A leading analysit warns the cost of renting in Brisbane could jump by more than 20% in just two years if federal Labor’s plan to axe negative gearing goes ahead.
SQM Research modelling reveals the Brisbane's rental market will be the most impacted by Labor’s proposal to change negative gearing, assuming the reforms were to come into effect on July 1, 2020.
The research house is forecasting a hike in rents in Brisbane of 13% to 22% between the years 2020 and 2022.
According to Realestate.com.au, that forecast is based on the worst case scenario where there would be no cut to interest rates, a rise in rental yields and changes to negative gearing and CGT concessions as a result of a Labor government coming to power.
If the Reserve Bank of Australia does cut interest rates this year or early next year, SQM Research is forecasting a rise in rents in Brisbane of between 12% and 19%.
“We’re forecasting Brisbane to be the most affected on the rental side (of all capital cities),” SQM Research managing director Louis Christopher said.
“This tax change is going to aggravate the undersupply issue because our view is that investors will effectively be turned off.
“Capital gains tax concessions will effectively be halved and they’re going to be demanding a higher rental yield.”
Labor’s proposals include a plan to restrict negative gearing tax concessions to only new properties and halving current capital gains tax discounts for property investors.
The plan was first introduced before the 2016 federal election when the market was still booming, but national dwelling values have fallen 6.8% since peaking in October 2017.
Were Labor to implement the plan, national property prices would drop a further 4% to 12% over 2020-2022, according to the SQM modelling, but the impact on Brisbane home prices would be minimal.
Mr Christopher said that even without any changes coming into effect, Brisbane rents were likely to rise 3% to 4% this year.
“Our view is that Brisbane is increasingly this year going to turn into a landlord’s market,” he said.
“The period of oversupply that Brisbane experienced from late 2014 to 2018 is fast coming to an end now, so the issue is Brisbane is going into a period of undersupply.
“We think that’s going to start sometime next year and we’re already starting to record increases in rents now.”