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

Capital Gains

jchancellor-FAypfDUnLy

Open letter to Bill Shorten - don’t touch negative gearing or the capital gains tax: Gavin McPherson

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Capital growth for capital city unit values nationwide recorded an increase of 4.9 percent year on year, according to CoreLogic RP Data's Hedonic Home Value Index, March 2016.
Unit values in Sydney increased 7.3 percent year on year, Melbourne 2.5 percent.
<a href="/images/2016/04/01/700_units_RP.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/01/700_units_RP.jpg" alt="">
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jonathanchancellor-7SQnKwU6yx

Capital city unit values up 4.9 percent year on year: CoreLogic RP Data

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Combined capital city dwelling values rose by 6.6 percent year to year to according to CoreLogic RP Data's Hedonic Home Value Index, March 2016.
CoreLogic RP Data head of research Tim Lawless said the figures show an over-performance by detached housing relative to units.
"This can most likely be attributed to the more efficient release of higher density housing supply together with an ongoing shortage of strategically located vacant land and new detached housing stock,” Mr Lawless said.
<a href="/images/2016/04/01/Screen%20Shot%202016-04-01%20at%203.00.56%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/04/01/Screen%20Shot%202016-04-01%20at%203.00.56%20PM.png" alt="">
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Combined capital city dwelling values rose by 6.6 percent year to year: CoreLogic RP Data 

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Hi Margaret,
We have a 1 acre or 4000 sq metre block of land , zoned farming in country Victoria. We bought it in July 2014 as an investment to develop it as a future home site.
If I sell a block of land with contract of sale dated in 2017 financial year, but settlement is in 2018 financial year, is CGT based on contract of sale date or on settlement date? It will make a difference as we will be retired in 2018 financial year and will be in  a different tax bracket.
The block of land, zoned farming, did not have a planning permit to build a dwelling or shed and has generated no income while we have owned it but we have made improvements. Are the cost of the improvements deductible? We have planted 600 trees at a cost of $1100.
We have drawn up a set of house plans and successfully applied for a planning permit to build a dwelling and shed at a cost of $1400. Are maintenance costs deductible?
E.g. 100 trips to the block of land to mow lawns, water trees, earth moving costs to remove dead trees, loan costs and purchase costs and selling cost.
Can we deduct stamp duty on purchase? Legal costs on purchase? Loan borrowing costs? Loan interest from date of purchase to date of sale? Loan discharge costs? Legal costs on sale of land? Council rates from purchase date to sale date? Break fees on a fixed loan for the land purchase if I sell before the 4 year fixed term is completed?
Thanks for your suggestions
Regards
Kevin
 
Hi Kevin,
According to the Australian tax office:
When you sell or otherwise dispose of real estate, the time of the event (when you make a capital gain or capital loss) is usually:
<ul>
<li>when you enter into the contract (generally the date on the contract), not when you settle – the fact that a contract is subject to a condition, such as finance approval, generally doesn't affect this date</li>
<li>when the change of ownership occurs if there is no contract (such as when a property passes to a beneficiary), or</li>
<li>if the real estate is compulsorily acquired – the earliest of</li>
<ul>
<li>when you receive compensation from the acquiring entity</li>
<li>when the entity became the property's owner</li>
<li>when the entity enters the property under a power of compulsory acquisition, or</li>
<li>when the entity takes possession under that power.</li>
</ul>
</ul>
In your case this means the event occurs in 2017 and this is the year the tax becomes due and payable.  If you have already lodged your tax return before settlement and the receipt of the proceeds, you would need to request an amendment to the prior year’s return. 
As for the remainder of your questions, you do need specific advice which takes into account all of your circumstances, including the purpose for which you originally bought the property and your intentions at the time.  Generally speaking though, I can tell you that:
1.   If this is not a working farm the zoning should not impact deducibility of any bona fide investment property related deductions.  You will need to get some specific advice around the planting of the trees, though, as they may not be deductible, unless such planting was required for the purposes of earning property related income.  
2.   Improvements to a rental property are deductible as long as the purpose for the block was to build an investment, and not to build future own home. 
3.   Once a property becomes income producing, maintenance costs are deductible.  If your intention was to build a property to rent out but instead you sell, some of your costs may become capital costs, but again this one would have to be determined by your accountant.
4.  You have a large list of other costs and again, their deductibility depends upon the reason you bought the block – if it was for an investment some may be considered capital costs (and so add to your cost base for the purposes of determining capital gains tax) and others, as long as the property was income producing, may be deductible as yearly expenses.  Even some costs which are normally yearly expenses can be added to the cost base in certain circumstances.  
It is critical that you consult with a highly skilled accountant who has experience in this area to be sure that you get the right advice.  Remember, regardless of what any one tells you, the responsibility for making the right claims rests with the tax payer.  Bad advice won’t get you out of trouble if you make an incorrect claim.
 
Have a property question?  <a href="mailto:news@propertyobserver.com.au" target="_blank">Ask Margaret!</a>
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mlomas-KC9MUPZ6Ca

Ask Margaret: Is CGT based on contract of sale date or on settlement date?

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Dear Margaret,
I bought an investment property in 2010 and was rented for 3 years before my family moved in. We are still residing at the said property.
My question is: If I sell the property, will I pay capital gains tax? I have read that if you bought an investment property but lived in it within the first six years, you are exempted.
Can you please explain this further?
Thanks a lot.
Maria
 
Hi Maria,
Capital Gains tax is very misunderstood, and the 6- year exemption even more so.  Many think, as do you, that you can live in a property sometime in that first 6 years to stop capital gains tax from accruing.  Others believe that you only have to move into an investment property for a while before you sell it in order to render it free from capital gains tax.
The tax office is not about to  let you off that easily!  Here are some important basics to know about Capital Gains tax: 
1.       Your own home is capital gains tax free as long as you are living in it.
2.       If you move out of your family home and rent it out, you can have a capital gains tax exemption for up to 6 years from the day you move out.  The conditions for this are that you don’t have another property which becomes your principal place of residence (as you can only have one exemption at a time) and you either move back into it, or sell it within that six years. This might apply if you moved elsewhere and rented with the intention of moving back some day.
3.       If your absence is longer than the 6 years you will have only a partial exemption for the six years.
4.       A property bought for the purposes of earning an income accrues capital gains tax from the moment you buy it.
5.       If you move into the property and it becomes your principal place of residence, then you still have a pro-rated capital gains tax liability for the time that it was a rental.  The purchase price will be your cost base, and the gain will be established from the sale price, and then pro- rated for days rented/days not rented. There are a range of adjustments which can be made to these figures, but they are many and you should check with your accountant to find out what they are. 
Moving into a former investment property cannot wipe your capital gains tax obligations in any circumstance. Equally if you move out of a family home and buy another one to live in, you must decide which property you want your principal place of residence exemption on – the former home or the new home.  If it is the former home, the new home you live in will attract CGT.  There are additional rules, such as the 6 month overlap rule – but this is where it gets complex and where advice from an accountant is paramount.
 
Have a property question?         <a href="mailto:news@propertyobserver.com.au" target="_blank">Ask Margaret!</a>
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What's my capital gains tax on an investment property? Ask Margaret

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GUEST OBSERVER
After Labor announced proposed changes to negative gearing and the capital gains tax discount, Prime Minister Malcolm Turnbull told parliament that the policy would administer two contradictory shocks, massive shocks, to the residential housing market. 
They are proposing to remove from the market for established dwellings one-third of demand. All investors would be gone. When I say all investors, I mean all investors.
That assertion was questioned by some listeners at the time, including The Guardian’s Katharine Murphy.
Does the prime minister’s claim stack up?
<h2>Not all property investors negatively gear</h2>
Data is not directly available on what proportion of home purchases are made by investors. Data on new home lending from The Australian Bureau of Statistics' Lending Finance figures indicates that between one-third and half of new lending is to investors. And ABS census data shows that just under a third of existing properties are owned by investors.
But not all of them negatively gear. Some do not borrow, and others do not borrow enough to be negatively geared: that is, their rental income is greater than the expenses and loan interest. The tax stats show us that about two-thirds of all housing investors are negatively geared. This suggests that around 20% of housing buyers are negatively geared investors.
<h2>Investor demand for housing will reduce – but not disappear</h2>
Labor’s proposed changes will reduce the after-tax returns on property investment.
Although negative gearing has attracted more attention, Labor’s proposed changes to capital gains tax will have a bigger impact on returns. Reducing the discount from 50% to 25% will increase the effective tax rates on capital gains, bringing the tax rates closer to those that apply to other sources of investment income such as rental income and bank interest.
Labor’s proposed changes to negative gearing will also have an impact. Under the policy, investors who make rental losses – because their rental income is less than their costs, including loan interest costs – will no longer be able to write-off those losses against wage and salary income. But for people investing in new housing there will be no change: they will still able to write-off losses against all forms of individual income.
For most investors in existing properties, the changes to negative gearing mainly affect the timing, not the amount, of tax deductions. Losses can still be deducted against investment income, including subsequent capital gains. But negative gearing may lose some of its psychological appeal. While there is no hard research for Australia, some investment advisors have warned against placing too much emphasis on tax breaks (particularly tax breaks on wages) and not enough on the financial returns to the investment.
Together these policies will reduce investor demand for housing. Indeed, one of Labor’s stated aims of the policy is to make it easier for first home buyers to get into the market.
Some investors will switch to other investment opportunities that offer higher post-tax returns. Others might choose to spend more and invest less. But some will also continue to invest in the housing market, and either borrow less, or simply accept a lower return on investment.
The extent to which investors will vacate the property market will ultimately depend on how much post-tax returns fall, and how sensitive is investor demand for property to changes in returns (what economists would call the “elasticity of demand”).
Our estimates suggest that the changes in effective tax rates from Labor’s policy are relatively modest.
Consider an investor in the top tax bracket, paying 45 cents in the dollar on their marginal income and earning a 6% nominal return on their property (half from rental income, half from capital gain). Let’s say the investor buys a property and then sells it after seven years.
Effective tax rates calculate how much tax is paid on the profit made by the taxpayer. If the investor buys the property outright, the effective tax rate will increase from 33% to 35% under Labor’s policy. If the same investor borrows 40% of the house value then effective tax rates increase from 19% to 22%. And for a negatively geared investor borrowing 80% of the property value, the effective tax rate changes from 5% to 9%.
<a href="/images/2016/03/9/image-20160307-30467-5ajcud.JPG" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/9/image-20160307-30467-5ajcud.JPG" alt="">
 
And any changes in post-tax returns under Labor’s policies may be swamped by annual fluctuations in property prices. As the Commonwealth Bank of Australia Chief Executive Ian Narev recently noted:
I can tell you having a $400 billion home loan book – your assumptions on unemployment and what’s happening in global interest rates will dwarf whatever assumptions you’ve got on the modelling about the impact of negative gearing by a factor of… I can’t tell you the number but it’s a big number.
<h2>A massive shock?</h2>
Under Labor’s policy, other passive investments that generate capital gains, such as shares, will also be subject to a more stringent tax treatment. Other investments that will be relatively more attractive after the change – for example, superannuation and bank deposits – have a very different profile of risk, return and liquidity.
No-one can ever perfectly predict investor behaviour. Ultimately, there are a whole host of factors that people take into account when investing in property, including rental returns (particularly for the one third of positively geared investors), risk perception, familiarity with the asset class and ability to obtain bank finance. In our opinion, modest changes in tax treatment are unlikely to change the decision-making calculus for the majority of investors.
Indeed, looking at other countries with less generous tax treatment for investment properties – US, Canada, Germany and France, for example – there is still plenty of investor activity in housing.
Given the evidence we have seen, it is overreach for the prime minister to say that Labor’s policy will drive away all investors away.
Danielle Wood is fellow, Australian Perspectives, Grattan Institute and can be contacted <a href="https://theconversation.com/profiles/danielle-wood-147710" target="_blank">here</a>.
John Daley is chief executive officer, Grattan Institute and can be contacted <a href="https://theconversation.com/profiles/john-daley-1870" target="_blank">here</a>.
Both are authors for The Conversation.
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Negative gearing changes won't mean all investors depart market

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House values continue to increase faster than units but the gap in capital gain has closed over the last few months, according to CoreLogic RP Data's Hedonic Home Value Index for February.
Over the year, house values increased 7.8 percent, units 6.2 percent. According to CoreLogic RP Data head of research Tim Lawless, over the current growth phase, house values have increased by a total of 33.3% compared to a 22.8% total rise in unit values.
“The CoreLogic-Moody’s Analytics forecasts for 2016 indicate the pace of appreciation in Melbourne home values is likely to remain more resilient to a slowdown this year, while cities like Brisbane, Hobart and Canberra are set to see an improvement in the growth trend.
"The forecast seems to be evident so far in these numbers.
“Overall, the latest results provide further evidence of a controlled moderation in the pace of home value appreciation.”
House values continued to increase at a faster annual pace than unit values, however the gap in capital gain performance has narrowed over recent months. 
 
<a href="/images/2016/03/Screen%20Shot%202016-03-01%20at%2010.23.42%20AM.png" target="_blank">Click to enlarge</a>
<img src="/images/2016/03/Screen%20Shot%202016-03-01%20at%2010.23.42%20AM.png" alt="">
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House, unit capital gain gap closes: CoreLogic RP Data

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GUEST OBSERVER
There is much confusion about the effects of Labor’s tax proposals with respect to investors in rental housing. They propose to grandfather existing arrangements. But investors in the future can only negatively gear newly constructed housing, while the policy recommends the capital gains discount fall from 50% to 25%.
Claims by Prime Minister Malcolm Turnbull that house prices will collapse appear to be contradicted by his assistant treasurer Kelly O'Dwyer who claims that housing costs will soar. These puzzling assertions arise due to a failure to distinguish between the market in rental housing, where housing is leased, and the market in which investors and owner occupiers buy and sell housing. Critically these two markets are interrelated.
To see why, consider the first round effects of Labor’s proposals when we put the grandfathering arrangements to one side (for the moment). Some existing investors will sell up when leases come up for renewal. There are now more tenants seeking rental housing opportunities than there is supply to meet their demand. Rents will begin to rise.
But the houses which investors quit add to the properties available for sale; there are now more houses available for purchase than there are buyers. House prices will begin to fall.
These market signals trigger a second round of effects. Some tenants will elect to buy rather than rent. After all renting has become more expensive and home ownership has become cheaper. These second round effects help to put a floor under falls in house prices, and help cap rent rises.
By considering the inter-relationships between the two markets we can understand how the government has issued apparently contradictory statements. Rents will rise and so the housing costs of tenants will increase. But there will be falls in house prices (or more likely a slower growth in prices); while existing owners take a hit, first home buyers housing costs are lower and attainment of home ownership becomes more affordable.
The second round effects mean that impacts are likely to be muted. This is made even more likely by a grandfathering proposal that should prevent a stampede by existing investors seeking to relinquish their property investments.
A disappointing aspect of the debate so far has been its neglect of the longer term structural consequences of Labor’s suggested reforms. Our current arrangements encourage high tax bracket investors to take on debt in the “chase” for capital gains. Capital gains are leniently taxed as compared to ordinary sources of income, such as earnings and rents.
Only 50% of capital gains are added to assessable incomes. This is particularly attractive to high tax bracket investors. Moreover, they are taxed on realisation rather than as they accrue. The shrewd investor realises the gains when assessable income from other sources declines; for example, following retirement when the investor’s marginal tax rate commonly falls.
There are not enough high tax bracket investors willing and able to invest in all our private rental housing stock. They tend to cluster in those segments of the market where healthy capital growth is expected, but rental yields are lower. Low tax bracket investors tend to cluster in segments where capital growth is expected to be subdued. Typically these are areas with lower house prices. To ensure adequate returns rental yields have to be higher in these low house price segments.
We therefore get a distorted investment pattern that disadvantages the supply of affordable rental housing.
Labor’s proposals will curb these distortionary effects by reducing the capital gains discount. They will also reduce the tax incentives to leverage investments. Rising indebtedness is a threat to the resilience and stability of our housing market.
Many believe that repayment and investment risks carried by heavily indebted home buyers played a central role in precipitating the global financial crisis. Tax concessions that favour taking on debt exacerbate those risks. If Labor’s proposals succeed in attracting attention to these and other structural problems that plague Australian housing markets, they will have a much wider significance.
 
Gavin Wood is professor of housing, RMIT University and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/gavin-wood-113723" target="_blank">here</a>.
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Will Australian house prices collapse if negative gearing changes?

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GUEST OBSERVERS
The Labor party took everyone by surprise over the weekend when it announced it would limit negative gearing to new housing and reduce the capital gains tax discount to 25%.
Proving negative gearing is no longer politically untouchable, the government has hinted its own policy may go some way in the same direction. But even then, some of the myths and half-truths peddled by vested interests have returned to haunt the debate.
Listening to the housing industry you would think that property tax concessions single-handedly drive new housing supply, keep a lid on rents and provide an opportunity for middle and low income earners to build wealth. In reality, these costly tax breaks increase speculation activity in the housing market, reduce affordability for first home buyers and primarily benefit high income earners. So why have some of these myths proved so enduring?
<h2>Myth 1: Changes will hurt mum and dad property barons</h2>
Like many myths, this one relies on some degree of truth – there are many middle income earners who negatively gear – but the emphasis on this group as the primary beneficiaries of property tax concessions relies on a statistical sleight-of-hand.
The government this week pointed out that most people that negatively gear property earn less than A$100,000. This is perhaps less surprising when you consider that so do almost 90% of the population: $100,000 a year puts you well in upper income territory. And the proportion of taxpayers negatively gearing is much higher for those earning over $100,000 than below this amount.
 
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/111620/width668/image-20160216-6548-1kdin4.JPG" alt="">
 
But compounding this myth is way its proponents use taxable income to show the distribution of tax benefits. People who negatively gear have lower taxable incomes because they are negatively gearing. This explains the high proportion of people with no taxable income owning loss making property investments – their declared losses are so large they have reduced their taxable incomes to zero. When we adjust to look at people’s incomes before rental losses are taken out we see that the vast bulk of the tax concession goes to those at the top. The top 10% of income earners receive almost 50% of the tax benefit from negative gearing.
 
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/111618/width668/image-20160216-22587-7yfscr.JPG" alt="">
 
Capital gains are even more skewed towards the wealthy. The top 10% of income earners receive almost 70% of the capital gains.
But what about all the property investing nurses and teachers we hear so much about? Well, there are some teachers and nurses that negatively gear – around 12% and 9% of them respectively. But they are much less likely to use these tax breaks than anaesthetists (29%), surgeons (27%) and finance managers (23%). And the average tax breaks received by those in the high income professions are also much larger, with the average anaesthetist reducing their tax bill by ten times more than the average teacher.
<h2>Myth 2: Negative gearing promotes new housing supply</h2>
The property industry argues that tax incentives for investment housing encourage more homes to be built. If so, it is a very inefficient way to do it. More than 93% of property lending is for existing housing.
Because negative gearing increases the price of homes it may encourage a little more building. But the big restraint on new building is not a lack of profitability in housing, but the availability of land and the planning permissions required to increase density in inner and middle suburbs. Tax concessions in this supply constrained environment mainly just bid up prices for the limited new supply.
In any case, most policy proposals carve out new supply. The Labor policy continues to allow full tax write offs for rental losses on new housing. So if anything the proposed policy change would encourage new supply.
<h2>Myth 3: Negative gearing keeps rent prices lower</h2>
But the most enduring myth around negative gearing concerns its role in controlling rents.
To understand the origin of this myth, we need to explore some history as well as economics.
The property industry claims that rents rose when the Hawke government restricted negative gearing in 1985. But this is a Sydney-centric version of the past. Rents did rise rapidly in Perth and rose somewhat in Sydney. Yet inflation-adjusted rents were stable in Melbourne and actually fell in Adelaide and Brisbane. In Sydney and Perth population growth and insufficient residential construction – due to high borrowing rates and competition from the stock market for funds – not the policy change, led to the rent rises.
 
<img src="https://62e528761d0685343e1c-f3d1b99a743ffa4142d9d7f1978d9686.ssl.cf2.rackcdn.com/files/111619/width668/image-20160216-22593-18cs5nz.JPG" alt="">
 
The industry also claims that if negative gearing is restricted, landlords will try to pass on some fraction of their higher tax costs by pushing up rents. But will they succeed?
Rents are ultimately determined by the balance between demand and supply for rental housing. In property markets – as in other markets – returns determine asset prices, not the other way around. Rents don’t increase just to ensure that buyers of assets get their money back.
Many other landlords with investment properties that are profitable won’t be paying higher taxes. Tenants will try to beat rent rises by threatening to move. So competition in rental markets will limit material rent rises.
Some investors may sell their properties if tax concessions are less generous. This might reduce house prices, but it will not increase rents. Every time an investor sells a property, a current renter buys it, so there is one less rental property and one less renter, and no change to the balance between supply and demand of rental properties. Indeed, one of the benefits of changes to negative gearing is that it makes housing more accessible for first home buyers.
The Labor party was brave to propose changes to negative gearing and capital gains tax concessions. But until changes like these are made, the property industry will continue to try to muddy the debate with myths and half-truths, and most ordinary Australians will be the losers.
Danielle Wood is fellow, Australian Perspectives, Grattan Institute and can be contacted <a href="https://theconversation.com/profiles/danielle-wood-147710" target="_blank">here</a>.
John Daley is chief executive officer, Grattan Institute and can be contacted <a href="https://theconversation.com/profiles/john-daley-1870" target="_blank">here</a>.
Both are authors for The Conversation
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Three myths on negative gearing the Australian housing industry wants voters to believe

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Brisbane home values increased by 1.9% over the September quarter, according to CoreLogic RP Data's October Housing Market Update.
CoreLogic RP Data research director Tim Lawless said Brisbane's home values over the September quarter are 4.6% higher than the same time last year, with capital gains more moderate than those made in Sydney and Melbourne with houses up 4.9% and units 2.1%.
 
Watch the update <a href="https://www.propertyobserver.com.au/https://vimeo.com/141744157" target="_blank">here</a>.
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