ABC The Business on Negative gearing

[BayView]

I don't really know how that addresses the equation as those people are still part of the rental pool.

Break it down to a group of 10 people.

7 own their own home
3 are living in rented investment properties owned by first group
1 house is being built

If negative gearing changed and one of the rental property owners decided to sell and is purchased by the tenant then there is still only a current demand for the 10 properties, it's just changed from 70% ownership/30% renting to 80%/20%.

You still have the house being built to cater for new demand.

As already suggested in the thread, the impact from rents rising would come if new supply was disrupted by the changes, but as I already pointed out, the number of negatively geared investors building new houses is small.

I think a change to negative gearing would be best for all if it was removed for existing properties (not in one hit) and only allowed for newly constructed homes (perhaps with a limit of first owner of new home only and first 5 years). This would encourage investors to contribute to new supply, rather than speculate on and contribute to the price rise in established homes.

Good theory.

If you give investors only the incentive for neg gearing on new builds, all you'll see will be a spike in prices on new builds, and you just know that the developers will be capitalising on that change to the game in an instant.

As is always the case; your comments are the same as all the other people who are not property investors who think NG is unfair.

It's only unfair if you're not in it, I suppose.

Me; I reckon it's a bloody purler - I get to take an NG property and turn it into a pos cashflow one....nice.

But then, if I'd sat on my fat @rse and never bought anything, I would prolly be a whinger about the rules too.

I guess you can whine, or make your own luck.

 

[Tony3008]

... As is always the case; your comments are the same as all the other people who are not property investors who think NG is unfair.

It's only unfair if you're not in it, I suppose.

I've got three IPs but could not defend the current tax treatment of IPs. Personally I think the UK system of ring-fencing IP income so that you can roll forward current losses against future IP profits but not other earnings is a fair one. If you buy a property that will come good in a couple of years no problem; if your strategy is to buy a house in a blue chip area that yields 2% and will never cover its costs but is bought in expectation of a healthy CG when you sell, is there any public interest in encouraging this?

If the argument is that incentives are needed to maintain/increase the supply of rental properties then they should be directed to the homes, not the owners. Currently you can have two owners of identical properties - one gets back 15% of their losses, one 40%. The NRAS model is on the right lines: it's a fixed amount so worth more on lower cost properties and does increase supply rather than encouraging investors to compete for existing stock. But you're right that some developers have just used it as an excuse for overcharging.

 

[Aaron Sice]

"ring fencing" the losses is a good way to put it - i also agree it's a better system - removes more speculators but also removes more tax.

what does the govt want more - lower prices or more tax revenue? i know which one they'll hurt from and which one they'll make an election issue out of.

 

[lizzie]

Why did they buy in late 2008/early 2009 after prices had been dropping steeply in many cases? Because they were incentivised to do so... have you seen the changes to the FHOG in NSW, QLD & SA? Will it be enough? I guess we'll find out over the next 6-12 months.

I wish the prices had been dropping ... instead the incentives only drove the prices higher in my area.

2009 could've bought a 2 bed unit for under $200k ... increase in the FHB grant and the price rose to $300k or over ... and haven't come back down.

 

[VYBerlinaV8]

i think it was a dig at the Hawke govt employing primary school kids as advisors.

Thanks, I'm having a sloooow day.

 

[hobo-jo]

I wish the prices had been dropping ... instead the incentives only drove the prices higher in my area.

2009 could've bought a 2 bed unit for under $200k ... increase in the FHB grant and the price rose to $300k or over ... and haven't come back down.

Yes prices bounced hard after the incentive. That was the point, prices were falling and all it took was a handout to get FHBs back into the market which was the foundation of a significant boost in some areas. Not so sure intervention will work that well again.

 

[BayView]

if your strategy is to buy a house in a blue chip area that yields 2% and will never cover its costs but is bought in expectation of a healthy CG when you sell, is there any public interest in encouraging this?

Seriously; how many investors - what % - would willingly pony up for a 2% yield, and/or even be in a position to carry the neg cashflow of that size?

But you're right that some developers have just used it as an excuse for overcharging.

No-one has to pay what they are asking though.

 

[BayView]

Yes prices bounced hard after the incentive. That was the point, prices were falling and all it took was a handout to get FHBs back into the market which was the foundation of a significant boost in some areas. Not so sure intervention will work that well again.

So; it's the FHB's and the Gubbmint who are at fault for price rises?, and not us greedy specufestor LL's ripping off the world with our disgusting NG, after all.......

So, what caused the price drops you refer to; it can't have been us LL's; we are too busy pushing UP the prices. Or maybe it was as we all rushed to offload our string of NG properties as we were collapsing under the weight of all that neg cashflow - even with our tax deductions....

 

[hobo-jo]

Ignorance is bliss right BayView?

All market participants are at fault, such is the nature of supply and demand on prices.

 

[lizzie]

Yes prices bounced hard after the incentive. That was the point, prices were falling and all it took was a handout to get FHBs back into the market which was the foundation of a significant boost in some areas. Not so sure intervention will work that well again.

I agree - but it is another example of "not" investors driving up house prices.

Wish I'd bought more at the sub-200

 

[turk]

Ignorance is bliss right BayView?

All market participants are at fault, such is the nature of supply and demand on prices.

For those not in the market it is probably viewed as a fault.

For those in the market it is probaly viewed as an increase in wealth.

 

[hobo-jo]

For those not in the market it is probably viewed as a fault.
For those in the market it is probaly viewed as an increase in wealth.

Funny, that works both ways. I see a lot of those holding property that is falling in value blaming "doom and gloomers" & market sentiment rather than seeing themselves at fault for paying too much in the first place

 

[BayView]

Funny, that works both ways. I see a lot of those holding property that is falling in value blaming "doom and gloomers" & market sentiment rather than seeing themselves at fault for paying too much in the first place

I hold property, and I've never blamed doom and gloomers for falling prices.

I only blame them for having a short term view, possibly with an element of unrealistic and unwarranted panic.

I've never paid too much for any property I've bought - they have all gone up in value, and they were all bought for less than asking price.

Some went up at slower rates than others, and some at different times than others due to their locations. There's no pattern.

And; I've never tried to time the market to buy at the bottom and all that; just kept buying as I could afford it.

Could I afford it every time? hell no; just kept hocking myself up to 80% and worked hard to get the debt down as I went.

It works.

I guess you'll be that guy who is waiting for the prices to come down before buying; don't wanna pay too much?

All market participants are at fault, such is the nature of supply and demand on prices.

Yes, this is true, but the argument is over what % each section has.

The whining FHB's and "evil specufestor" hating dudes would have it that we are the whole cause of why you can't buy a decent house.

 

[hobo-jo]

I hold property, and I've never blamed doom and gloomers for falling prices.

I only blame them for having a short term view, possibly with an element of unrealistic and unwarranted panic.

I think "fault/blame" is the wrong word to put on property investors. While they are in part "responsible" for the rise in prices (as are all market participants), the blame really rests with Government as it's their tax rules, decision making and planning policies which laid the foundation for prices to rise as far as they have.

We can't blame property investors for taking advantage of perfectly legal exploits in the tax system (which is in part responsible for high prices).

We can't blame first home buyers for leveraging up government grants to buy new homes (which is in part responsible for high prices).

We can't blame those who are now choosing to abstain from the market due to prices being too high.

And not saying you are BayView, was just a general comment.

The whining FHB's and "evil specufestor" hating dudes would have it that we are the whole cause of why you can't buy a decent house.

I can appreciate this as I see it as well, but don't agree with many of their views.

It's the Government who has the moral responsibility to look after it's consituents, so where their policies are not working for the benefit of society then they should be changed (and in my opinion negative gearing rules should be changed). This is not the "fault" of property investors.

 

[plusnq]

Unless you live in a tent or a caravan, everyone is a participant in the housing market

 

[turk]

Funny, that works both ways. I see a lot of those holding property that is falling in value blaming "doom and gloomers" & market sentiment rather than seeing themselves at fault for paying too much in the first place

I haven't seen a lot of property holders blaming "doom and gloomers" for falling values, is this another fluffy soundbite?

Perhaps you can put up links to support this assertion?

 

[Aaron Sice]

I haven't seen a lot of property holders blaming "doom and gloomers" for falling values, is this another fluffy soundbite?

Perhaps you can put up links to support this assertion?

uh.....been around a water cooler lately?

even Glenny boy is having a dig at them.

asking someone to post up "proof" when all you have to do is pick up a newspaper is a bit lame, dont you think?

or is that a silly question?

 

[lizzie]

is this another fluffy soundbite?

If it's in the papers then it's a fluffy soundbite - a survey taken of Fred and Jill at the water cooler, both bought their single IP thru a seminar.

 

[flatout81]

Negative Gearing will decline in popularity as property prices continue to soften for the next decade or two.

What is the point in making a negative return on a devaluing investment.

 

[HotRod]

Negative Gearing will decline in popularity as property prices continue to soften for the next decade or two.

What is the point in making a negative return on a devaluing investment.

But you beat the tax man. I know, people think they still win, even if they lose.