Economists respond to Labor plans
Labor has proposed changes to negative gearing and capital gains tax.
The Opposition wants to stop investors who purchase established properties from negatively gearing them.
Its plan would allow the owners of existing investment properties to continue to apply negative gearing concessions - deducting any losses incurred.
It also allows investors who buy new dwellings - adding to housing supply - would also be entitled to the deduction.
Labor’s plan would also see the owners of existing investment properties have their 50 per cent capital gains concession ‘grandfathered’, but investors who buy after the policy start date would only be eligible for a 25 per cent discount.
A new Deutsche Bank report says there is “no evidence” Labor's proposed housing tax policy changes would lead to a ‘slump’ in new home construction.
“If a reduction in the 'after tax return' available to property investors was perceived as imminent, we would expect to see...a temporary surge in approvals as investors sought to access the 'grandfathering' clause in Labor's proposed policy. As yet, there is no evidence of this,” Deutsche Bank economist Phil O'Donaghoe says.
“This lowers the likelihood of a 'slump' in dwelling approvals if the proposed policy is implemented, in our view.
“Our sense is that the relative attractiveness of new dwelling investment compared to investment in established dwellings should be a positive, at least at the margin, for new dwelling construction,” he said in his report.
Independent economist Saul Eslake says Labor’s changes should be implemented quickly so as to avoid a rush of investors seeking to access the grandfathered concessions.
“My concern was that there would be this Gadarene rush to get snouts in the trough. I think that is less of a concern now,” Mr Eslake said.
He also rubbished claims that the changes would accelerate home price falls.
“All that's bollocks,” he said.
“If you're an opponent [of the changes] now is never the right time to do it, and I think that should just be seen through.
“Because existing investors keep their negative gearing, if anything, they're less likely to sell because they would lose their negative gearing.”