John Symond sounds off over negative gearing

John Symond from Aussie Home Loans takes a big stick to all politicians over the debate on negative gearing.
Kevin:  Interested to read during the week that John Symond, founder and Executive Chairman of Aussie Home Loans, made the comment that property prices would fall 10% to 20% under Labor government. John joins me.
John, thank you for your time. Is this all around negative gearing?
John:  Yes, it’s around the proposed policy of the Labor government, or Labor, if they were to form a government, to effectively abolish negative gearing on existing properties going forward, so if you were to buy a property, you won’t be able to claim negative gearing benefits.
I’ve made it very clear that totally hitting it on the head is insane and can cause property falls. I’ve previously said that there are improvements can be made. Improvements can be made to anything, including negative gearing, but there’s a big difference between making improvements and abolishing it. Of course, my concern is Labor is looking at abolishing it, not improving it.
Kevin:  I guess what concerns me and what concerns a lot of people is the lack of research around this issue and really getting an understanding about it, John. Your figures of 10% to 20%, where do they come from?
John:  Look, that’s anecdotal, Kevin. Who knows? All I can say is I’ve been in this business of property and home loans for 50 years. I’ve seen governments come and go. I’ve seen a lot of good policies. I’ve seen a lot of crazy policies. I have a reasonably good knowledge of housing, and it is my opinion – and my opinion only – that if Labor was to abolish negative gearing going forward, you would create an oversupply of properties hitting the market, an undersupply of buyers, and that can only mean one thing for properties, and that’s properties dropping value on existing properties.
For the government to say, “Oh, but you’ll get negative gearing benefits on new properties,” well, a day after you settle that new property, it becomes an established property, and who’s going to buy that property when you don’t get any negative gearing benefits going forward?
I just feel very frustrated when politicians don’t consult industry players who might know more than they do and might know more than academics who study statistics only, so I’m very critical about it. I’m not talking up my own game, because I’m someone who always says what I really do believe in, and I believe that this is fundamentally potentially a disastrous policy if ever it was implemented.
Kevin:  Yes, they seem to be treating it very much like a black-and-white issue: it’s either there or it’s not. You mentioned earlier in our chat that maybe they should do some enhancements around negative gearing. What would you recommend they look at, John?
John:  Well, they could possibly put a ceiling cap. Look, you see, probably 80% of investors are PAYG, hard-working moms or dads earning less than $80,000 a year. If they want to protect them that’s fine, but put a ceiling limit where you might not be able to claim above a certain dollar threshold, and anything over that goes in as a capital cost, so that in the future if ever you sell the property and if you sell it for a profit, you can then add those capital costs to the cost base.
There are many ways you can improve it, and that’s what I was saying when I made comments on Q&A three years ago, but to go and totally abolish it just makes no sense whatsoever. Labor says, “We want to help first-home buyers.” No one wants to help first-home buyers better than I do. We all want our kids to be able to go out there and achieve the great Australian dream of home ownership.
But you don’t go and smash the other 80% and hurt those, particularly, as I said, most of them are moms and dads just doing their best to build up a nest egg for their later years in retirement.
Kevin:  There is a school of thought as well that if Labor do, in fact, win government and implement their policy that it will likely have the reverse effect where there will be a rush of investors wanting to get in before negative gearing does actually shut down. In fact, there are some agents around Australia reporting that that is already happening, John.
John:  Well, that can happen, as well. Again, any surge – up or down – is not a good thing to ensure we have a healthy housing market. We have to remember the housing industry has underpinned the Australian economy the last four years while we’re transitioning from a commodities country to a non-commodities country, and why play with fire? Why take a huge risk to destabilize the one thing that’s propping up the Australian economy?
Again, I can’t see any logic, and it’s crazy, and whether this policy came from Liberals, Greens, Labor, I don’t care; I would still make those comments, because I think it’s crazy and it’s dangerous and it will hurt all Australians.
Kevin:  Yes, once again, it gets back to what you said earlier, too: they should really be consulting with the industry, people like yourself, and it’s interesting to see that real estate agents around Australia have actually banded together, as well, to come out and also echo the concerns that you’ve just said.
John:  Let’s hope that Labor wakes up to themselves, do some homework, and as you say, talk to the industry, talk to property developers, real estate agents, real estate industry, lenders, banks.
All they have to do is talk to banks and say, “Well, how will this impact bank balance sheets?” You have big Australian banks, half their balance sheet is housing loans. If all of a sudden the value of their balance sheets drop by X percent, the ratings agencies aren’t going to be too happy, and that might cause banks to lend less money. Is that what we want?
There are always unintended consequences. I’m not suggesting for one minute Labor is going out with not honorable intentions; what I’m saying is they haven’t done their homework and it could have catastrophic repercussions, and they have to be very, very careful, particularly when the world globally is in a very uncertain state. We’re hanging onto the Australian economy, doing the best we can. Don’t do anything so extreme to tip it over. That’s my concern.
Kevin:  John, great talking to you. Thank you very much for your time today.
John:  Good, Kevin.
Kevin:  Thank you.

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