Our Clients

RESOURCE

Negative Gearing Report

Download Adept Economics Research.
Download

Case Study

Negative gearing modelling

In 2016, Adept Economics advised leading Brisbane-based financial planning firm Walsh’s on the likely economic and property market impacts of the then federal Opposition’s proposed changes to negative gearing of investment properties and capital gains taxation. The analysis received substantial media coverage during the 2016 election campaign, including from the Australian, Daily Telegraph, Sky News, 4BC, and the Guardian Australia. The analysis found that restricting negative gearing to new properties and reducing the capital gains tax (CGT) discount from 50 percent to 25 percent, as proposed by the Federal Opposition, would significantly reduce the rates of return for investment properties purchased after the implementation date.

Highly-leveraged investors would be more acutely affected. The policy may result in lower property prices on average, possibly in the order of 4 percent, given lower rates of returns would make investment properties less attractive to invest in and would reduce the willingness of investors to pay for them. In particular market segments popular with investors, such as inner-city units, prices may decline to a larger extent than 4 percent. For example, for an inner-city apartment block that is 50 percent owned by investors, the decline in property prices could be 5 percent or more.

Even though existing properties purchased before 1 July 2017 would be ‘grandfathered’, their value would be affected because the value they would eventually sell for would be reduced, as a prospective investor purchasing the property would earn a lower rate of return due to the changes.

The project is a good illustration of Adept Economics’ standard methodology as it combined extensive data analysis and economic modelling informed/ground-truthed by consultation with industry stakeholders, including leading real estate agents and property developers.

Free Economic Updates

Subscribe to receive our monthly economic e-newsletter, packed with the latest insights, hints and tips from our leading economists.
  • This field is for validation purposes and should be left unchanged.
Download Free Resource
By providing your email to access this resource you are opting in to receive news, research and updates from Adept Economics
  • By providing your email to access this resource you are opting in to receive news, research and updates from Adept Economics.

  • This field is for validation purposes and should be left unchanged.
Powered by