Labor’s proposed negative gearing changes could see property prices fall by up to 15 per cent and rents rise by 6 per cent, according to the worst-case scenarios in a new independent analysis.

Under the best-case scenario, the new report by property analysts SQM Research states that Australian house prices would fall by a combined 4 per cent over 2018, 2019 and 2020 if Labor’s proposal to limit negative gearing is implemented.

The new report was released as Prime Minister Malcolm Turnbull and Treasurer Scott Morrison launched a fresh attack on Labor’s plan to curb negative gearing and halve the capital gains discount, while criticising opposition Bill Shorten’s scare campaign over Medicare privatisation.

In a clear sign that Mr Shorten’s political attack over the Coalition’s alleged plans to privatise Medicare is biting – despite the Prime Minister ruling it out repeatedly – the government released a new ad on Tuesday in which Mr Turnbull “guaranteed” Medicare funding under his government.

The 4 per cent dip in price rises pre-supposes a half a per cent rate cut by the Reserve Bank to compensate, and the biggest dip pre-supposes no rate cut by the RBA. The worst losses are predicted in 2019, when prices could fall by between 3 and 8 per cent in 12 months.

Off-the-plan investors would be exposed to a substantial risk of their property being valued below purchase price, the report warned, and a three-year, phase-in period to the changes should be considered, according to SQM Research managing director Louis Christopher.

Rents would remain stable, initially, but there could be upward pressure from 2020 onwards due to an expected decline in the completion of new properties. In a worst-case scenario, rents would rise 6 per cent.

“More affordable equals lower property prices,” Mr Christopher said.

“While we take the view that negative gearing reform is a good thing, such reform should be done as part of a wider property tax reform that should include a broad-based land tax and the elimination of stamp duties,” he said.

Labor treasury spokesman Chris Bowen was quick to point out that Mr Christopher had previously publicly supported “key features of Labor’s housing affordability policies”.

“Mr Christopher has strongly criticised claims by the likes of BIS Shrapnel about Labor’s policies increasing rents and has backed in the reforms to focus negative gearing to new properties,” he said.

But Mr Christopher told Fairfax Media the report had not been commissioned by anyone and that the firm had “elaborated” its position after conducting research.

“Back in February we hadn’t done any detailed research,” he said, referring to more supportive comments made when the policy had first been released.

Campaigning in Darwin, Mr Turnbull dismissed suggestions the Coalition was running a scare campaign on negative gearing and described Mr Shorten’s Medicare claim as “the most outrageous, bizarre lie told in this whole campaign”.

“What Labor is proposing with negative gearing has got nothing to do with housing affordability . . . what Labor is doing is imposing a massive restriction on economic freedom by banning negative gearing in a way that will drive down house values and drive up rents,” he said.

In Brisbane, Mr Morrison highlighted a separate Adept Economics report that showed, he said, “the value of homes will go down by four per cent on average. These sorts of figures have been dismissed by the Labor party and other commentators”.

Despite Mr Shorten successfully forcing the government to dump the possible privatisation of Medicare’s back-end payment system, the Opposition Leader insisted the government could not be trusted and that he was simply “reminding” voters of this fact. “I wouldn’t trust this government with the health of the nation,” he said.

It’s not just home owners who would take a hit – the property industry itself would be shaken up.

Analysing the temporary removal of negative gearing in September 1987, the report found “property owners hung on to their tax concession properties like gold and buyers ultimately lost interest in non-negatively geared properties”.

As a result, sales turnover would decrease by 17 to 21 per cent in the first full year following the scrapping of negative gearing, Mr Christopher said.

This would subsequently reduce stamp duty revenues collected by state governments and potentially result in job losses in the property industry.

The analysis used an international comparison of respective average lending rates and collated average gross rental yields, average interest rates and negative gearing policies across different countries.

A previous report on the impact of negative gearing changes from BIS Shrapnel forecast rents to rise by up to 10 per cent and property prices to fall 6 per cent, however, it did not model the Labor policy directly.

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