Negative gearing and its impact on housing made headlines again after the Australia Institute/Get Up research report showing most of the benefits of negative gearing flow to a very small cabal of wealthy Australians in the top income brackets.
Besides revealing who receives the most benefit from negative gearing, the research shows that since 1999, the cost to government of claims made by investors has grown substantially — more than $7 billion in the last reported year and an average of more than $6 billion for the previous five years.
That’s a big cost to the national budget.
But potentially the bigger cost for the Australian community is the ability of investors to out-compete owner-occupiers in the housing market. Anecdotally, with investment lending hitting more than 40% of total loans over the past year, that appears to be the case.
But is it true?
That’s the question we put to Luke Andersen, senior analyst at mortgage book risk management company Morgij Analytics. Anderson told Business Insider that, at the time, while claims for negative gearing rose there had been a significant shift in the structure of Australian home ownership.
“Over the past 15 years the number of Australian who own their home outright has fallen while the number of Australians who are now carrying a mortgage on their home has risen,” Andersen said.
Coupled with the rise in negative gearing tax claims and the number and size of investment loans at the moment that suggests investors are out-competing owner occupiers.
Disclaimer: Greg McKenna is a consultant to Morgij Analytics on mortgage book risk management.