check for feedback before you sign up on any property purchase.
Unless you are staying rent free or subsidised at home, much of the outcome depends upon the rent you have to pay because, as with any owner-occupied house mortgage, this is paid from after-tax income.
The higher the rent you pay, the less capacity you will have to service the cost of a negatively geared investment home, even after allowing for the tax benefit from a negative gearing loss.
No two lenders will lend you the same amount, so shop around.
And when you do sound out the emerging no go postcodes that lenders are shying away from lending.
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Why negative gearing is a positive for a first home as an investment

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Negative gearing can't be equated with standard business tax practice, and is not allowed in many countries, says economist Saul Eslake. 
Prime Minister Malcolm Turnbull has recognised this in the past, says Eslake in a recent post in the New Daily.
In a recent interview with the ABC’s Leigh Sales, Turnbull defended negative gearing as “income tax 101”, going on to explain it as  “a fundamental principle of tax law and has been forever that you can deduct from your income the interest expense of money that is borrowed to purchase an income-producing asset”.
This is quite a common proposition put forward by those who wish to defend the practice. It allows individuals who borrow finance the acquisition of an investment asset to offset the excess of interest they pay on those borrowings over the income the investment produces, in any given year, against their other income (for example, from wages and salaries) to reduce the amount of income tax they would otherwise be liable for.
They argue that this simply allows individuals to do what businesses can – offset the costs of ‘doing business’ (including financing costs) against taxable business income.
However, it ignores a very important difference between the tax treatment of companies and individuals. Companies don’t get the 50 per cent tax discount on capital gains which individuals have done since 1999 (nor did they get the CPI inflation adjustment to the cost base of assets which individuals did between 1985 and 1999).
Once upon a time, Turnbull appreciated this difference.
Eslake cites a speech by Turnbull from 2005 to a conference co-sponsored by The Australian newspaper and the Melbourne Institute of Applied Economic and Social Research, in which he described negative gearing as a form of ‘tax avoidance’, one of the few open to PAYE and other ‘unincorporated’ taxpayers.
A month earlier in a paper co-authored with the ANU’s Jeromey Temple, Turnbull observed that “Australia’s rules on negative gearing are very generous compared to many other countries”, noting that “the normal deductibility principles do not apply to negatively geared real estate such that the taxpayer is not obliged to demonstrate that the negatively geared property will generate positive cash flow at some point in the distant future”.
People are, of course, entitled to change their minds – especially when, as Maynard Keynes is supposed to have said, the facts change, says Eslake.
But the only relevant fact that appears to have changed between 2005 and today is that Turnbull is heading a Coalition government, rather than being a backbencher in one, and he is confronting an Opposition advocating changes to negative gearing, unlike the Labor Opposition in 2005.
In their 2005 paper, Turnbull and Dr Temple argued “the concessionary taxation of capital gains encourages people to invest in a manner which turns income into capital and, as in the case of negative gearing, allows them to deduct losses at, say, 48.5 per cent and then realise gains and pay tax at effectively half that rate”.
They cited then Reserve Bank Governor Ian Macfarlane and other commentators as claiming “this divergence in the taxation of income and capital coupled with negative gearing has contributed to the asset bubble in residential real estate”.
Ten years on, the things that have changed are that the top tax rate is now effectively 49 per cent, that capital city residential property prices are almost 75 per cent higher than they were then, and that Macfarlane is no longer Governor of the Reserve Bank.
As Turnbull acknowledged, most other countries with personal income tax regimes similar to ours don’t allow negative gearing in the way that we do. The US removed it (for investment properties) as part of a broader package of tax reforms in 1986 – with no apparent adverse consequences for the level of investment in the housing market.
And two of Turnbull’s closest political soulmates – New Zealand’s John Key and Britain’s David Cameron – both recently introduced changes to their countries’ tax regimes explicitly designed to dampen speculative investment in housing.
New Zealand has subjected investment properties bought and sold within two years to income tax at the investor’s full marginal rate, with effect from 1 October last year. And last year’s UK Budget provided that, from 2017 onwards, landlords will no longer be able to deduct the cost of their mortgage interest from their rental income in calculating their taxable income.
In conclusion, Eslake says that Turnbull would do well to follow the example set by these, electorally successful, centre-right Prime Ministers, as well as the inherent logic of his own opinions of a decade ago, rather than regurgitating the self-serving propaganda of parts of the property industry.
Saul Eslake is a leading Australian economist. He worked as the Chief Economist at the ANZ for 14 years and has worked at Bank of America-Merrill Lynch. Between 2009 and 2011, he was the Director of the Productivity Growth Program at the Grattan Institute. <a href="https://www.sauleslake.com.au/">Visit his official website here</a>.
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Negative gearing is simply a form of tax avoidance: Saul Eslake

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GUEST OBSERVER
More Australians than ever before owned a rental property and those relying upon negative gearing dropped, according to the latest ATO Taxation statistics release.
The 2013-14 year ATO taxation return statistics show a drop to 1.257 million people (or 62 percent) declaring a net rental loss out of the 2.03 million persons that own an investment property.
The total amount of net rental loss declined from $12.04 billion to $10.97 billion which shows that more rentals across Australia were being positively geared than ever before.
There is a year on year decrease in the loss made by a rental with lower interest rates supporting this outcome. 
In the past 12 months, Australia has seen a substantial rise in the number of individuals with a rental interest, which is mainly due to the increase of middle Australia into the residential market.
In terms of additional investors, the numbers of individuals with a rental interest and a taxable income between $37,000- $80,000 has increased by 8,872 over the year, with those in this taxable income bracket hitting 707,282 individuals with a net rental interest.
The largest volume increase in overall investors came through an additional 42,362 individuals in the $80,001- $180,000 taxable income bracket. Middle Australia is clearly buying into residential property and this is the largest increase in net rental interest over the year. This taxable income group makes up 34.7 percent of all individuals with a net rental interest.
<a href="/images/2016/03/23/Screen%20Shot%202016-03-22%20at%2012.00.10%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/23/Screen%20Shot%202016-03-22%20at%2012.00.10%20PM.png" alt="" width="727" height="312">
In 2013-14 there was also a:
• 12.9 percent increase or a 9,029 additional individuals in the $180,001- $250,000 taxable income bracket with a net rental interest.
• 10.3 percent increase or a 5,023 additional individuals in the $250,001- $500,000 taxable income bracket with a net rental interest.
• 12.4 percent increase or a 1,431 additional individuals in the $500,001- $1,000,000 taxable income bracket with a net rental interest.
• 18.5 percent increase or an additional 729 individuals in the over $1,000,000 taxable income bracket with a net rental interest.
<a href="/images/2016/03/23/Screen%20Shot%202016-03-22%20at%2012.13.08%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/23/Screen%20Shot%202016-03-22%20at%2012.13.08%20PM.png" alt="">
There has been a clear growth in the number of lower to middle income earners that have joined the investment ranks over the past several years with those earning over $80,000 growing the largest in terms over the 12 month period.
Although the percentage increases in net rental interest at the higher taxable income ranges are the largest, their actual additional numbers are quite small compared to the lower taxable income brackets. The scale of investment in these higher taxable income brackets would be expected to be much greater than at the lower end.
<a href="/images/2016/03/23/Screen%20Shot%202016-03-22%20at%2012.15.00%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/23/Screen%20Shot%202016-03-22%20at%2012.15.00%20PM.png" alt="">
Total property investors increased by almost 67,000 persons over the year to surpass the 2 million mark for the first time. With an eye on retirement, 29,600 of these additional new investors were aged between 40-59.
In particular, low interest rates have seen Rent Interest deductions decline by around $1.08 billion on the previous year which reduces the number of investors making an annual loss on a property.
Also contributing to the positive gearing position, there was an increase in the total Gross Rental Return from all properties by around $2.19 billion compared to the previous year.
By age, younger investors are still the most likely to rely upon negative gearing with 82 percent of all property investors aged between 18-29 declaring a net rental loss.
All age groups except those over 70 saw a decline in the net rental loss with positively geared investment increasing across the age groups as investors get closer to retirement.
Some 13 percent of all persons across the country earning a taxable income under $80,000 had a rental property, whereas 26 percent of those earning over $80,000 per year had a rental interest. The likelihood of owning a rental increases as wages increase with 40 per cent of all those earning $500,000 -$1 million having a rental interest.
In vast numbers those earning in the lower tax brackets make up the largest proportion with a rental interest.
By income, 767,000 those declaring a taxable income under $80,000 made up 61 per cent of total net rent losses, with an average Net Rent Loss of $7,351 in the year.
Other Rental Deductions, which include deductable expenses on rental properties such as repairs, maintenance, cleaners, tradeswork, insurances and other costs paid out by investors to maintain a property, climbed by almost $1.4 billion from $16.99 billion to $18.38 billion over the year. 
Over the past 20 years the Other Rental Deduction category which reduces taxable income has grown from $4 billion to $18 billion per year, so there is clearly a shift in investment patterns around the repairs and maintenance which is beneficial for tenants, jobs and the economy.
<a href="/images/2016/03/23/Screen%20Shot%202016-03-22%20at%2012.16.22%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/23/Screen%20Shot%202016-03-22%20at%2012.16.22%20PM.png" alt="">
The rise in Other Rental Deductions shows that despite average Net Rental Losses declining, there is an increasing propensity from all investors to plough some of the gains from lower interest rates back into the property. With the negative gearing concession being a motivating factor, the increase in Other Rental Deductions provides incentive to maintain the rental yield by putting money back into keeping the tenant happy in a more competitive rental market.
With average rents starting to flatten in 2013-14 as growth that corresponded to rapidly rising property values in the previous decade subsides in parts of the country, the Other Rental Deduction investment is clearly supporting and sustaining the yield.
This increase in Other Rental Deductions by way of investment in Australian property stock would be a supporting boost for the base level trades and maintenance services on upkeep and would have provided a significant boost to jobs across these areas.
What generally has been overlooked when considering the ATO Taxation statistics in previous years is the increasing value to the economy for the trades, cleaners, gardeners, plasterers, chippies, sparkies, plumbers and others that come from the property investor that pays out when things break, need repair or maintained.  
What hasn’t been factored into account is that there has been strong growth in the numbers of those small handy trades that comprise a significant part of the property and construction workforce.
<a href="/images/2016/03/23/Screen%20Shot%202016-03-22%20at%2012.17.38%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/23/Screen%20Shot%202016-03-22%20at%2012.17.38%20PM.png" alt="">
The increase in foreign investment in residential real estate is becoming apparent in the 2013-14 year with an 82 percent increase in non resident investment in residential real estate compared to the previous years.
<a href="/images/2016/03/23/Screen%20Shot%202016-03-22%20at%2012.18.44%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/23/Screen%20Shot%202016-03-22%20at%2012.18.44%20PM.png" alt="" width="1120" height="726">
Nicholas Proud is principal of <a href="https://propertyanalytics.com.au" target="_blank">Property and Construction Analytics Australia</a>.
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Middle Australia is buying into residential property 

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At the moment, the issue of negative gearing is extremely topical due to the Federal opposition proposal to change the availability of negative gearing to new properties only. 
In data released last week, the Australian Tax Office (ATO) published their annual taxation statistics for the 2013-14 financial year. 
The latest data shows that over the year there was a substantial decline in net rental losses claimed.  In fact, net rental losses haven’t been this low in close to ten years.
<a href="/images/2016/03/22/Chart-1-3-580x210.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/22/Chart-1-3-580x210.jpg" alt="">
The first chart looks at net rent over time and what is immediately noticeable is that since the beginning of the 2000’s net rental losses have been consistent and grown to be much greater than they ever were before that time. In 1999 the capital gains tax indexation was scrapped and replaced with a 50 percent discount on the capital gain if the asset is held for more than a year.  Since that time we have seen an increase in net rental losses suggesting that this change has made rental income losses more attractive to investors.
Over the 2013-14 financial year the value of net rental losses was $3.719 billion which was down 34.2 percent from the previous year when there were net rental losses of $5.654 billion. Net rental losses peaked at $9.065 billion over the 2007-08 financial year which indicates that rental losses are now 59.0% lower than this peak. 
Lower mortgage rates clearly have an impact given that holding costs are lower and this has no doubt contributed to the value of rental losses having fallen.  We would expect a further reduction in rental losses over the 2014-15 financial year considering that standard variable mortgage rates fell by a further 50 basis points over the 2014/15 financial year.
<a href="/images/2016/03/22/Chart-2-2-580x203.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/22/Chart-2-2-580x203.jpg" alt="">
The net rental data is split into two components, those that make a profit and those that make a loss. Focusing on those making a profit, there were 776,672 individuals that recorded a net rental profit in 2013-14, with the number increasing by 6.1 percent over the year to its highest number on record.  These individuals made a total profit from their net rent of $7.248 billion which was an historic high and up 5.3 percent over the year. As a result, the average net profit by these individuals was $9,332 which was -1.0 percent lower over the year.
The reason for the decline in the average net profit is most likely due to the fact that some of those that have shifted from making a loss to making a profit are making far smaller profits than those that were already established as making a profit.
<a href="/images/2016/03/22/Chart-3-3-580x203.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/22/Chart-3-3-580x203.jpg" alt="">
Turning to those individuals claiming a net rental loss, there were 1,257,301 of them in 2013-14 and they claimed a total of $10.967 billion worth of rental losses over the year. The number of individuals claiming a rental loss was -3.7 percent lower over the year which was the fewest claiming a loss since 2009-10. In value terms, losses were -12.5 percent lower over the year and at their lowest total value since 2009-10 as well. The average loss claimed was $8,722 which was the lowest it has been since 2005-06.
<a href="/images/2016/03/22/Chart-4-3-580x210.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/22/Chart-4-3-580x210.jpg" alt="">
The taxation statistics also split out the proportion of individuals that were claiming a loss compared to those whose properties were neutral or returning a profit in each state and territory.  Individuals with an investment property in Queensland were the least likely to be neutral or positively geared (30.7 percent) while investors in New South Wales were the most likely to be neutral or positively geared (47.5 percent).
<a href="/images/2016/03/22/Chart-5-1-580x137.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/22/Chart-5-1-580x137.jpg" alt="">
The above table shows net rental statistics across income ranges which match to the national income tax bands.  Firstly the non-taxable individuals’ data shows that 3,251,992 individuals are non-taxable compared to 9,712,276 that are.  Of those non-taxable individuals, 11.3% have claimed net rent compared to a higher 17.1% of taxable individuals and non-taxable individuals average net rental loss is much lower than those taxable individuals.
Focussing only on taxable individuals, the data shows that those on the lowest income band, more than half of them claim net rent and it is the only income band shown where on average they are seeing a rental profit.  This is probably reflective of retirees or those close to retirement positively gearing investment properties to provide them with an income source. 
In terms of number of individuals, far more individuals on lower incomes claim net rent however, this is by virtue of far more individuals overall are on lower incomes.  If you look at the percentage of individuals claiming net rent across the income ranges you can see that the proportion is much higher for the higher incomes (except for less than $18,200). 
As the income range gets higher you can also see that the average net rental losses increase significantly.  This indicates that the benefit from negative gearing tends to be greater for those that have higher incomes, conversely, the lower income earners are more likely to have their investment properties either positively or neutrally geared.
The taxation statistics show that the lower mortgage rates are reducing the value of losses claimed on rental properties.  With mortgage rates currently lower than they were in June 2014, it is reasonable to expect that the value of rental losses will continue to decline. 
Interestingly, since June 2014 we have also seen the level of investor participation in the market has hit record high levels and has since sunk back to decade average levels.  Given this, we would expect that over the coming year the number of property investors to increase quite substantially at the same time as the value of losses to fall.
It is important to also note that there is a significant shortcoming to all of this data.  Because it is all based on net figures, the data is assessed once the deductions have been made.  Particularly in the case of the income brackets, we don’t have a clear indication of how many people have shifted into a lower taxation bracket due to the deductions they have been able to make.
Although there has been a lot of debate about the tax burden negative gearing creates and changes to negative gearing policies, this data shows that the actual value of these losses has fallen substantially and is likely to remain much lower as long as interest rates remain at low levels.  While any policy changes may be seen as making access to the housing market more equitable, the financial benefit to the Government from such changes is likely to be limited.
Cameron Kusher is research analyst for CoreLogic RP Data. You can contact him <a href="https://blog.corelogic.com.au/about/">here</a>.
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Net rental property losses at near ten year lows: Cameron Kusher 

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<div>The Labor Party's Opposition Leader Bill Shorten and Shadow Treasurer Chris Bowen had pledged to limit negative gearing to new properties only from 1 July 2017 in order to save the federal budget a highly questionable $32.1 billion over a decade. This always sounded suspect based upon my day-to-day experience in the market given that the overwhelming majority of property investors are only making at worst moderate net rental losses these days. Yes, investors have been considerably more active recently due to prevailing low interest rates, but remember the ratio of stock versus flow, while new investors have been generally able to borrow money at around just 4 percent, or somewhere close to it.</div>
<div> </div>
<div>Unfortunately as I expected it transpires that the ALP have botched their numbers, and Labor will accordingly cop a good deal of heat on this point from the Coalition. Net rental losses halved
</div>
<div> </div>
<div>The latest Australian Taxation Office (ATO) Taxation Statistics to 2013-14 show that the potential budget impact of negative gearing to taxpayers has crumbled by well over 50 per cent in only two years (and by considerably more from the peak), and of course there will be more declines to come for at least the next two tax years as well. </div>
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<div>It is no shock to me to discover that net rental deductions have fallen by more than half in the two tax years to 2013-14, from $7.9 billion to just $3.7 billion. And recall that the cash rate has been cut several times further since 1 July 2013, from 2.75 per to only 2 percent, so there are yet further declines to net rental losses in the post. The latest statistics for financial year 2013-14 show that just under 1 million or exactly 60 percent of those claiming net rental losses have a taxable income of less than $80,000 (thereby paying tax at a highest marginal rate of only 32.5 percent or lower), while only 133,307 or 8 percent of those claiming are paying tax at the highest marginal rate. It is true to a point that middle aged and slightly older Aussies tend to negatively gear property around their peak earning years. This rings true from my experience and the experiences of my peers - none of us owned rental properties as students, or indeed for some time after that as we paid off student debts and saved initial deposits, but plenty do now we are in our late thirties. </div>
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<div>Given that taxpayers across all taxable income brackets use negative gearing, after tax-effecting net rental losses of only $3.7 billion in financial year 2014 it is clear that as things stand such a move to limit negative gearing to new dwellings prospectively could only save a fraction of the amount claimed from the federal budget.</div>
<a href="/images/2016/03/21/NG.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/21/NG.jpg" alt="">
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<div>Remember that Labor is not proposing to scrap negative gearing, rather to grandfather existing arrangements and limit negative gearing to new dwellings. With a record 776,672 earning a profit for their rental properities, the total cost of negatively geared properties only fell by 12.5 percent to a four year low of $10.9 billion. And given that negative gearing losses are carried forward and taxes levied at a future date - or upon eventual sale in event of a capital gain - net rental losses are a timing difference only and the ALP projections are exposed as too optimistic. Further declines in the post  Realistically, then, the projected $32.1 billion of savings could only feasibly come from cranking up the rate of capital gains tax, itself a crappy tax - an inefficient tax insincerely marketed as a "discount", although in the case of property it is actually levied on top of fairly vicious stamp duties as well as rates/land taxes etc. Total capital gains reported by taxpayaers increased by 37 percent to $34.4 billion, largely thanks to fewer loss making transacions as the financial crisis fades into the rear-view mirror. </div>
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<div>It is worth noting in passing that moves to restrict property investor activity and therefore lending would also result in lost levies from stamp duties and reduced company taxes on bank earnings, as well as putting downward pressure on superannuation balances via lower share prices.</div>
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<div>If this sounds harsh on Labor, recall that they were actually in government until 2013, so where were the sweeping policy changes then? Ironically, the ALP was in power for a six year stretch when scrapping negative gearing might actually have made a material difference to the budget, but alas that particular ship has now well and truly sailed. </div>
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<div>Futures markets are pricing in a further 25 basis points cut to the cash rate by November 2016, suggesting that the ATO aggeregated statistics for net rental deductions could continue declining for at least another three tax years to come. </div>
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<div>A potent combination of the existing negative gearing rules and low interest rates have encouraged record dwelling investment - and in turn a surge residential construction jobs - and at the same time have done an an sterling job of keeping capital city rents down as new supply comes online apace, encouraged by strong aggregate demand for property and an uplift in prices. </div>
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<div>And all of this is before the potential distortions of encouraging investors to speculate on considerably riskier new properties are even touched upon, let alone the concerning impact of increased public housing costs on the budget.</div>
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<div>On the back of these slim pickings, and given that PM Turnbull has already batted changes to the capital gains tax to the fence, there is Buckley's chance of the Coalition proposing a similar move to the ALP in Opposition. Presumably this is for similar reasons that Labor took no such action when they weren't in Opposition - pollies actively deflating a housing market in the midst of a once-in-a-century terms of trade and resources investment bust? It seems like a remote possibility to me, but you can choose to believe whatever you want. The wrap All of this has been well known about for some time, of course: scrapping negative gearing was never going to be much of a boon for the budget. If negative gearing is going to be binned then it should be so on intergenerational grounds or because it represents iniquitous tax legislation, not based upon bogus claims of "billions" to be saved in the budget. Finally for today, spare a thought for the taxation figures above, the line items of which I have charted simply as the ATO present them, for they're doubtless set to once again be tortured mercilessly come Monday morning. </div>
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<div>
PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blogger</a>. 
His latest book is <a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>.
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pwargent-M4siyDbqQY

Negative gearing set to stay: Pete Wargent

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The cost to the federal budget of negatively-geared rental property deductions has fallen 12.5 percent to $10.9 billion.
It sits at the lowest level in four years due to record low interest rates.
The latest Tax Office statistics show the country's two million landlords claimed interest deductions of $21 billion, a decline of 9 percent.
It noted earnings from rents were flat at $38 billion.
The figures, published on Friday, were based on taxpayer's 2013-14 tax returns.
<a href="/images/2016/03/21/Screen%20Shot%202016-03-21%20at%2010.24.04%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/21/Screen%20Shot%202016-03-21%20at%2010.24.04%20AM.png" alt="">
SOURCE: PCA/ATO
It show 62 percent of landlords are returning net losses, down from 64 percent the year before.
A record 776,672 taxpayers earned a net profit from their investment property in fiscal 2014, an increase of 44,322 people compared with the year before.
Columnist Pete Wargent writes the ALP have botched their numbers, and Labor will accordingly cop a good deal of heat on this point from the Coalition.
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