Researcher says public debate since May budget has overstated how much reforms will cost landlords and investors.
Most property investors may end up paying less capital gains tax after Labor’s budget reforms, research based on an analysis of historical data suggests.
The e61 Institute’s analysis also found half of all landlords would have faced higher costs from the loss of negative gearing over the period from 2008 to 2025 if the new system had been in place, suggesting the tax reforms alone cannot explain a slump in investment demand.
Under the changes, 53% of housing investors would have paid more tax in total in that period, while 43% would have paid less, according to the research.
New investor loan applications fell 28% in two months at the Commonwealth Bank after the budget’s release and July data shows growth in investor credit has slowed.
The Reserve Bank governor, Michele Bullock, said on Tuesday the budget reforms had “very directly” impacted the market.
Garvin said some market commentary may have misjudged the impact of the reforms on investor activity because it overestimated investor profits on house sales.
Inflation averaged about 3% annually from 2008 to 2025, implying a tenth of the median capital gain would be taxable under the new system.
The Liberal shadow treasurer, Tim Wilson, said the budget’s “cruel twist” was that higher investor costs would be passed on as higher rents.
Dr Peter Tulip, chief economist at the Centre for Independent Studies, said investors would not be “naive or short-sighted” about negative gearing and come to focus on capital gains.