A multi-millionaire property investor who owns 25 properties is blowing up about the negative gearing changes, even though he will keep his tax concessions.
News.com.au reported on Sunday that the changes will be fully grandfathered, which means they will not impact existing investors.
New property investors will still be able to negatively gear a property, but only if it is a new build, not an existing apartment or home.
Daniel Walsh, a buyer’s agent and founder of the consultancy Your Property Your Wealth who owns 25 homes, warned that it will hit younger voters, not help them.
“I think that rents will definitely have to skyrocket, like we already saw this in the Keating era, where they went up last time they did this with negative gearing,” he said.
“So exactly the same thing is going to happen. It may take a couple of years for it to pan out. It’s not going to be instant, but that will happen.”
Negative gearing is a tax strategy where an investment property’s expenses including interest, repairs, and rates exceed the income it generates, creating a loss that owners can deduct from their income taxes.
The author of 6 Principles to Retire Younger & Richer, Mr Walsh, said the government’s changes would be a disaster.
“Older generations have given them these benefits to be able to get wealthy,’’ he said.
“Everyone’s climbed that mountain, and then, technically, now the young people that are trying to also replicate what maybe their parents have done, they’ve just pulled the ladder up on them.”
The decision to grandfather the changes means around one million boomer and Gen X property investors who are currently negatively gearing are sitting pretty, but younger Australians looking to ‘rent-invest’ will be locked out of negative gearing unless they purchase a new property.
The changes will end negative gearing as we know it, however, for future investors, unless you are prepared to buy a new home and add to the supply of homes.
For existing housing stock, negative gearing is over, unless you already have your foot in the door before budget night.
Mr Walsh, who admits the grandfathering leaves him personally better off, said he was more concerned about the hundreds of thousands of younger clients he works with.
He said the vast majority of his clients are under 35 and use rent-vesting – renting where they want to live and investing where they can afford — as the only viable path to eventual home ownership.
“House prices got so expensive that most young people can’t get into the market where they live, so they end up renting in expensive areas and investing throughout the country in areas they can afford,” he said.
“They’re hoping those investment properties go up in value so they can sell them and use the proceeds as a deposit on a family home. I have seen thousands of clients do that — clients as young as 18.”
Mr Walsh said the policy fundamentally misunderstands how younger Australians are now navigating the housing market, and that restricting negative gearing to new builds would strip away one of the few remaining tools they had to build wealth.
“The government is so far behind on this,” he said.
“They think everyone has the ability to save enough money every single year to eventually have a deposit to go buy their two-and-a-half million dollar home.
“They don’t. There’s no possible way for that to happen.”
However, The Barefoot Investor has told critics to “stop whingeing” in his Herald Sun column, insisting the current system was stacked against younger Australians.
Finance guru Scott Pape said claims by some investors that the changes would create a “toxic mess of pain and devastation” were overcooked.
“I’m not sure if you’re from the housing lobby, the Liberal Party, or if you’ve just stumbled onto my column for the first time in 22 years and haven’t worked out that I’ve spent the better part of two decades arguing against negative gearing and every other form of taxpayer-funded landlord welfare,’’ he said in response to a reader’s letter.
“For far too long, first home buyers have had the footprints of investors on their backs.
“A toxic mix of pain and devastation? Please.”
He said his sympathy for landlords who would be thrown into financial peril by the changes was limited.
“If that’s what happens to your investment portfolio after a few tax tweaks, you’ve got bigger problems than I can help with,” Mr Pape said.
“If they’re that skint, they should sell their homes immediately and get out of the market while they still can. They don’t own their home. The bank does.”
