Every debate needs a strawman – and in the one about housing affordability, negative gearing is the chosen target.
Tim Williams is the latest to position it so.
In his piece for The Fifth Estate (28 November) he praises NSW Planning Minister’s Rob Stokes for his contribution to the debate on negative gearing.
Except this. He didn’t mention the few bits of modelling done on the effects on house prices from the removal of negative gearing.
One was done by the McKell Institute where he serves as a Researcher, among his myriad roles. We think the modelling has flaws but it seeks to put a number on the benefits to house prices regardless.
The case for? It equals a 0.49 per cent cut.
That’s it. 0.49 per cent.
So before we laud the minister for his bravery, let’s put that in context.
Every time a NSW homebuyer enters the market, they pay a stamp duty bill that amounts to 4 or 5 per cent depending on price.
Stamp duty revenue has risen from $4 billion to $8 billion on the current government’s watch – and the average bill jumped from $21,000 to over $35,000. That’s a high hurdle
Infrastructure charges add as much again – and sometimes more – to house prices.
And the time, cost and red tape in the NSW planning system magnifies the effect more.
If the minister wanted to tackle any of these things within the remit of state governments that’d be truly brave. It would also make a truly substantial difference to housing costs.
There is no doubt Sydney went to sleep for a decade and is paying the price. We ran housing approvals and completions at half the rate of Melbourne at one point.
Both markets have negative gearing and both markets have the same interest rates; but the one difference is the continuity of land supply.
The consequence is that a block of land in Melbourne, in an area with a similar demographic profile and similar distance from the CBD, goes for half the price.
The convergence of pent up demand, a stronger economy and low interest rates means approvals have lifted – but barely to the point of meeting Sydney’s demand.
So to point to the tail end of that, and say negative gearing is the source of all woes, is flawed for several reasons.
But above all, it is flawed because it gives politicians the excuse they need to avoid real solutions that’ll move the needle on prices by more than 0.49 percent.
Glenn Byres is the Chief of Policy and Housing at Property Council.