The topic of negative gearing has re-emerged as a hot-button issue leading into the federal election. Prime Minister Anthony Albanese’s recent comments have brought the policy into the spotlight, though he clarified that changes to negative gearing are not currently part of his party’s platform. However, the fact that future amendments weren’t ruled out has left many investors feeling uncertain about what lies ahead.
As someone who has worked in Perth’s finance and real estate sectors for over 20 years, I understand the vital role that negative gearing plays, especially for everyday “mum and dad” investors. These investors form the backbone of Perth’s rental market, particularly in our northern suburbs, where demand continues to run high. Any potential changes to negative gearing could have serious repercussions for both these investors and the overall rental market.
The Crucial Role of Mum and Dad Investors
In Western Australia, approximately 85% of rental properties are owned by private investors—many of whom are everyday Australians with just one investment property. These “mum and dad” investors are key to keeping the rental market supplied, providing much-needed housing in an already tight market.
When policies like negative gearing are under scrutiny, these small-scale investors are often the most vulnerable. Even the suggestion of changes can cause unease, leading some to consider selling their properties. And with current market conditions favouring sellers, this could create a ripple effect. If investors begin exiting the market en masse, we could see a severe reduction in rental property availability, just as we did after the COVID-19 rental moratoriums.
Following the moratoriums, Perth’s rental market was hit hard. Properties became scarce, rents soared to record highs, and the vacancy rate fell to a staggering 0.4% in March. While the market has since shown signs of recovery—rising to a 1.4% vacancy rate in August—it is still far from balanced. A healthy rental market typically sees vacancy rates between 2.5% and 3.5%. Any changes to negative gearing that discourage investment could undo the progress we’ve made, leaving renters struggling to find affordable housing.
Why Negative Gearing Matters for Investors
Stable policies like negative gearing are essential to maintaining confidence in the property market, particularly for small-scale investors. Removing or modifying this policy could result in a significant drop in rental housing supply. Fewer properties on the market would likely drive rents up even higher, making it more difficult for tenants already feeling the strain of rising living costs.
For “mum and dad” investors, negative gearing is often the key factor that makes owning an investment property financially viable. Without it, many would be discouraged from entering or remaining in the market. Given that investment loans make up nearly 38% of all finance for residential properties, any dip in investor confidence could seriously impact the rental market, pushing prices higher and reducing housing options for tenants.
Why Stable Policy Matters
Together with the Real Estate Institute of Western Australia (REIWA) and the Real Estate Institute of Australia (REIA), we strongly support policies that encourage investment and promote housing affordability. Part of the solution to housing supply lies in creating a stable regulatory environment. When investors feel confident, the market can stay more balanced, and renters then have more housing options, keeping rent prices manageable.
As the federal election approaches, it’s important that the conversation around negative gearing is balanced and considers the long-term impact on rental markets. In Perth’s northern suburbs, where the rental market remains tight, maintaining investor confidence is critical to ensuring continued recovery and future growth.
Source: Real Estate Institute of Western Australia (REIWA)