Hundreds of auctions got underway across the country on Saturday, with prospective first home buyers buoyed by the biggest tax reform in decades.
At one auction, for an apartment in South Melbourne, the successful bidder had spent more than a year trying to buy.
“I think it’s great to encourage younger buyers, rather than investors making more money all the time. [It’s] giving us young people a shot at it,” she told the ABC.
How the federal budget’s tax changes will affect you
The changes to negative gearing in Tuesday’s budget saw the immediate end of tax perks for property investors wanting to maximise profits and offset their losses on existing properties.
Auctioneer Sam Paynter said first home buyers were “up and about”.
“I certainly think first home buyers have got a good pathway to enter the market at the moment, it’s positive,” he said.
“For investors, clearly a lot of older investors who are coming to the end of their journey are considering their options — and so they should, the government has made it very hard for them.”
Prime Minister Anthony Albanese was also talking up the prospects for younger buyers on Saturday.
“If a young person is going to an auction today, unlike last week, the investor who is bidding against someone who wants to live in that home as their first home won’t have the taxpayer by their side subsidising their bids,” he said.
“We know over a long period of time, that if you have the previous system of negative gearing for existing homes, then someone can perhaps, if they’re in a contest, go that extra little bit further, bid that extra $50,000, because they know that will be a deduction for them.”
The changes do not affect properties bought before the budget was handed down, and tax perks remain in place for investors purchasing new builds.
Anthony Albanese has made intergenerational equity a theme of this year’s budget. (AAP Image: Lukas Coch)
“Not only are they then investing in their future assets and future wealth, they’re investing in the nation’s future assets and the nation’s future wealth as well,” Mr Albanese said.
Some critics argue the changes could reduce rental availability and lead landlords to increase already record-high rents.
Rental market slowed last quarter, vacancies still tight
Data from Domain showed rental prices for houses were flat last quarter in Melbourne, Adelaide, Perth and Darwin.
They were up around 1 per cent in Sydney, Canberra and Hobart, while Brisbane saw the most growth, at 3.1 per cent.
Vacancy rates remained tight, but edged higher over that same period.
The Domain report said the slower rent growth was driven by renters’ reduced capacity to absorb further increases, rather than any easing in demand or rental conditions.
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The opposition has vowed to reverse the government’s changes if it wins government.
“They’re going to increase rent, build fewer homes, and kneecap young Australians by taxing their first home deposit when it’s invested,” Shadow Treasurer Tim Wilson said.
Economist Saul Eslake has spent 40 years calling for negative gearing to be abolished.
He argued that fewer investors buying existing houses was a positive outcome.
Independent economist Saul Eslake believes the changes will dampen rent price inflation. (ABC News: Maren Preuss)
“The opposition is, in a sense, right when they say ‘if you tax something more, you will get less of it’. But in this particular context, getting less investment in the housing we’ve already got is actually a good thing,” he said.
“It will reduce upward pressure on prices and create more opportunities for aspiring home buyers to realise their aspirations.”
Mr Eslake believes the retention of negative gearing for investors buying new builds could help skew investment in that direction and add to housing supply, resulting in downward pressure on rents.
“I think common sense suggests that’s what’s going to be the likely result, contrary to the suggestions made by property interests and others that rents are going to go through the roof,” he said.
“I think this will help to dampen rent price inflation.”