Open a newspaper, turn on talkback radio or spend five minutes on social media and you'll find somebody warning that changes to property tax breaks will send rents soaring.

Subscribe now for unlimited access.

Login or signup to continue reading

The argument is always the same. Investors will sell their properties. There will be fewer rentals. Rents will rise.

It sounds plausible until you stop and ask a simple question: who are those investors selling to? The homes do not disappear. They are bought by people who want to live in them. First home buyers who have spent years competing with investors at auctions finally get a better chance of getting a foot in the door.

When a renter buys a home, they stop being a renter. They stop competing for the pool of rental homes. That is the part of the story the property lobby wants us to ignore.

When an investment property is sold to a first home buyer, a rental property leaves the market. But so does a renter. The industry wants us to count one and ignore the other.

This is where the property lobby gives away the game. We are told to count the rental property that leaves the market, but not the renter who leaves it too. That same logic is now being used to argue that any future rent increase should be blamed on tax reform.

The latest claim is that landlords will raise rents if their tax breaks are wound back. This claim has spread quickly through parts of the property industry and sympathetic media outlets. But landlords do not set rents based on their tax returns. They set rents based on what they think the market will bear.

If higher tax breaks and lower costs for investors automatically led to lower rents, Australia would........

© Canberra Times