Peter Peard, CEO of Peard Group says many people renting a home in Perth were unaware of the consequences that would flow from the major changes in negative gearing being proposed by the Federal Labor Party.
“The last time negative gearing was abolished back in 1985 by the Hawke Labor Government, weekly rents in Perth surged upwards by 37%. Although such a significant increase is not guaranteed, there is no doubt Perth will experience higher rental prices".
While there is now an oversupply of rental properties in Perth, this could quickly evaporate if property investors stop buying established rental properties when negative gearing benefits are no longer applicable after the Federal election.
It is predicted that house values could fall as much as 15 per cent during the four years it will take for the market to absorb the Labor Party's planned negative gearing changes.
While this is the worst case scenario, there is no doubt there will be a fall is values as investors pull out of the market and the pool of available rentals shrinks.
Buyer sentiment for investment is currently very weak in Perth and any dramatic changes to areas covering taxation benefits could have a strong negative impact on the overall property market.
Despite the fact that negative gearing provisions may still be in place for new builds, this change to negative gearing will discourage many people from investing in property and, as a result, the supply of rental properties will begin to shrink.
The Peard Real Estate Group is predicting strong rises in weekly rents where investors typically buy homes to maximise negative gearing benefits.
Peter Peard, the Group’s CEO says that these areas tend to be located in suburbs where rental returns are low because the purchase price of the home far exceeds the market rents, compared to less expensive suburbs. Mr Peard looks at some of the top suburbs where rents are expected to rise if negative gearing is abolished.
SUBURBS TO BE HIT BY NEGATIVE GEARING CHANGES
3. CITY BEACH
7. MOUNT CLAREMONT
9. MOUNT LAWLEY