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Will negative gearing affect your renting on the Gold Coast?

By Andrew Bell

Living on the Gold Coast is something that many Australians dream about doing one day – but sometimes buying real estate in the region is too out of reach. That's where renting comes into play, and getting into an affordable home without needing to fork out a large deposit to buy outright is very attractive for many people.

Renting takes away many of the extra costs associated with owning a home, such as land tax and other levies that need to be paid each year. You'll still need to look after your own power, internet, gas and water charges, but that's a huge step down from land tax and council rate payments every 12 months. That's why renting is such a brilliant option, and there are few better places around the country to live than the Gold Coast.

The way of life here is fun and there's always a sunny outlook on life to match the weather. But what could the upcoming changes to negative gearing mean for tenants of rental properties?

Investors to start being restricted

Property prices around the country have been increasing at a dramatic rate for years now, and it has led the median dwelling value in Brisbane and the Gold Coast to $538,030, according to CoreLogic RP Data.

A 10 May media release from the Property Council of Australia suggests an increase in future rents could be the result of limiting negative gearing over the coming year. As investors start to decrease their potential for capital gains and a plethora of properties all giving them income, they will be pressing to maintain the same levels of income with fewer properties. This will only be possible with increased rents, and that's going to potentially be impacting tenants.

A memo from the Property Council questioning the Federal Opposition's proposed negative gearing policy was the centre of attention, and the Property Council CEO Ken Morrison raised the point of impact on tenants.

"We accept that the Reserve Bank were not modelling the Federal Opposition's policy – but this memo clearly flags that changing negative gearing would impact rents," he stated.

"Australia has a shortage of housing and negative gearing encourages investment in supply. Increasing supply is the key to addressing issues of housing affordability."

What is the best solution for everyone?

If negative gearing is limited drastically, investors would start to look at other markets for their next purchases, thus removing the demand for supply. When that supply decreases, there won't be as many new properties being built, and that's only going to make buying Gold Coast real estate more difficult.

If buying a house on the Gold Coast is tough, renting may be the only option for many people, and investors who can't have as many homes negatively geared – and reaping the same rewards from such Gold Coast real estate – will drive their rents skyward.

"In the current debate on negative gearing, it is worth noting that the presence of investor activity has had a positive impact on the level of rents," said Real Estate Institute of Australia president Neville Sanders.

"From 2013, when investment in housing started to pick up, we have seen the rate of increase in rents slow down in Australia. The March quarter 2016 increase was 0.1 per cent, the lowest since March 1995. The annual increase in rents to March 2016 has been 0.9 per cent, again the lowest since March 1995."

Clearly, investor activity on the rental market has kept expansion to a minimum, and that's got to be welcome news for tenants on the Gold Coast. If negative gearing policies are changed radically, would you be affected?

Get in touch with Ray White Surfers Paradise to talk about what your options on the market are – buying might be your best bet.

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