Angus Raine (pictured above), executive chairman of Raine & Horne, has called on federal and state governments to introduce tax incentives in the May federal budget to enhance property market supply and address affordability, advocating for decisive action to restore market balance.
The housing affordability crisis in Australia has reached critical levels, with prices remaining high despite increased borrowing costs. The Economist magazine highlighted the persistent challenge, noting affordability is at its worst since 1994.
Raine suggested a significant policy shift: a two-year exemption from capital gains tax (CGT) for property investors over 60, aiming to stimulate market supply by encouraging the sale of long-held assets.
“Property held by older investors contributes to supply challenges in capital cities,” Raine said. “One option to breaking the supply impasse is to provide older investors with an exemption for, say, 24 months on the payment of the CGT liability. This exemption should also come means test-free.
“The aim of this exemption is to free up supply by encouraging the release of long-held assets by older investors, specifically baby boomers (born 1946 -1964) and the silent generation (1928-1945).”
According to a report from the Reserve Bank, there has been a significant increase in the share of property investors aged 60 and older since the early 2000s.
Complementing federal initiatives, Raine advocates for state and territory governments to offer stamp duty exemptions to those over 70 looking to downsize.
“Stamp duty eats into the retirement nest-eggs of many older Australians that are tied up primarily in their three-four-bedroom family homes,” Raine said.
Raine believes that by adopting this measure, state governments could correct the financial imbalance facing older Australian homeowners while also tackling the supply constraints that affect the real estate aspirations of repeat property buyers in capital cities.
“This proposal would also unlock supply and allow the next generation of families the opportunity to occupy these larger houses,” he said.
Reflecting on the impact of previous tax changes, such as the Howard government’s superannuation incentives in 2007, Raine believes similar tax breaks for older property owners could significantly free up tightly held real estate.
During that period, the federal government provided retirees a limited-time offer to contribute up to $1 million in after-tax superannuation funds until June 30, 2007. Subsequently, starting from 1 July 2007, it imposed a $150,000 annual cap on non-concessional contributions.
“Property listings in Sydney skyrocketed as investors cashed in their housing assets and pumped the funds into superannuation to take advantage of the tax changes that unlocked larger homes,” Raine said.
“Seventeen years later, my conviction remains the same that implementing some tax breaks for older property owners could yield similar results by unlocking a significant amount of tightly held property in our capital cities for many years for the benefit of younger buyers and upgraders.”
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