Labor has doubled down… are they being a bit ‘courageous’?
So it’s game on. Some people thought that Labor might flinch, and give up on taking negative gearing reform to the election.
But they didn’t. In fact, if they get elected, they’re going to bring the reforms in as soon as possible – which in their mind is January 1, 2020.
From The ABC:
Shadow Treasurer Chris Bowen said the long-awaited start date would still provide enough time for scrutiny of the legislation and more industry consultation…
“This allows it to come in at a quieter time in the property cycle — obviously Christmas and New Year being a quieter time — a good smooth time for implementation,” Mr Bowen said.
“This strikes the right balance”…
Mr Bowen also argued that delaying the change until property prices recovered from a recent downturn in capital cities would only increase market uncertainty.
“At the last election we said it would come into force 12 months after the election, this time we are saying seven months and they are roughly comparable timeframes,” Mr Bowen said.
That whole “quieter time in the cycle” is a bit of bollocks. We’re talking about one of the most significant reforms in a while. It’s not something that will be introduced in January and forgotten by February.
Still, if it’s going to happen, it’s better to get it over and done with. There’s enough uncertainty in the market, what with the ever-changing APRA restrictions and what have you.
The more certainty, the better.
And I definitely agree that doing it in a down turn is better than waiting for the market to recover.
For a lot of people, they’re willingness to ‘carry’ a negatively geared property depends a lot on how much capital growth they’re expecting. If you expect strong capital growth, you’re more willing to lose a bit on rent.
So with the market slowing, and expectations for capital growth easing, the ‘appetite’ for negative gearing is already falling.
Changing the negative gearing rules at this stage in the cycle means you’re going to have less impact than if you introduced them at a time when the market was booming and capital growth expectations were sky-high.
Labor also obviously knows it’s on to a winner with the reforms. They’ve been on the table for so long now they feel like old news. And if the policy was going to cost them votes, they would know by now.
In fact, Robert Gottleibsen at The Australian reckons the major parties’ polling points to it being a clear winner:
“Coalition polling showed that its campaign against the ALP curbs on negative gearing was not working and that the vast number of young Australians who can no longer afford a house loved the ALP policy because it would make dwellings more affordable…
There was misery all around among Coalition ranks.
A jubilant shadow treasurer Chris Bowen gained the same message from ALP polling and he quickly locked in the start date for the policy at January 1; six months earlier than expected. Politically, it was a smart move…”
I’ve never been a fan of negative gearing personally. The negative cashflow translates into lower serviceability, and with banks getting more stringent on expenses, cashflow is going to be more important than ever.
So personally, I’m not shedding any tears.
But I am watching this carefully. And I am wary of spooking an already edgy market.
What I think Labor should do is balance out the uncertainty that these reforms might create by delivering more market certainty in other areas. In particular, I’d love to see them and APRA draw a line under any more credit restrictions, and map out a clear pathway for unwinding the restrictions that are in place.
If they did that, then I really doubt we’d see any impact from these reforms in the data at all.