Market Update – April 2016

No change to Negative Gearing

Goods news from the Turnbull Government – An announcement has been made that there will be “no change to the negative gearing and capital gains tax rules”. This comes as a welcome sign of relief for many current and new investors.

This news will strengthen the confidence across the nation but also strengthen what is already a strong investor base in the local Tweed Shire and Southern Gold Coast. With a population base of approximately 150,000 between Pottsville and Palm Beach and an estimated 35% living in a rental premises the changing of rules could effect a very large number of people.

Many people often argue the benefits of negative gearing only helps the rich – a perception that is not evidenced (see below). We need to be reminded, though, that if the government didn’t allow some of the concessions to encourage middle-class Australians to enter the investment sector then the government would have to provide more housing. This in turn would cost every taxpayer with the lack of stock and most likely increase rents.
The property Council of Australia has recently released the following 5 facts based on the latest ABS statistics:

1. Over 2 million Australians own an investment property – including 1.2 million who negative gear. It’s a vital tool for wealth creation.
2. 770,000 Australians who negative gear have a taxable income below $80,000.
3. 58% of negative gearing deductions (by value) go to the people with taxable incomes less than $80,000.
4. New investors account for 30% of all new construction – they are vital to increasing supply and keeping pressure off house prices
5. The cost to the Budget of negative gearing is falling – down 53 per cent over the past two years.

Now is still a good time to invest as there continues to be pressure on the rental market with low supply and high demand.
And, given the latest release of data from the ABS showing we are in a period of deflation, and a likely drop in interest rates next week, good debt is as affordable as it will be for the foreseeable future.

If you would like some advice on increasing your portfolio, or would like to get a “wealth check” please call – we would be more than happy to help.

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