Labor Party our next Federal Government?
Currently, the polls say that the Australian Labor Party will be our next Federal Government.
If Labor does return to government what effect will it have on residential property investors?
Until the Labor Party’s final policy announcement, we are in the dark. They have made clear their intention to deter residential property investors. Their misguided belief is that an absence of property investors will make more homes available for first homebuyers.
Why misguided?
The main consequence of having fewer investors is less housing available for rent. This results in an increase in rental prices making it harder for renters to save for the deposit on their first home.
My basis for this claim
In the mid-1980’s Paul Keating’s Labor government abolished negative gearing. Within 12 months, rents in Sydney increased by 60%!
They had not appreciated the amount of rental housing provided by the private sector. It pushed the waiting list for public housing out so far that it has still not recovered.
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What did the government do to address the problem and save face?
To get investors back into the residential market, the government allowed investors to depreciate the cost of a new building at 4% for 25 years.
This worked to a limited extent. Investors said, “Paul, we like this 4% depreciation but we still want negative gearing before we come back into the market.”
And did Paul Keating’s Labor Party Government listen?
Yes. In less than 2 years, they re-introduced negative gearing but dropped the 4% building depreciation from 4% to 2.5%.
After all this, the investors ended up better off with negative gearing returned, plus the 2.5% new building depreciation.
There was no effect on investors who had negatively geared properties prior to the changes and the same applies now.
You would think that the Labor Party had learned a lesson.
Set up your residential property investment portfolio before the next Federal Election and any change in legislation will not affect you.
I urge those interested in buying investment properties in Brisbane or setting up a SMSF to contact my office ASAP for a cost-free/obligation free appointment.
Until next week …
Steve Taylor
If you prefer to listen here is my radio interview on Emerald 4HI:
At the helm of Steve Taylor & Partners, Steve has been delivering expert advice and product knowledge to investment clients for over 30 years. We provide individuals, couples and families with the right strategies to create wealth and change their lives with solid bricks and mortar.
DISCLAIMER
Steve Taylor & Partners blog is opinion and not advice. Readers should seek their own professional advice on the above subject. The figures stated in this article were accurate at the time of publication. For up to date figures, please contact our office.
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