Housing tax changes make investing in a house in the regions more attractive than in the big cities, economists say.<\/p>\n
As transient mining and farm workers typically pay rents that are relatively higher compared with the price of the house than in the cities, experts say changes to negative gearing make regional purchases a better option.<\/p>\n
REA Group economist Luc Redman said changes to capital gains taxes and negative gearing \u201cprovide a slightly more favourable opportunity for regional property relative to metro\u201d.<\/p>\n
\u201cThat comes down to two key components of how regional property evolved prior to the pandemic: trends that are beginning to swing back towards normal levels.\u201d<\/p>\n
Regional areas with established mining and farm workforces had always commanded higher rental yields for the owners who borrowed to buy the property, Mr Redman said.<\/p>\n
\u201cThose higher yields are certainly more difficult to come by in metro areas and, with the negative gearing changes, will likely attract more investors, as their ability to deduct loan losses is lost,\u201d he said.<\/p>\n
Because typically houses in the regions do not appreciate in value as quickly, slashing the capital gains tax discount also hurts metro owners by comparison.<\/p>\n
An investor wanting to negatively gear in the future \u2013 which to start must be a new home \u2013 takes on more risk doing so on a property out in the regions though.<\/p>\n
\u201cThe risk to investors pursuing this tactic in regional areas is that returns are contingent on future demand to live in that region, which would mean the area has a strong industry underpinning or lifestyle attractiveness,\u201d Mr Redman said.<\/p>\n
Fresh Economic Thinking chief economist Cameron Murray said the tax changes did not favour regional housing over metro investments.<\/p>\n
Regional housing returned higher rent yields because owning a house in the country was riskier, and the tax changes would affect city and regional housing investments proportionately, he said.<\/p>\n
\u201cThe net effect is a wash,\u201d Mr Murray said.<\/p>\n
\u201cIf there is an effect on market decisions to buy new housing over existing, then that will have to occur in locations where new housing is more common. But that historically has been cities, which have grown faster than regions in recent decades.\u201d<\/p>\n
A key pandemic-era trend was also starting to flip, he said.<\/p>\n
\u201cGiven the Covid-era flight from cities is reversing a touch now, I don\u2019t think there is much market demand for more new homes in the regions \u2013 except in special circumstances where there are local resource booms.\u201d<\/p>\n
Australian Bureau of Statistics figures show regional Australia gained 43,000 people in 2020. About 86,000 people left Sydney between June 2020 and June 2022, and 60,000 Melburnians left the big smoke during the same period.<\/p>\n
Peter Tulip from The Centre for Independent Studies said the capital gains tax change marginally favoured regional investors.<\/p>\n
\u201cI don\u2019t think the tax changes will make a significant difference to regional real estate,\u201d Dr Tulip said.<\/p>\n
\u201cProperties with relatively high rental yields, as we see in the country, are less adversely affected than properties relying on capital gains, as in the city, but the difference is small.\u201d<\/p>\n
Investment properties purchased after 7.30pm on the night of the federal budget, May 12, cannot be negatively geared from July 1, 2027 \u2013 except if the home is newly built.<\/p>\n
But council zoning laws remain a stubborn hurdle for housing developments in regional centres.<\/p>\n
Grattan Institute associate Ashleigh Chang said these supply constraints were still the biggest handbrake.<\/p>\n
\u201cRegional markets may not be about to become \u2018hotspots\u2019, but much like in our cities, there are many regional areas where rents are high relative to prices because there simply aren\u2019t enough homes,\u201d she said.<\/p>\n
\u201cIn many regional areas the binding constraint to supply doesn\u2019t seem to be investor appetite \u2013 it\u2019s that we\u2019ve made it too hard to build.<\/p>\n
\u201cIf planning systems keep choking off new supply, that \u2018buy new and hold for yield\u2019 route is actually harder in the regions, not easier.\u201d<\/p>\n
Regional councils needed to zone for higher density homes in the town centres, make more land available on the edge of town and make sure \u201ca small number of objectors aren\u2019t able to stop already-approved housing for months at a time\u201d, Ms Chang said.<\/p>\n","protected":false},"excerpt":{"rendered":"Housing tax changes make investing in a house in the regions more attractive than in the big cities,…\n","protected":false},"author":2,"featured_media":765809,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[64,63,99,187436],"class_list":["post-765808","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-au","tag-australia","tag-business","tag-newswire-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/765808","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=765808"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/765808\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/765809"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=765808"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=765808"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=765808"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}