Housing Is Not an Investment Strategy. It Never Should Have Been.

There’s a story doing the rounds online that I keep thinking about. A single parent, working full time, goes to auction fifteen years ago. She’s the only person there who actually wants to live in the house. Everyone else is an investor. She wins, barely, but pays more than she should have because a cluster of people with existing wealth decided that her future home was a line item on their tax return.

That’s not a market functioning well. That’s a market that has been quietly, legally, systematically tilted against people who just need somewhere to live.

The current changes to negative gearing have predictably produced a lot of noise. Some of it is genuine concern, some of it is people who’ve built their retirement plans on a system that probably shouldn’t have existed in quite this form. I have some sympathy for the latter. People made real financial decisions based on rules that were in place. That’s not nothing. But sympathy for individuals doesn’t mean the policy was good, and it definitely doesn’t mean we should keep it forever because changing it is uncomfortable.

The more interesting statistic I came across in all this: around 20% of Australian taxpaying households own an investment property. Compare that to 7% in the US and about 4.6% in the UK, neither of which have negative gearing in the same form. We didn’t just build a system that allows housing as investment. We built one of the most generous versions of it on the planet, and then seemed surprised when house prices went up and renters got squeezed.

The argument that negative gearing suppresses rents by encouraging more rental supply is not completely without logic. But it relies on a chain of assumptions that don’t hold cleanly in the real world, and it ignores the competing effect of investors bidding up purchase prices against owner-occupiers. You can’t fix the rental market by making it harder for people to buy. Those things are not separate problems.

The grandfathering question is genuinely tricky. Phasing this out over five to ten years instead of locking in existing properties indefinitely would have been cleaner. The current approach means the real impact is probably fifteen to thirty years away. We have a housing crisis now, not in 2045. Still, the alternative was probably losing the election and getting nothing at all, so here we are: incremental progress that doesn’t feel like enough, which is the defining experience of Australian housing policy for about two decades running.

What gets me is the framing that keeps appearing, the idea that young people are somehow being denied a wealth-building opportunity because the rules are changing. That framing treats an accident of timing as an entitlement. The fact that previous generations could do something doesn’t make it right, and it doesn’t mean the next generation is owed the same mechanism. Especially when that mechanism made it structurally harder for them to buy a home in the first place.

The woman in the story said something that’s stuck with me: she doesn’t care what her house is worth. She wants young people to be able to buy a home near her. I find that more or less impossible to argue with. A system that turns a basic human necessity into a vehicle for tax minimisation and capital accumulation is one that has confused means and ends. Housing is shelter first. Everything else is secondary.

The Singapore stamp duty model is worth looking at properly. Zero for first home buyers, then a steep sliding scale for second and third properties, and an eye-watering rate for foreign buyers. That’s a system designed around a priority. Ours has, for decades, been designed around the opposite one.

I don’t know if the current changes will be enough. I genuinely don’t. The grandfathering is a long tail, the new-builds carve-out has its own problems around developer incentives, and nothing here addresses land rezoning or the infrastructure that needs to follow density. It’s a partial fix to a structural problem that accumulated over thirty years. Those don’t tend to resolve quickly or cleanly.

But the direction is right. That matters.