The Negative Gearing Debate
In this episode, Jeremy Cordeaux and real estate expert Neil Jenman delve into the controversial topic of negative gearing and how it affects first-home buyers. Jenman argues that negative gearing is one of the primary reasons why young Australians are struggling to enter the housing market.
“First-home buyers have the footprints of investors on their backs,” he says, highlighting the harsh reality that investors are squeezing out potential new homeowners.
This allows investors to offset their losses on rental properties against their taxable income, which incentivises purchasing more properties. This, in turn, pushes up house prices, making it increasingly difficult for first-time buyers to afford a home.
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A Broken System
Jenman describes Australia’s housing system as broken, explaining how both rental loss offset against other income and capital gains tax (CGT) are driving up house prices. These policies favour investors, making it harder for young Australians to buy their first homes.
“Australia’s housing market is rigged in favour of investors,” he argues.
Negative gearing and CGT concessions create a housing market that prioritizes investor wealth over first-time homebuyers.
Jenman points out that many investors purchase properties purely for tax benefits, increasing competition and driving up prices. As a result, first-home buyers find themselves competing against investors with deeper pockets and better financial incentives.
Negative Gearing : The International Perspective
Cordeaux and Jenman compare Australia’s housing policies to those in the UK and US. In those countries, the focus is on providing tax benefits to home loans rather than investment properties.
“In other countries, home loans get the benefits, not investment properties,” Jenman explains.
He believes Australia could learn from international systems where homeownership is easier for first-time buyers. In those countries, investment properties are not incentivised in the same way.
The episode concludes with a call for policy reform in Australia’s housing market. Jenman urges policymakers to reconsider the negative gearing system and its impact on the housing crisis. He argues that shifting the focus to supporting first-home buyers can help create a fairer housing market.
For a deeper dive into the effects of negative gearing and housing affordability, tune in to this episode of The Court of Public Opinion.
Topic time in podcast and video: 22:57 – 25:08
