Renters have become the targets of a new property industry ad campaign. Renters have become the targets of a new property industry ad campaign.
Finance Property Property lobbyists accused of ‘scare campaign’ on renters Updated:

Property lobbyists accused of ‘scare campaign’ on renters

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Renters have become the targets of a new property industry ad campaign described by experts as “cheeky” negative gearing scare tactics.

The Real Estate Institute of Australia has joined forces with the Property Investors Council of Australia to wage war, via a series of online videos, on Labor’s proposed changes to negative gearing before the election.

As part of an ongoing campaign, the two industry lobby groups this week posted a video targeting tenants on social media alleging that the changes will result in increased rents, lower vacancy rates and higher unemployment.

But the Grattan Institute’s Danielle Wood has hit back at the video, saying the independent think tank’s in-house modelling shows the impact on tenants will be minuscule.

“It’s clearly a scare campaign and they’re massively overstating the effects. If it had an effect on renters, it would be over the long term and it would be so small,” she said.

“If you’ve got fewer investors in the market, they aren’t selling to investors – they’re selling houses to home buyers, so you’ve reduced the supply and demand of investment properties.

“Fewer investors does mean fewer rental properties, but those properties don’t disappear – home buyers move in, and so there are also fewer renters.”

The price of rent would only be affected if the policy reduced new housing supply and those effects would be small, as around 90 per cent of investment lending is for existing houses, and Labor’s plan leaves the tax write-off for new homes, argues Ms Wood.

“It’s cheeky to run a scare campaign directed at people who aren’t getting the tax concession. When there is a tax concession in place, everyone pays.”

Labor’s proposal would result in negative gearing being restricted to newbuilds but it would be grandfathered for people using the tax break on existing homes.

It would be implemented alongside a 50 per cent reduction in the capital gains tax discount from January 1 if the party forms government after the May 18 election.

REIA defends position

Standing by the video, REIA president Adrian Kelly told The New Daily that there were “a number of studies showing the impacts on prices and rents”.

Pointing to a contentious report by SQM, Mr Kelly said the research showed that rents are expected to increase by between 8 per cent and 15 per cent on a weighted average for the capital cities for 2020 to 2022.

“This is in contrast to the current situation where we have the lowest annual increase in rents for two decades,” Mr Kelly said.

That report was described by the Labor opposition as “ridiculous” and “irresponsible”, but Treasurer Josh Frydenberg backed the research, saying it proved rents would rise under the policy.

“Reducing the number of investors in the market also pushes up rents,” he said.

“Investors often accept lower rents in the expectation of future after-tax capital gains when they sell.”

Rents a key election battleground

The March election survey from rent.com.au showed that more than two-thirds of Australia’s seven million renters were undecided about who they would vote for in the election and 80 per cent of them felt ignored by the major parties.

A targeted campaign based on rent hikes and less housing options could be enough to sway some of those voters.

“We have all major parties talking about their potential changes,” rent.com.au CEO Greg Bader said.

“Yet they do not seem to be able to articulate clearly how this will affect renters: Will there be more choice? Will prices go up or down? These are the things that the renting and wider population would like to know.”