Fed: Costello tells home unit investors to be wary

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Fed: Costello tells home unit investors to be wary

CANBERRA, Dec 4 AAP - Treasurer Peter Costello today warned property investors to becautious as the supply of flats and units made it more difficult to find tenants.

Mr Costello said he believed there were now as many tenants as constructed flats in Australia.

Investors could face bigger than expected losses if the number of new flats and unitsbegan to outstrip the number of tenants, he said.

"Medium density developers are businesspeople making their own decisions," Mr Costellotold reporters.

"My view is we've probably got to the stage where there are as many tenants as thereare constructed flats.

"If professional developers think that's not the case, well they develop at their own risk."

His comments came after the Reserve Bank of Australia left interest rates unchangedtoday, and followed the latest figures which found a massive suge in building approvalsin October.

Mr Costello said the latest figures showed high volatility, particularly in mediumdensity housing.

But he said the government believed the housing sector was slowing.

"I think I can say the housing sector is slowing. It hasn't stopped, but it is slowing.

We expect that slowing to continue," he said.

Mr Costello said some of the continued demand was driven by tax measures, but he saidthe government had no plans to change rules on negative gearing.

"The government has no plans to change negative gearing," he said.

"But at the end of the day, if you are buying a unit or a flat for investment purposes,you've still got to have a tenant. And there are only so many tenants.

"And if you get to a stage where the number of flats or units exceeds the number oftenants, then you'll have much bigger losses than the ones you were trying to generate."

He said negative gearing helped defray losses against other income, but investors werestill making a loss.

"You've got to remember this: a loss is a loss," he said.

"If you don't have a tenant that loss would be more substantial.

"I have said to people before, consider these investment deals very carefully. Likemost investments they can go up, they can go down."

AAP jg/sw/tnf/bwl

KEYWORD: ECONOMY HOUSING LEAD