Could Queensland axe negative gearing?

Negative gearing: Even if you aren't a property investor, you've probably seen the term crop up more than once or twice. It's swiftly becoming a key factor in the coming election, and with a potential change in government just around the corner, every political party seems to be falling over themselves to offer their perspective on this controversial issue.

Some want it gone, others want it limited and still more simply want the status quo to be maintained. Whatever your leanings, it's clear that negative gearing is an important issue for all of Australia: But could Queensland survive if it was removed?

A common tool

Negative gearing, put simply, is a method that property investors use to claim back some of their losses on a property. If your real estate is used as a way to build wealth, and you are making a loss due to rents not being higher than mortgage repayments, you can claim that as a deduction at tax time.

For many Australians, this makes investment both attractive, and possible in the first place. Reducing your outgoings in this way makes it that much easier to wait until you develop the property into positive cashflow, or build enough equity by the time you retire.

The investor effect

Without negative gearing, that kind of affordability would not be possible.

So what has this got to do with the wider Queensland property market? As Real Estate Institute of Australia (REIA) President Neville Sanders explains, around a third of all new dwellings around Australia are built by investors - and much of that will be made possible through negative gearing. If it was eliminated, you'd see a number of investors turn off property, reducing the supply in Queensland and affecting rental prices, pushing them higher through lack of housing.

The REIA argues that this would cause instability for not only investors, but renters too. The Real Estate Institute of Queensland (REIQ) has already found that the March quarter was particularly beneficial for renters, with rents dropping in regional Queensland by tens and even hundreds of dollars a week: such value will surely attract bargain-hunters. You can bet that without negative gearing, that kind of affordability would not be possible, even in the less expensive areas of rural Queensland.

As the mining boom begins to fade, property is becoming more and more important to the Queensland economy as a whole. Negative gearing is just one tool in the investor's toolbox, but it is an important one. If you want to find out how to use it and many other tools to their fullest, make sure you get into contact with the property investment experts at Think Money: negative gearing is just the start of the things we can teach you.