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Negative gearing back in the headlines

By Brett Pilgrim

Negative gearing can be one of the biggest draw cards to the world of real estate. If the income earned from your rental in Adelaide is less than the repayments you need to make on your home loan, as well as other expenses, you can claim the difference as a tax deduction.

This has been receiving a fair bit of press over the past few months, and not all of it good. For one, some commentators have lambasted negative gearing for only favouring the wealthy and driving up house prices. However, new research from the Property Council of Australia and the Real Estate Institute of Australia (REIA) has highlighted that it could be more important to real estate in Adelaide than a lot of people think. 

In a new report, titled Australian housing investment: Analysis of negative gearing and capital gains tax discount for residential property, the Property Council has cast off some common myths and claims that negative gearing supports affordability and enables everyday Australians to get their start in the property market. Not only that, but it acts as a major incentive to invest in rental properties.

"The reality is that if negative gearing was abolished there would less investment and rents would go up," Property Council of Australia Chief Executive Ken Morrison said.

"Negative gearing and CGT are doing all the right things when it comes to improving housing affordability for Australians."

With some 43 per cent of loans taken out in South Australia were for investment properties in March 2015, according to CoreLogic RP Data, it seems that investors are also having a part to play in the construction of new homes. Property Council figures show that investors finance around a third of all new new homes built every year.

What's more, REIA CEO Amanda Lynch said that middle Australia gets the most benefit from negative gearing, not the property moguls as some have suggested. 

"Mum and dad investors are overwhelmingly the ones who benefit most for the ability to negatively gear their property investments," Ms Lynch said.

As negative gearing continues to be an option for investors in Adelaide, it could be enough to convince you to make the leap. For guidance finding a suitable home, and property management expertise to help you make the most of it, get in touch with the team at Ray White.

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