The world according to GRP — Monday, February 18, 2008:
Gifts disguised as incentives
[Letter submitted to THE AGE, Melbourne, Feb.18, 2008.]THE AGE reports that while lending to property investors buying EXISTING homes rose 18% last year, lending to investors building NEW homes fell again, and only one in 12 dollars lent to investors was used to build something ("Investors' housing splurge", Feb.18).
These figures demolish claims that the most prominent tax concessions for property investors, namely negative gearing and the discounting of capital gains, are incentives to increase the supply of rental housing for the benefit of tenants. If negative gearing is to help tenants, it must be available only for building new homes, not for buying existing homes. And if discounting of capital gains is to help tenants, its availability must depend on whether you BUILD something, not on how long you hold the asset.
For tax purposes, buying a NEW home (i.e. one that has never been occupied) should be treated the same as building a home, so that developers have an incentive to build on developed lots before selling them. But any further extension of the tax concessions is not an incentive; it's just a free gift for those who least need it.
Copyright © Gavin R. Putland except as otherwise attributed. Posted at The world according to GRP under the title Gifts disguised as incentives. You may republish this item verbatim on your website or blog provided that you include this notice (with hyperlinks).
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