Would you invest without negative gearing?
According to research from CoreLogic RP Data, Brisbane had the second best median capital growth in the country through April. At 2.2 per cent, that's fairly impressive, and only just behind Sydney. On an annual basis, the Sunshine State's capital has also seen median property values rise by 6.2 per cent – certainly nothing to sneeze at.
Clearly, conditions for property investors around Queensland are picking up. But with ongoing debate raging about negative gearing, will this important part of many people's investment strategy remain in place? And should you be a property investor if negative gearing is canned?
Do or dire
The Federal Labor party has proposed many changes to the investment landscape if it is elected, including the potential abolition of negative gearing. The Real Estate Institute of Queensland (REIQ) recently surveyed its constituents about this potential change, to gauge feedback from the mouths of property investors themselves.
According to the results, 79 per cent of respondents would actually abandon property investment if such changes were introduced. Rob Honeycombe, chairman of the REIQ, explains further, saying there would be "a crippling effect on house values and on the rental market, where the private rental market plays such a critical role in keeping rents affordable".
It's clearly something that is stirring emotions.
So it's clearly something that is stirring emotions and getting on people's nerves. But how likely is the change actually, and would it really spell such widespread concern?
Focusing on the facts
Mr Honeycombe also pointed out that mum and dad property investors in particular look to real estate to build their wealth. "They believe it's as "safe as houses,"" he noted. And the Real Estate Institute of Australia (REIA) thinks that negative gearing is part and parcel of why property investment is so attractive to everyday Australians.
"The current taxation arrangements provide many Australians with the opportunity to invest in property and augment their savings in particular their retirement savings and at the same time improve rental affordability through an increased supply of rental housing," explained REIA President Neville Sanders.
With the addition of the note that negative gearing is allegedly helping to create $7 billion of new real estate every year, it seems that many industry bodies are adamant that negative gearing will continue to help people find the right assets to invest in. With benefits also cited for housing affordability and managing rental levels, there are clearly a lot of reasons that negative gearing is likely to help Queenslanders' investment strategies.
Moving forward from here
Essentially, a lot of people want negative gearing to stay. But even if it was to be abolished in some form, that might not necessarily spell the end for property investment in Queensland. After all, no matter what the property industry says about the tax setup, your strategy should always be centred around your own personal financial situation.
Negative gearing is one way that people benefit from investment property, but it isn't necessarily the only way. If you can find new real estate that suits your budget, you may be able to establish positive cashflow property, while also receiving the benefits of capital gains.
And remember, this capital growth is something that you should think about for the long term. Not just a year or even five years from now, but much further down the line when you start looking at retirement and providing for your family.
At Think Money, we help people develop investment strategies that are designed specifically for them – not just for the current market. This could include negative gearing, or it might avoid it altogether. Come and talk to us about how to start creating wealth through property!