What is negative gearing, how does it work and does it increase house prices?

There's been a lot of talk in recent years about how difficult it is for young people to buy a home in Australia, but with everything getting more expensive lately, the conversation has been intensifying. And the discussions usually include terms such as "negative gearing" and "capital gains tax concessions". Janda explains the major benefit comes from combining negative gearing with a discount to something called the capital gains tax. "If you can use negative gearing to offset your current rental losses at your full marginal tax rate but then pay effectively half that rate of tax on any capital gains then that looks like a pretty attractive way to pay less tax overall — assuming your investments do make a profit. Dr Henry, who Janda refers to, explains that negative gearing and the capital gains tax concession go hand in hand.