Prime Minister Anthony Albanese's recent tax reforms are providing luxury property owners with a financial incentive to retain their holdings and generate significant rental income, even as property values decline, a real estate expert has stated.
Glenn Price, a real estate agent specializing in the Brisbane and Gold Coast markets, criticized the changes to negative gearing and the capital gains tax discount introduced in the Federal Budget in May. Under the new rules, effective July 1 of next year, new investors will lose the ability to claim property-related costs or interest expenses under negative gearing. However, properties purchased before the May 12 budget announcement are grandfathered, allowing their owners to continue benefiting from existing provisions.
Price explained that these reforms eliminate any immediate pressure for owners to sell. He noted that some landlords are currently collecting rents as high as $30,000 per week while awaiting an increase in property values. "Phantom inventory is a polite way of saying rich people don't have to sell if they don't feel like it," Price told the Daily Mail. "No mortgage stress, no urgency, no reason to budge. The government just built a very expensive incentive for luxury owners to never sell again."
He added, "Keep the capital gains tax grandfather rules alive by simply not selling, bank an exorbitant weekly rent while you wait. Almost makes you think it was designed by someone who owns one." Price indicated that this situation would persist as long as owners are financially rewarded for delaying sales. "The only thing that shifts it is a desperate seller or a desperate buyer, and right now neither side has to be," he said. "Why would they blink first when they've just been handed every reason not to?"
These comments coincide with a deepening housing downturn in Sydney, where recent data shows that 91 percent of suburbs experienced a decrease in house prices in the three months leading up to July. More than 200 suburbs saw their median values drop by at least $100,000, with the most significant declines concentrated in affluent areas. Suburbs such as Cremorne, Fairlight, Manly, Mosman, and Balgowlah Heights have collectively seen median house values fall by over $300,000.
Nationally, home prices have decreased for four consecutive months, with prices falling in every capital city except Darwin in July, according to REA Group senior economist Anne Flaherty. Flaherty anticipates further price declines in the coming months. "While inflation moderated in June, it remains elevated and there is still a risk that interest rates could move higher before the end of the year," she stated.
Flaherty attributes the pressure on prices to high interest rates, compounded by ongoing cost of living challenges, which reduce borrowing capacity. "Budget tax changes are also likely impacting overall buyer confidence, while ongoing price falls could be driving some buyers to delay purchasing until prices stabilise," she added. IMAGE2
Melinda Jennison, president of the Real Estate Buyers Agents Association of Australia, observed a widening gap between sellers' price expectations and buyers' willingness to pay, creating a challenging market. "We're seeing a clear divergence in expectations," Jennison said. "Many vendors remain anchored to price expectations from several months ago, while buyers are responding to softening sentiment and changing economic conditions."
This divergence is evident even in competitive markets, where multiple offers or bidders may not result in successful sales. Owners who have not achieved their desired sale prices are increasingly opting to rent out their properties. "Almost every week, we receive calls from homeowners who have had their properties on the market but haven't achieved the price they were hoping for," Penelope Cobbold, owner of Luxury Property Rentals Cobbold & Co., told the Manly Daily. "Rather than continuing to reduce the asking price, they're asking us what they could achieve by renting the property instead." Cobbold reported seeing luxury homes rented for up to $30,000 per week, with some owners earning over $700,000 annually. IMAGE6