Property market ‘running scared’ of Labor's new tax

March 21, 2019

Labor leader Bill Shorten's proposed windback of negative gearing tax breaks would cause already nervous investors to desert the property market, sending prices falling further in most cities, according to the latest econo­mic modelling.

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The Australian reports, in a best-case scenario from SQM Research, housing prices will drop a further 4-8 per cent over a three-year period from 2020 to 2022, assuming an interest-rate cut of 50 basis points by early January next year.

Property sales turnover is predicted to fall another 8 per cent to 15 per cent by 2022 from 2019 levels with most of the declines in sales to occur in the 2020 calendar year, causing a flow-on effect to state and territory governments with an aggregate fall in state stamp duty revenue of $2.3 billion.

In a best-case scenario from SQM Research, housing prices will drop a further 4-8 per cent over a three-year period from 2020 to 2022, assuming an interest-rate cut of 50 basis points by early January next year.

Property sales turnover is predicted to fall another 8 per cent to 15 per cent by 2022 from 2019 levels with most of the declines in sales to occur in the 2020 calendar year, causing a flow-on effect to state and territory governments with an aggregate fall in state stamp duty revenue of $2.3 billion.

SQM has also modelled a harsher scenario in which price falls could reach 15 per cent without an interest rate drop, and one where the current tax break remains untouched.

If there were no change to negative gearing, average capital city prices could rise 8-14 per cent over the three years.

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