Scare Tactics

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GUEST OBSERVATION
The lowest blow of this election campaign may have come from a firm of real estate agents that abused its position of trust to scare renters about Labor’s proposed negative gearing changes.
If you are one of those renters, relax. You have nothing to fear from the changes. You might even benefit from them. The only interests the real estate firm is protecting is its own.
<a href="https://images.theconversation.com/files/274660/original/file-20190515-60541-2j3qx4.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip" target="_blank"><img src="https://images.theconversation.com/files/274660/original/file-20190515-60541-2j3qx4.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=237&amp;fit=clip" alt=""></a>
Letter from Raine &amp; Horne principal Graham Cockerill. <a class="source" href="https://www.propertyobserver.com.au/https://twitter.com/samanthamaiden/status/1127827648451715074" target="_blank">Samantha Maiden, Twitter</a>
Late last week Raine &amp; Horne principal Graham Cockerill wrote to tenants saying Labor’s changes would be “devastating” and including material from the Real Estate Institue of Australia warning of what might happen if “the planned changes to negative gearing do go ahead”.
“The fall in property prices will decrease the value of 18 million Australian’s retirement nest eggs,” and “rents will rise” the material warns. “Further, government savings will be less than estimated, unemployment will rise and our whole economy will be in jeopardy.”
Other renters have received official looking material apparently sent by the Liberal Party reading “Final Notice: Rent Increase”.
<a href="https://images.theconversation.com/files/274574/original/file-20190515-60557-16beq7g.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/274574/original/file-20190515-60557-16beq7g.jpg?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a>
<a class="source" href="https://www.reddit.com/r/brisbane/comments/bofcll/i_received_this_piece_of_fear_mongering_political/" target="_blank">Apotheosical, Reddit, Tuesday May 14</a>
It’s a jumped-up scare campaign. But some renters may give it more credibility than it’s worth because some of it comes from the people who normally notify you when your rent is going up.
Here are some facts.
Labor’s policy will not raise rents.
Real estate agents don’t decide rents, landlords do.
The Labor policy won’t fundamentally change the balance of supply and demand in the rental market.
Yes, if there are fewer cashed-up investors that might mean fewer rental properties. But those properties won’t disappear – home buyers will move in, so there will be fewer renters.
And the policy shouldn’t reduce the supply of new homes, because most investment lending goes to existing rather than new homes. Labor’s policy actually leaves in place the tax breaks for people who invest in new homes.
Some of the renters targeted by Raine &amp; Horne might be saving to buy a home. If you are one of them, here are some more facts.
Labor’s policy will help renters buy houses
You stand to benefit from the Labor policy. If there are fewer taxpayer dollars in the hands of property investors, that will boost your prospects of being able to buy a home yourself.
If there is reduced demand from investors, house prices will fall. The fall will be modest – we at Grattan Institute calculate it will be <a href="https://theconversation.com/confirmation-from-nsw-treasury-labors-negative-gearing-policy-would-barely-move-house-prices-116736" target="_blank">in the range of 1% to 2%</a>. The Commonwealth and NSW Treasuries estimate similar modest price falls.
So what about the headlines you might have seen about 10% or 20% price falls?
All those estimates were prepared by – or paid for by – the property industry. If you detect a pattern you are right. Well-resourced property groups that stand to lose from capital gains tax and negative gearing changes have been muddying the water for a long time now.
The industry talks its own book
Here are a few facts that real estate agents aren’t rushing to tell you. Negative gearing and the capital gains tax discount work together to create a very generous tax regime for the property industry. Investors write off their losses after interest costs in full against the taxes on their wages. But when they sell, they only pay tax on half their gain. Given strong growth in property prices and low inflation, some wage earners <a href="https://grattan.edu.au/wp-content/uploads/2016/04/872-Hot-Property.pdf" target="_blank">end up paying less tax</a> than if they had not invested at all, despite the profits on the investments.
And like most tax concessions, people with higher incomes benefit the most. That’s why the share of anaesthetists negatively gearing is almost triple that for nurses, and the average tax benefits they receive are around 11 times higher.
The end result is that the government has been subsidising investors to buy their second, third or tenth property while at the same time crying crocodile tears about the fact that lots of young people trying to buy their first home are locked out of the market.
The industry claims of rising unemployment and putting the economy “in jeopardy” show a similar disregard for facts. The Labor policies will collect on average an extra A$3 billion to A$4 billion a year in revenue for the government over the first decade, less than a 1% increase in the total tax take. Much of that money will go back into the economy through <a href="https://theconversation.com/labors-costings-broadly-check-out-the-days-of-black-holes-are-behind-us-thankfully-116904" target="_blank">reductions in other taxes or increases in spending</a>. Any negative overall effects from the higher levels of tax will be imperceptibly small across a A$1.8 trillion economy.
There is, however, one industry that might go backwards.
Real estate agents take healthy commissions from housing investors. Investors, particularly negatively geared ones, also turn over properties faster than homeowners. So real estate agents benefit when there are more properties in the hands of investors and fewer in the hands of homeowners.
Don’t be scared by the real estate agents’ campaign. Labor’s negative gearing policy won’t raise your rent. And if you’re trying to buy your first home, it just might boost your chances.
<a href="https://theconversation.com/profiles/danielle-wood-147710" target="_blank">Danielle Wood</a>, Program Director, Budget Policy and Institutional Reform, <a href="http://theconversation.com/institutions/grattan-institute-1168" target="_blank">Grattan Institute</a>
This article is republished from <a href="http://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/real-estate-agents-targeting-tenants-is-the-lowest-of-the-low-blows-during-election-2019-117188" target="_blank">original article</a>.
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Real estate agents targeting tenants is the lowest of the low blows during election 2019: Grattan Institute's Danielle Wood

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EXPERT OBSERVER
Sydney Lord Mayor, Clover Moore (pictured), will hold a community meeting on March 6 to scaremonger residents of Waterloo by claiming over development by the NSW Government.
The Lord Mayor’s doom and gloom statements about over development of the social housing precinct in Waterloo reflect a growing anti -development rhetoric by politicians in the build up to the NSW Election on 23 March.
In previous community meetings Clover Moore has shown images of wall to wall high rise towers in Hong Kong as being typical of what will happen at Waterloo. But the truth is very different.
The Lord Mayor claims that the density of the proposed 6,800 apartments at Waterloo will be excessive yet it will by 25 percent less dense that the award winning Central Park development on Broadway.
The density of the preferred option for Waterloo will be 730 people per hectare compared to the 1,000 people per hectare at Central Park yet few people would claim that Central Park is over developed.
The City of Sydney has used dwellings per hectare density figures but social housing units in inner Sydney have only 1.3 people per dwelling as tenants are mainly single people.
To compare these smaller dwellings to large homes in other parts of Sydney is incorrect and giving a false measure of density.
The NSW Government deserves credit for its proposal to revitalise the ageing social housing precinct at Waterloo.
For decades governments and councils have called for the renewal of the precinct with a focus on mixing market based housing with social and affordable housing but until now none have found an economically viable solution. It is easy to criticise the current proposal if you don’t have to fund the project which will cost billions of dollars.
The City of Sydney has slashed into the government’s funding model by reducing the income earning market apartments by a massive 1,500 dwellings, eliminating the taller buildings that generate much of the income then saying that new funds should come from the government and that any renovations should be funded by someone else.
The approach for the Waterloo revitalisation by the NSW Government is similar to world best practice. In Canada the Toronto Community Housing Corporation (TCHC) called for bids from the private sector to revitalise the Regent Park social housing estate a few kilometres from the centre of town in the mid 2000’s.
The project replaces 2,083 degraded social housing units and adds 448 affordable housing rental units along with 5,400 new market condominium units. So around 70 percent of the final homes will be market homes and they will subsidise the 30 percent that are social or affordable homes.
The Waterloo market housing proportion is only 65 per cent with 35 percent being social or affordable housing. Both projects are Page 2 of 3 carefully spread over 20 year timeframes so that change is carefully managed for existing residents and the project can respond to conditions in the market place.”
The City of Sydney scheme is presented in their report as being light and filled with greenery while the state government’s scheme has been presented as ominous black towers.
This continues the Lord Mayor’s rhetoric that Waterloo would become a ‘ghetto’ with ‘Hong Kong density.’
What is needed by the City of Sydney Council is positive comments about how to improve the public domain and social outcomes of the masterplan rather than the current approach to totally undermine the proposal. The end result of the Lord Mayor’s attack could be to stop the project and put it on hold for a few more decades.
We are on the edge of making the revitalisation of Waterloo a reality after years of detailed work with the community. To sabotage all this work now would be a very destructive act by the City of Sydney Council.
CHRIS JOHNSON is the Urban Taskforce CEO
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Clover Moore is scaremongering Waterloo residents: Chris Johnson

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GUEST OBSERVER
The many measures adopted to encourage more first home buyers into the property market have so far failed to produce the upswing that everybody had hoped for, leaving many to wonder if there is a solution to the declining rates of home ownership.
But put yourself in the shoes of those contemplating the big step into a lifetime mortgage and there should be no surprises. There is so much uncertainty swirling around property which only serves to discourage first home buyers from making the most important financial decision of their lives.
We all know that certainty is crucial to future planning, whether in business, life or real estate. And some of the negative sentiments that are getting an airing along with the always-on electioneering and point scoring do nothing to engender confidence.
Doomsayers who predict catastrophic falls in property values, despite ample evidence to the contrary, make for scary reading. The forensic examination of every Reserve Bank statement, looking for hints of an interest rate rise, can be equally misleading and off-putting.
You have to read deep and wide to find a rational voice in this debate and that is difficult when people who should know better seek to exploit a complex problem for political gain.
Last week the Greens announced their war on home ownership with a party platform to strip away capital gains tax exemptions and negative gearing. Never mind that negative gearing is the vehicle that many first home buyers are relying upon to get their foot on the property ladder.
But Labor’s weekend declaration that they are going into election mode to be ready for the gift that might arise from the citizenship mess that has embroiled so many politicians, is the real worry.
In the last election, Labor singled out property for special treatment as an investment class, grandfathering their own investment property portfolios but depriving future owners of the same benefits. Is it possible to be any more cynical or self-interested? At least the Greens had the decency to share the pain.
In an environment where many politicians, including those who would be in power in a change of government, have a stated policy intention to reduce property prices, it is hardly surprising that many potential first home buyers are sitting on their hands.
This attack on property investment is rolled out under the banner of equality, purported to enable more people to experience the financial and emotional security that comes with home ownership.
However the effect, in the here and now, is that it adds another level of uncertainty for those who might otherwise take advantage of historic low interest rates and the government stamp duty concessions that have been broadened to encompass both new and second hand homes.
Anybody who can remember the heart-palpitating moment when they bought their first home will know that it was the best decision they ever made. Young people do not need to have their considered decision-making undermined by well-heeled politicians and commentators pursuing their own personal or political agendas.
If it’s equality we’re after, let’s play fair and leave off the scare tactics.
Andrew Cocks is a Managing Director at Richardson &amp; Wrench and can be <a href="https://www.randw.com.au/staff-profiles/2332-andrew-cocks" target="_blank">contacted here</a>.
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