Negative gearing blamed for inflated house prices

An Australian think-tank says negative-gearing is increasing the cost of housing.

“In the past, these may have supported the rental market, but in a market where supply is constrained it simply increases the price of housing for everyone,” a report by the Sydney-based McKell Institute states.

The report states that the housing system in acute stress.

“Housing stress, whether it’s the cost of a mortgage or rent, is now afflicting over half the population, with interest rates set to rise further.”

It costs 9.2 times the median salary to buy a house in Sydney.

“The long-term international average is between two and three times the median salary,” the report says. “First-time buyers now typically pay half of their income on mortgage costs.

“The lack of access to healthy, affordable, well-located housing would have intergenerational implications for engagement with work and the community, leading to significant drops of productivity in the economy.”

It says home ownership is not accessible for two-thirds of 35-year-olds in Sydney.

The report recommends phasing out negative-gearing on established properties, although it says it could be retained for new properties to stimulate supply.


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