Ray White Group has called on the federal government to keep the capital gains tax (CGT) discount as it is amid concerns that any speculated cuts could lead to a reduction in much-needed rental supply.
Dan White, managing director of Ray White Group, and the group’s chief economist Nerida Conisbee have called on the government in an open letter to its members to avoid making any changes to the tax discount.
The federal government is understood to be weighing up options to scale back the CGT discount in the lead up to the May federal budget, although nothing has been confirmed.
Property owners who hold an investment property for more than 12 months are eligible for a 50% CGT discount, meaning only half of the net capital gain is added to their taxable income when it's sold.
The CGT discount has become a hot topic in Australia’s housing affordability debate, with some saying the discount boosts rental supply, while others argue it’s too generous to investors.
It comes as home prices continue to climb higher, with the latest national median home price having grown 9.1% to $897,000 during the year to February, according to PropTrack.
Mr White told realestate.com.au that housing affordability was a real problem, but the measures aimed at investors could have unintended consequences for renters.
Ray White Group managing director Dan White and chief economist Nerida Conisbee say the speculated CGT discount changes could hurt rental supply. Picture: Supplied
“I think there's no question that housing affordability is a problem, and there's no doubt that it’s an issue for first-home buyers,” he said.
“But I think that simply trying to create disincentives for housing investors is just going to transfer the pain towards the 2.9 million Australian households that rent. They've had a huge increase in their rents in the last five years, and this is only going to make it worse for them.
“You may be easing the problem on the one hand, but you’re making it harder for another part of the community on the other, and I don’t think that’s fair."
In the letter, Mr White and Ms Conisbee wrote that the speculated CGT discount changes could reduce the number of properties available for rent, increase rents, impact new home building, and more.
"These potential changes are being considered in an attempt to reduce investor demand for residential property to assist owner-occupiers, especially first-home buyers," they said.
“Whilst we acknowledge the increasing challenge of housing affordability, our position, and the position of many industry bodies, is that reducing or eliminating the CGT discount will result in higher costs for the 2.9 million households that are renters.
“These measures will put even more pressure on renters that have had to absorb rent increases of 49.6% over the past five years."
A federal Senate inquiry into the CGT discount recently heard from a range of supporters and opponents, including the Real Estate Institute of Australia (REIA).
REIA president Jacob Caine said changes to the CGT discount risked worsening Australia’s housing shortage and affordability crisis.
Real Estate Institute of Australia president Jacob Caine says the country is already navigating the most acute affordability crisis in its history. Picture: Supplied
“If you look at every conceivable model that has interrogated the implications of changes to the CGT, it shows that it has a negative impact on supply,” he said.
“At this moment in time, when Australia is navigating the most acute affordability crisis in its history, we really can't tinker with the system in a way that will reduce the supply of existing homes and new homes coming into the market.
“Ultimately, it puts more pressure on people who are trying to secure their first home and an enormous amount of pressure on renters who are the most vulnerable to price changes in the country.”
The Greens and others in support of cutting or eliminating the CGT discount argue that the concession has been used to subsidise speculation on existing properties, drive up home prices and make home ownership even more difficult for renters.
Australia's median home price rose 9.1% to $897,000 during the year to February. Picture: Getty
Almost one in three households rent in Australia, with private landlords representing about 83% of the rental market.
There is also speculation that the budget may include restrictions on negative gearing, which is when the costs of owning an investment, such as a rental property, are higher than the income it earns and the loss can be used to reduce your taxable income.
Ray White manages more than 222,000 properties on behalf of landlords.
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