The notion that negative gearing leads to an increased supply of rental dwellings is flawed: 92% of
investment is used to purchase existing dwellings, displacing previous owner-occupiers or tenants to
buy or rent elsewhere, respectively, resulting in little to no net increase in the rental stock. Negative
gearing is a poor investment strategy over the long term for investors pursuing capital gain rather
than rental income as housing prices have increased by an average of 2.4% annually from 1880 to
2011 in real terms (before 1996, housing had delivered a real return of only 0.7% annually). Negative
gearing for purposes of realizing capital gain, however, becomes a viable strategy during the boom
phase of a housing cycle as capital values are substantially appreciating. Contrary to claims that
quarantining negative gearing during 1985-87 caused a surge in rental prices, rents increased in only
some capital cities while stagnating or falling in others.[…]
It is recommended that, at a minimum, negative gearing be quarantined to the purchase of newly-
constructed dwellings, or preferably, be abolished. The Commonwealth Rent Assistance (CRA) scheme
is better targeted towards those who require help in the course of renting rather than subsidising
residential property market investors. Although the CRA could increase rents, it appears to be the
most straight-forward mechanism available to policymakers to aid tenants.
Published by Prosper Australia
In 2023, 27,408 dwellings (1.5% of all homes) were left totally empty over the year, and a further 70,453 (3.7% of all homes) were barely used.
[…]
Empty homes are widely dispersed across the city, but the fastest growth has been in the City of Melbourne, where 10,000 homes are now vacant – equivalent to half the new builds in this area over the last five years.
That many renters cannot afford to outbid the convenience value of an empty property speaks of deep inequality, the root cause of unaffordable housing.
But vacant homes also illustrate how housing supply is at the mercy of speculative incentives. Low interest rates and taxes that favour capital gains over rental income make it rational for some owners to choose the flexibility of an empty home over the cash it could yield.