IN RESPONSE to Dick James's letter to the editor headlined "Negative gearing" (November 8), I feel it is important to make comment and clarify a few facts in what is an important debate and which is bound to be further considered in the upcoming federal government taxation white paper.
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Firstly, the majority of investors are ordinary mums and dads who have only one investment property, and it often forms an important part of a self-funded retirement plan.
In fact, 80 per cent of all loss-making properties are owned by people who have an annual income of less than $80,000. Negative gearing allows lower income earners to purchase property as a retirement savings strategy that they wouldn't otherwise have.
The rules that allow negatively gearing of property are the same rules that apply to other asset classes such as shares. To amend the current negative gearing provisions for housing would see real estate treated differently to other asset classes and create a distortion in the investment landscape.
Contrary to popular misconceptions, negative gearing of property investments is passed on to renters in lower rents. Conversely the withdrawing of negative gearing would see rents rise.
The Commonwealth's provision of negative gearing has helped provide additional vital rental stock and substantially alleviated the pressure on both federal and state governments for greater provision of welfare housing.
The removal of negative gearing would also force some investors to drop out of the market, causing serious downward pressures on all property prices - and this is not good news for the millions of property owners right around the country, not only investors. Investors currently represent around 30 per cent of residential property purchases nationwide.
The damaging outcomes would potentially have a greater impact on the Australian residential property market than the GFC and could easily trigger many unforeseen circumstances for the Australian economy generally.
Negative gearing was removed by then treasurer Paul Keating back in the '80s and quickly reinstated after only about a year when they realised they had made a massive mistake. Let us hope that Treasurer Joe Hockey is a student of history and learns from the mistakes of his predecessors and resists any temptation or pressure from Treasury to gain additional revenue by altering in any way current provisions.
— PETER BUSHBY, president, Real Estate Institute of Australia, ACT.
