Expertshave rubbished Treasurer Josh Frydenbergs claims that a proposed rollback ofnegative gearing will decimate the property market and send rents soaring.

This article was published by The New Daily on the 8th of November 2018.

In anop-ed published by The Daily Telegraph on Thursday,Mr Frydenberg claimedLabors proposedchangestocurrent concessions for property investors will hurt every Australian and smash property values.

If you own your own home, it will be worth less. If you rent your home, it will cost you more,Mr Frydenberg wrote on Twitter.

[Bill Shorten] must listen to the experts and ditch his big property tax!

Independent economist and long-time negative gearing scholar Saul Eslake told_The New Daily_ that the Treasurers description of the reforms as a property taxwas somewhere between misleading and disingenuous.

Proposing to scale back tax breaksfor investors in property and other assets is not imposing a new tax, he said.

Rather, its limiting the capacity for people to borrow in order to acquire assets and offset the cost of that borrowing against other tax liabilities.

MrEslakedescribed the Treasurers claim that Labors property tax will hit 1.3 million Australians who negative gearand every Australian with equity in their home as hyperbole.

The question that needs to be asked is Forwhom should we feel more sympathy?

People withthree to six investment properties, whowill see the value of investments decline a bit?

Or the large number of predominantly younger and growing proportion of middle-aged people unable to get into the housing market because theyre faced with ever-increasing competitionfrom investors?

Labors proposed reforms:

Willhome pricescrash under the reforms?

The end ofhistoric property price booms in Sydney and Melbournehas seen national home pricesdecline by 2.7 per cent over the past 12 months.

However,Treasury modelling released earlier this year found that theeffect of Labors reforms onhome values was likely to be mild.

Changing tax policies will put downward pressure on prices thats sort of the idea, University of Sydney economist and housing expert Peter Phibbs said.

We have locked a lot of punters out of home ownership because of price growth.

The proposed changes wont slam the market, he said.

Wakelin Property AdvisorydirectorJarrod McCabe said that in the short term we may actually see the market jump in advance of the start date as investors look to lock in the current rules under the grandfathering provisions.

In the long term we think the tax policy will be adjusted to and it will be fundamental issues like the state of the economy and population growth that drives the market, he said.

University of New South Wales City Futures Research Centre fellow Chris Martin said it would be a good thing for house prices generally to decline.

If you own your home, this isnt going to change what its worth to you in terms of the shelter it provides you, Dr Martin said.

And if youre looking at selling and buying another house to live in, the price of the next house will have gone down too.

Will rents go up?

Theclaim that renters will pay moreshould the reformsgo through is nonsensical, Mr Eslake said.

In particular, by grandfathering existing propertiesLabor will, if anything, discourage those who own existing properties from selling.

Rather, first-home buyers and trader-uppers will face less competition for existing properties and have a greater opportunity to gain a foothold in the housing market, Mr Eslake said.

Dr Martin also dismissed the claim.

On the contrary, negative gearing has contributed to higher rents, because it is part of the reason why more higher-income households are renting longer (ie priced out of owner-occupation), and theyve bidded up rents,he said.

Instead of pushing down rents, negatively gearing pushes house prices higher than what investors would otherwise be prepared to pay for an asset that yields a given rental income.

Mr McCabe said rents may increase by a modest amount, say five per cent as landlords look to pass some of the costs on to tenants.

Landlords ability to do this will, in part, depend on the tightness of the rental market that they operate in. Most city rental markets are tight.

This article was written by journalist Isabelle Lane.