HIA
THE Housing Industry Association has called on the Australian Government to rule out any changes to negative gearing and capital gains tax in this year’s tax review, warning that further tax instability would undermine new home construction and deepen Australia’s housing shortage.
Releasing its report Taxation of Housing and its Impact on Supply, HIA chief economist Tim Reardon said housing affordability could not be improved by increasing taxes on residential investment.
“You don’t fix a housing shortage by taxing housing harder,” Mr Reardon said.
“And you certainly don’t make homes more affordable by destabilising the tax settings that support new home construction.”
The report argues housing is already one of the most heavily taxed sectors in the Australian economy, with taxes applied at every stage of the housing lifecycle. It says many of these imposts fall most heavily on new housing, directly increasing costs and reducing the viability of new developments.
“The political reflex has been the same for decades,” Mr Reardon said.
“First it was to blame investors. Then foreigners. Then foreign investors. Meanwhile governments quietly add more taxes, more charges and more costs to housing, and wonder why supply keeps falling short.”
HIA’s analysis shows investors are responsible for commencing more than 40 per cent of new homes built in Australia, with an even greater share of apartments and rental housing.
“When you discourage investors, you don’t free up housing, you stop it being built,” Mr Reardon said.
“Investors don’t neatly switch from established homes into new construction when taxes rise. They leave the housing market altogether.”
The report also challenges claims that changes to negative gearing or capital gains tax would improve affordability for first home buyers, arguing that housing prices are ultimately driven by supply and demand, and that shortages can only be resolved by building more homes.
“New homes don’t exist in isolation,” Mr Reardon said.
“They become established homes. Taxing established housing more heavily reduces the value of new housing as well, which makes fewer projects stack up.”
HIA is urging the Federal Government to provide certainty to the housing market as part of the tax review process, warning that policy instability risks further slowing construction at a time of acute undersupply.
