Saturday, October 18, 2003

Investors blamed for land boom: "Mr Howard said he did not expect property values to fall... the Victorian Government blamed the housing affordability crisis on generous tax concessions for investors.

"In its submission to the Productivity Commission inquiry into first home ownership, the Bracks Government singled out negative gearing and capital gains tax breaks as key reasons for the housing bubble. Over the past seven years, lending to housing investors rocketed by 402 per cent in real terms, accounting for 52 per cent of the total growth in housing debt.

"Investors can write off rental losses against tax and since 1999 pay tax on only half the capital gain when they sell. That, along with historically low interest rates and relaxed lending practices have encouraged the investment surge. But the submission said the tax concessions had left first home buyers at a serious disadvantage.

"'The overall effect of these arrangements is to provide incentives to invest in residential properties,' it said. 'This is particularly true for negative gearing, which is only available to investors. This puts owner-occupiers, including first home buyers, at a competitive disadvantage relative to investors.'"

No comments: