<div id="readability-page-1"><div>[MELBOURNE] Tax changes for property investors in Australia could trigger a property market downturn at a time when consumer sentiment is already damaged, according to the chief executive of Morgan Stanley Australia.“If you look at auction clearance rates and various other metrics post-budget, they are quite alarming,” Richard Wagner said on Wednesday (Jun 10). “That would suggest that we will see some downward pressure on certain pockets of the property market.”The tweaks announced in last month’s federal budget included reducing the ability to deduct losses and mortgage interest from property investments from income and the removal of a capital gains tax discount. The move is designed to lower the barriers for first-time buyers to enter one of the world’s least affordable housing markets.“Investors have been hurt,” Wagner said. “Investors are 40 per cent of the real estate market at the residential level – that’s got to have an impact on prices.” The impact of the budget will play out over the next six months, he added.The changes have coincided with a challenging economic backdrop that includes interest rate hikes, elevated inflation, cost-of-living pressures and higher fuel costs.“Consumers are under pressure with two rate hikes recently,” he said. “Consumer sentiment is really damaged.”A Westpac Banking survey on Tuesday showed consumer sentiment slipped into “deeply pessimistic” territory.The budget may also lead to money flowing away from real estate and into shares, said Rebecca Hill, CEO of Morgan Stanley Wealth Management Australia.“Australian wealth has been built through the property sector over many decades and we are expecting to see a shift from that property investment to potentially more higher growth” assets such as “equity markets here or offshore”, she said. BLOOMBERG</div></div>

Morgan Stanley Australia CEO Richard Wagner warns that recent tax changes for property investors, including reduced deductions and removal of capital gains tax discounts, could trigger a property market downturn. This coincides with damaged consumer sentiment due to interest rate hikes and inflation. The budget aims to help first-time buyers but may shift investment from real estate to equity markets.

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Morgan Stanley Australia CEO warns of weaker property market