The Barefoot Investor has delivered a characteristically blunt message to panicked property investors ahead of Labor’s looming changes to housing policies in the federal budget: stop whining, and if you can’t handle higher rates, “sell your homes immediately”.
Finance guru Scott Pape has unloaded on landlords fearing the potential changes to capital gains tax and negative gearing, dismissing claims the reforms will unleash “a toxic mix of pain and devastation”.
His comments come a few days before Treasurer Jim Chalmers is set to unveil sweeping tax changes designed to tackle housing affordability and “intergenerational anxiety” over home ownership.
Under the reforms, existing negatively geared investors will largely be grandfathered out, while future investors will only be able to claim concessions on new builds and apartments.
The government is also expected to wind back the Howard-era 50 per cent capital gains tax discount and return to the pre-1999 system where gains were indexed to inflation.
But while property lobbyists and investors have warned the changes could trigger rent rises and force landlords to sell, Mr Pape said many investors had become too reliant on taxpayer-backed incentives.
“For far too long, first home buyers have had the footprints of investors on their backs,” he wrote in a column for The Herald Sun, replying to a concerned reader.
“It seems like utter madness from the Labor government that will hit your readers hardest,” the member of the public had written to him.
“One expert called it ‘a toxic mix of pain and devastation’ that will force landlords to sell investment properties. And they’re doing this during a cost of living crisis when research found that 9 per cent of mortgage holders would default if there are one or two more rate hikes. Clearly making things more expensive for landlords like me will make us jack up our rents. It’s just common sense!”
“A toxic mix of pain and devastation? Please,” said Mr Pape.
“If that’s what happens to your investment portfolio after a few tax tweaks, you’ve got bigger problems than I can help with.
“I’m not sure if you’re from the housing lobby, the Liberal Party, or if you’ve just stumbled onto my column for the first time in 22 years and haven’t worked out that I’ve spent the better part of two decades arguing against negative gearing and every other form of taxpayer-funded landlord welfare.”
Mr Pape’s response to the statistic that 9 per cent of mortgage holders could default was blunt.
“First, if they’re that skint, they should sell their homes immediately and get out of the market while they still can. They don’t own their home. The bank does,” he wrote.
“Second, these people most certainly are not my readers.
“We’re way too smart for that.”
The comments land amid a fierce national debate over whether the Albanese government’s reforms will help younger Australians locked out of the housing market or simply punish aspirational investors.
News.com.au previously confirmed existing negatively geared landlords will be exempt from the biggest changes, sparing an estimated one million Australians from losing their current concessions.
However, from budget night, investors purchasing existing homes will no longer receive the same tax advantages, with incentives redirected towards new housing supply.
The government believes the move will encourage construction while reducing competition between investors and first homebuyers for established homes.
Dr Chalmers has argued the status quo is “unfair and unsustainable”.
“We’re not trying to punish anybody who has made decisions about how they’ve used the tax system or the housing market in the past,” he told news.com.au.
“It’s about trying to expand opportunity in the housing market for more people.”
The Treasurer has also warned voters to brace for a “scare campaign full of lies” once the reforms are formally announced.
The issue has become politically explosive because of the sharp decline in home ownership among younger Australians.
Government figures show home ownership rates among 25 to 29-year-olds fell from 43 per cent in 2001 to 36 per cent at the last census, while ownership among 30 to 34-year-olds dropped from 57 per cent to 50 per cent.
The reforms are expected to trigger a fierce backlash from the Coalition and investor groups.
Former prime minister John Howard accused Labor of launching “yet another tax slug”, while fund manager Geoff Wilson described the changes as “theft from every aspirational Australian under 40 trying to get ahead”.
The Barefoot Investor, who has long criticised negative gearing and generous investor tax concessions, argued many Australians had become dangerously overleveraged.
And in another swipe at parts of the finance industry, he also warned readers to be wary of expensive investment advice dressed up as sophistication.
In one reader exchange, a couple nearing retirement revealed a financial planner had advised them to ditch their low-fee industry super fund for a product charging $8000 a year in fees.
Mr Pape savaged the recommendation.
“You and I both know that the only thing you can guarantee Lenny is reducing his nest egg by $24,000 in fees over three years,” he wrote.
“His low-cost industry fund offers dozens of investment options. You could build him an index fund portfolio inside his existing fund and put the $8000 back in his pocket where it belongs.”
His full column can be found here.
