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Time to give negative gearing the support it needs?

By Kevin Kelly

There's been no shortage of speculation around the issue of negative gearing lately, and it seems that two property groups believe it should be given more support.

Both the Property Council of Australia and the Real Estate Institute of Australia (REIA) argue that negative gearing is helping to boost the country's supply of new homes. At a time when affordability concerns are on the rise, this should be encouraged, not hampered.

Negative gearing refers to the process some investors use to purchase and hold property. They buy the asset, but the interest paid on the loan is more than the income received from it. Investors essentially find themselves making a loss, which some analysts believe is potentially damaging to the market.

However, the research put forward by the two groups suggests that offering a capital gains tax (CGT) discount alongside negative gearing helps to support investment in real estate. As a direct result of this, more property in Bunbury and other areas is constructed to keep up with demand, bringing advantages to the building sector as well.

CEO of the REIA Amanda Lynch said there are some common misconceptions surrounding negative gearing, and the types of investors who are benefiting from it.

She continued: "Mum and dad investors are overwhelmingly the ones who benefit most for the ability to negatively gear their property investments.

"This is middle Australia. 66.5 per cent of taxpayers who earn an annual income of up to $80,000 own 80 per cent of negatively geared properties."

The report highlights that by removing negative gearing, and the CGT discount that investors benefit from, the supply of rental properties will be dramatically reduced. As a result, the cost of renting homes will be forced upwards, pricing yet more people out of the market.

Many investors are taking a closer look at property in Bunbury at the moment. If you're one of them, make sure you get in touch with our experienced team of experts.

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