Property prices could fall in the Gold Coast after Tuesday’s federal budget moved to discard negative gearing deductions for travel expenses, local real estate agents said.
The new measure, which the Turnbull government expects will enable it to claw back an estimated $540m in savings, will stop investors from claiming travel expenses as part of their investment expenditure, whether it’s inspecting property or undertaking maintenance.
Some agents are worried the new ruling could reduce demand for Gold Coast property from interstate investors, although some said the closure of the loophole could be limited to encouraging holiday-makers to look elsewhere.
Demand for properties in the Gold Coast has been particularly strong due to Sydney and Melbourne’s overheating property markets, forcing investors to look elsewhere, LJ Hooker Palm Beach agent Rob Cinelli told The Australian.
“There are all these costs that are eroding the appeal to investors. I am concerned about how it’s going to impact on property performance, including price growth and volumes,” Cinelli said.
Approximately 70% of buyers of investment property through Gold Coast-based Smart Real Estate are interstate buyers, according to principal Brad Scott. “If they’re unable to reduce their expenses there’ll be less demand for investment properties on the Gold Coast. Therefore you may see a decline in investment properties across the board, and for investment properties on the Gold Coast in particular,” he said.
Many interstate investors looking for $350,000 to $500,000 units that need some refurbishment are likely to switch to buying properties closer to home, said Ben Stephens, principal of Base Property Group.
“A lot of [the units] are at the stage when they need some refreshing,” Stephens said. “A lot of people will come up … they’ll do the property maintenance themselves … they’ll repaint them.”
Other agents are less worried about the new ruling’s impact on the market. John Newlands, chairman of the Real Estate Institute Gold Coast, believes the decision isn’t a game changer. “We’re disappointed with that but I don’t think it’s a big enough thing to put them off purchasing,” he told The Australian.