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How changes to Capital Gains Tax could impact housing affordability

How changes to Capital Gains Tax could impact housing affordability

Newly released research from the Housing Industry Association (HIA) suggests that an increase in Capital Gains Tax would raise the cost of renting and make housing affordability even more problematic.

On behalf of the HIA, the Centre for International Economics (CIE) investigated how changes to the Capital Gains Tax (CGT) would affect the current economy. More specifically, the investigation sought to understand how an increase in Capital Gains Tax would impact the housing market for both renters and first-time home buyers.

The research has highlighted significant consequences an increase in CGT would have on the Australian housing market. One of the most impactful issues for everyday Australians would be the decrease in affordable housing.

HIA principal economist, Tim Reardon, said that “increasing the tax on housing will result in less investment in housing, fewer houses being built and inevitably a worsening of the affordability challenge.”

“Increasing the tax on investment homes may initially benefit first time home buyers, but over time this gain will be lost as rental costs rise leading to higher home prices that will once again force first time home buyers out of the market.”

Mr Reardon concluded by pointing out that “we cannot tax our way out of the housing affordability problem.”

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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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