Lender CEO weighs in amid potential negative gearing reforms
As property prices fluctuate and tax policies face potential reforms, Australians are re-evaluating their approach to homeownership and property investment.
Ryan Gair (pictured above), chief executive of non-bank lender Rate Money, believes there is no single “perfect time” to buy, regardless of market conditions. Instead, he advises prospective buyers not to delay indefinitely, as waiting for ideal conditions often leads to missed opportunities when prices rebound.
The decision between buying a home to live in versus renting and investing in other properties is a longstanding debate. This question has gained urgency in Australia amid rising housing costs and the possibility of changes to negative gearing, a tax policy that allows property investors to offset rental losses against their income.
Owning a home offers stability and long-term financial benefits, particularly through property appreciation.
“Owning a home provides long-term stability and the chance to build wealth through property appreciation,” Gair said. “With no rental increases to worry about, homeowners also gain emotional security, knowing that they have a place of their own. Over the last 10 years, average house prices in Sydney, Melbourne, Brisbane and Adelaide have increased by an impressive 80 to 100%.
“However, the initial financial burden of buying a home can be steep. Deposit requirements, legal fees, and historically high interest rates can make homeownership a heavy commitment. Housing markets can also be unpredictable especially if you aren’t living in a capital city.”
Renting, on the other hand, offers flexibility and lower initial costs, Gair pointed out. Renters can live in desirable areas without the financial burden of a mortgage, freeing up capital for diversified investments. Renting also allows for greater mobility, which can be beneficial for people who move frequently for work or lifestyle reasons.
“The rent-and-invest strategy enables renters to channel their savings into various investment opportunities, potentially leading to higher returns than owning a single home,” Gair said. “However, if negative gearing is scaled back, property investment may become less attractive, particularly if landlords can no longer offset rental losses against their income, leading to fewer rental properties in the market and higher rents, impacting renters.”
The Albanese government has hinted at possible reforms to negative gearing, with Treasury reportedly exploring policy options, such as capping tax deductions rather than eliminating them entirely.
Economist Saul Eslake argues that negative gearing has disproportionately benefited wealthier Australians, inflating property prices and disadvantaging first-time buyers. A cap on negative gearing, he suggests, could improve affordability for new entrants to the housing market.
However, critics warn that reducing negative gearing could decrease the supply of rental properties, driving up rents and worsening the rental crisis.
“This makes it crucial for potential investors and renters to carefully consider how upcoming policy changes may influence the property market,” Gair said. “Whether negative gearing changes are taken to the next election and regardless of your decision, staying informed about policy changes and consulting with professionals will be crucial to navigating the ever-evolving real estate landscape.”
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