Aussies borrowers put on alert as the Greens unveil plans to force Labor to scrap a key promise to voters
unveil plans to force Labor to scrap negative gearing in a hung parliament.
While house prices are surging in most capital cities, they fell by two per cent in Melbourne in the year to April as the Victorian government's $975 land tax on investors turned off potential landlords.
Australian house prices fell from 2017 to 2019 when the banking regulator cracked down on interest-only loans.
A hung parliament could spark another property market downturn should Labor break an election promise and scrap negative gearing for future purchases of investment properties.
Greens leader Adam Bandt has signalled his party would force Labor to tighten negative gearing and scrap the 50 per cent capital gains tax discount should it be forced into a minority government to stay in power.
'As we sit here today, Labor and Liberal are giving $180billion in tax handouts to wealthy property investors,' he told the ABC's Q+A program on Monday night.
'What that means is a first-home buyer turns up to an auction with all their savings, and they bid as much as they can.
'A wealthy property investor who might have five homes is next to them, they can just keep bidding the price up and up and up knowing they've got a big, fat cheque from Anthony Albanese and Peter Dutton in their pocket to write it off as a tax loss.'
CoreLogic's head of research Eliza Owen has modelled what would happen if property prices fell, without referencing any particular election policy.
She found that even with a double-digit fall, most home owners would still be making a capital gain compared with what they paid for a property.
'Even if national home values were to fall by 10 per cent, most homeowners would remain in a strong equity position,' Ms Owen said.
She cited Reserve Bank figures showing just one per cent of mortgages are in negative equity, where the debt is greater than the value of the home a borrower is paying off.
'This is in part due to high home values. But, as noted in their latest financial stability review, "even when faced with a severe 30 per cent decline in housing prices, around nine in 10 mortgages would still have positive equity",' Ms Owen said.
The Greens want to restrict negative gearing to one property but only for an existing investor as it banned the tax breaks for future purchases of investment properties.
'We need to wind that back in a way that is fair to the mum-and-dad investors, who might have got one additional property that they're using for their retirement,' he said.
'Like, they're not the ones who are out there trying to screw the system. But if you've already got five houses, the federal government should not be giving you a subsidy to go and buy your sixth while people are struggling to get their first.'
Mr Bandt exaggerated the amount negative gearing and the 50 per cent capital gains tax discount is costing the Budget in foregone revenue.
He claimed it was $180billion but Parliamentary Budget Office figures provided to the Greens showed the tax concessions for property investors were projected to cost $170.9billion over the next 10 financial years.
The tax deductions for rental losses and the capital gains tax discount cost $89.11billion during the previous 10 financial year.
Labor dumped its plans to scrap negative gearing for future purchases of existing homes after losing the 2019 election with a plan to also halve the 50 per cent capital gains tax discount to 25 per cent.
The banks won't lend someone more than 5.2 times their income under the Reserve Bank's existing 4.1 per cent cash rate.
House prices surged in the early 2000s, vastly outpacing wages growth, after former Liberal prime minister John Howard introduced a 50 per cent capital gains tax discount in 1999.
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