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Might Labor’s negative-gearing policy yet save the housing market?

Chris Martin writes in The Conversation (26.5.16) about the ALP’s proposals to amend negative-gearing regulations, much criticised by the government and representatives of the property sector, but which might help buffer the economy against a fragile housing market.

‘The Real Estate Institute of Australia (REIA) has unleashed the hounds on Labor’s proposed reforms to negative gearing. The REIA’s campaign, Negative Gearing Affects Everyone, follows the lead of the Property Council, which describes the Australian housing market as a “house of cards”, with the REIA stressing how “fragile” the Australian economy is. You might be tempted to dismiss this as propaganda from people who exaggerate for a living, but evidence is mounting of instability close to the REIA’s home: the off-the-plan apartment sector.

‘ … We should still expect such a reform to reduce total investor demand for housing, and hence reduce house prices overall. These are both good things. But it may also help cushion what might otherwise be a drastic and painful collapse in the new-build sector.

‘Both the REIA and the Coalition government talk about Australia’s “transitioning” economy. They should consider negative-gearing reform as a measure for transitioning out of our presently fragile, property-bubble-led economy.’

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