If a series of property tax reforms proposed by the Australian Labour Party were implemented, housing prices would fall further and rents would rise, according to a new study. These reforms include restrictions on tax deductions.
These forecasts show that Sydney`s housing prices were most affected by these changes, falling by an average of 9 percent.
This will reduce home prices in Brisbane and Adelaide by 6 to 7 percent, according to Riskwise Property Research and Wargent Advisory, while Hobart expects to drop 2 percent to 3 percent.
Falling house prices will lead to a decline in activity among new housing projects and property investors, which will eventually lead to "a decline in affordability," the study said.
Labour`s long-term plans include curbing tax deductions on new rental homes and halving existing capital gains tax concessions.
Photo: shadow Treasurer Chris Bowen disagrees with the Australian Labour Party`s suggestion that the housing tax plan should be changed.
Australia`s Labour Party accepted the proposed reforms in the last election, saying it would help provide a level playing field for the first buyers and improve affordability.
Doron Peleg, an analyst at Riskwise, said the proposals might be intentional, but could have unintended consequences.
`The biggest impact will be on the fragile real estate market, which already has weak housing demand,`he said.
These real estate markets are concentrated in resource-based or mining-driven areas such as Darwin, McGee, Persinthe and Townsville.
"another unintended consequence will be in the housing market in Sydney, where the proposed reforms would be equivalent to a sudden 1.15 percent increase in interest rates," Peleg said.
Pete Wargent, an analyst at Brisbane who took part in the report, said the 9 percent decline in Labour`s planned tax reforms was equivalent to a more than 20 percent rise in the cost of borrowing in Sydney.
Wargent added that things had changed significantly since Labour first introduced "negative tax deductions" in 2016.
At the time, runaway prices were a hot political issue, he said, but many of the then-booming markets are now struggling and are vulnerable to major tax changes.
Shadow Finance Director Chris Bowen recently dismissed claims that the changes had been cancelled, saying the changes were intended to make long-term adjustments, not to address short-term real estate cycles.
Risk studies looked at Corelogic data, including flat growth rates, construction and recent price declines.
