ABC The Business on Negative gearing

[MIW]

and assuming that every negatively geared property investor only owns 1 (pretty big assumption),

I thought most of the people in Oz own 1 or 2 property in general, so "(pretty big assumption)" is not so accurate I presume, right?
Anyway I need to stick up for Lizzie, right?

 

[BayView]

Do you ever post at APF? Bear-baiting central.

No. This is the only joint I waste my time at.

 

[BayView]

Okay TomW - you seem to google better than I ... also I don't have the time to scoure through hundreds of pages of info looking for charts but ... I'd like to lay down a challenge.

If you think that negative gearing is affecting house prices so much - can you please find somewhere that factually shows how many rental property "are" actually negatively geared?

There's no need Lizzie.

Here's the maths:

*Most folk are on a wage of $100k or less. (the average is said to be around $60k, but this would be totally skewed by the very high income earners).

*Given this, the majority of folk aren't able to afford many neg geared properties.

*Only 5% of all PI's have more than one IP.

*IP's make up about 30% of the total house ownership.

Can you see where this is going? It's saying that the volume of neg geared IP's in the Country is not that big. It's saying that not many folk invest, not many can afford lots, and certainly not a string of neg geared properties....bugger all in the wider picture.

Bad news for all the Trolls.

 

[wategos]

*Only 5% of all PI's have more than one IP.

not relevant

*IP's make up about 30% of the total house ownership.

Can you see where this is going? It's saying that the volume of neg geared IP's in the Country is not that big.

1.1 M / 1.75 M x 30% = 19% of all properties in the country are negatively geared.
This is certainly significant and enough to move and support prices.

This distortion is pretty unique to Australia. I believe it will play a big part in our own sub prime like price collapse. Speculators losing money (the 19%) will be removed by the banks from the market as their equity diminishes, a process that will feed on itself.

 

[hobo-jo]

I thought most of the people in Oz own 1 or 2 property in general, so "(pretty big assumption)" is not so accurate I presume, right?
Anyway I need to stick up for Lizzie, right?

It's a pretty big assumption in the context of the discussion, e.g. lizzie's suggestion that all positively geared investors hold 5 properties and negatively geared investors only own 1.

 

[BayView]

Speculators losing money (the 19%) will be removed by the banks from the market as their equity diminishes, a process that will feed on itself.

How does their equity diminish?

Also, from my experience; Banks don't remove folks who have negative equity; they remove you when you can't repay the loan.

 

[Shadow]

You realise that half the bears over there are just sockpuppets controlled by shadow and strindberg right?

you should be aware that my handle has been used by shadow and strindberg in their trolling attempts:

http://www.bullionbaron.com/2011/06/bullion-baron-being-impersonated-by-apf.html

I haven't used your 'handle' anywhere, nor do I 'control bear sockpuppets' on Australian Property Forum, or anywhere else.

Why on earth would I want to 'control bear sockpuppets' on APF, or use your handle? How would I benefit from that?

Seriously, you think I have time every day to simultaneously control hundreds of 'bear sockpuppets', while also posting as myself here and on APF?

 

[tobe]

Annual government outgoings to property
Negative gearing $2.5b (tax forgone on $6.5b losses claimed)
FHB grants $0.7b ($7K for each of 100,000 FHBs)
TOTAL GOV SPEND $3.2b

Annual government take from property
Rates $9b ($1000 on 9m dwellings)
Stamp duty $6b ($15k on 400k transactions)
GST $6b ($40k on 150k new dwellings)
Development and approval fees $15b ($100k on each of 150K new dwellings)
Plus more fees for extensions etc
Plus land tax $6b
Plus CGT on sales
TOTAL GOV TAKE $42b+

NET POSITION... TAX REVENUE OF $39b+ each year from the housing sector

The annual gov take from property might also include PPOR's?
land tax might include commercial property?
Why would any of these revenues stop if NG stops? People still need a roof over their heads? People will still buy and sell property, councils still need to collect garbage and do hard rubbish collections?

 

[HotRod]

It's a pretty big assumption in the context of the discussion, e.g. lizzie's suggestion that all positively geared investors hold 5 properties and negatively geared investors only own 1.

Wouldn't be too far off, IMO.

NGing will only get you so far, one maybe two properties. People quickly learn that losing money is not the best way to live.

PGing can grow and grow and become its own beast and you buy more as they support the purchase of others.

 

[Ideo]

I repeat.

NG does very little to really affect the value of property, except in some select areas.

What NG does is potentially exacerbate the existing high prices which are caused by a fundamental problem with
a) High cost of development, particularly in regards to time delays and needless red tape from local government.
b) High construction costs
c) High land costs due to lack of suitable land for development, which also results in poor infrastructure connections, coupled with an unwillingness for local government to release more land
d) the overwhelming NIMBY-ism of the typical Australian land owner, who will oppose anything that is happening near them
e) Countless additional legislative red tape put in place to stifle development
f) Lack of imagination and foresight from political leaders
g) Lack of investment in regional areas in order to promote decentralisation, thereby making areas outside of the capital cities far more attractive places to live and invest
h) the "great Australian dream" mythology. Most new release housing areas cater for the gotta have 5 bedrooms, 3 car garage, a media room, a tv room, a snooker room and a rumpus room crowd. Smaller, more energy and cost efficient land releases and even building designs are not really out there.

These are the real issues surrounding hou

 

[hobo-jo]

Wouldn't be too far off, IMO.
NGing will only get you so far, one maybe two properties. People quickly learn that losing money is not the best way to live.
PGing can grow and grow and become its own beast and you buy more as they support the purchase of others.

I agree with what you are saying. There is the potential that positively geared property investors own a larger number of properties (on average) than those negatively geared, but it's not going to be on a 5:1 ratio.

 

[Aaron Sice]

not relevant


1.1 M / 1.75 M x 30% = 19% of all properties in the country are negatively geared.
This is certainly significant and enough to move and support prices.

This distortion is pretty unique to Australia. I believe it will play a big part in our own sub prime like price collapse. Speculators losing money (the 19%) will be removed by the banks from the market as their equity diminishes, a process that will feed on itself.

that still leaves 81% of properties with reasonably sound financial foundations; if NG is removed.

that's some "sub prime" crisis you got there.....

 

[Aaron Sice]

I agree with what you are saying. There is the potential that positively geared property investors own a larger number of properties (on average) than those negatively geared, but it's not going to be on a 5:1 ratio.

absolutely - the bank will only let you go so far with NG properties.

it's a stop gap measure as far as the bank is concerned.

 

[VYBerlinaV8]

that's some "sub prime" crisis you got there.....

"Sub-prime" has got to be one of the most misunderstood and misused terms relating to property ever.

 

[TomW]

There's no need Lizzie.

Here's the maths:

*Most folk are on a wage of $100k or less. (the average is said to be around $60k, but this would be totally skewed by the very high income earners).

*Given this, the majority of folk aren't able to afford many neg geared properties.

*Only 5% of all PI's have more than one IP.

*IP's make up about 30% of the total house ownership.

Can you see where this is going? It's saying that the volume of neg geared IP's in the Country is not that big. It's saying that not many folk invest, not many can afford lots, and certainly not a string of neg geared properties....bugger all in the wider picture.

Bad news for all the Trolls.

You can't seem to even recall what you were arguing on the weekend:

"My guess would be that a lot less rentals would be available than there are now, and therefore rents would be higher, and the strain on public housing would increase..

Investors aren't going to happily take on the huge debt associated with buying an IP, and work extra hours to earn more income to fund the sudden cashflow drain."

Now you're saying that the effect of negative gearing is minimal either way?

 

[wategos]

that still leaves 81% of properties with reasonably sound financial foundations; if NG is removed.

that's some "sub prime" crisis you got there.....

Only 13.5 percent of mortgages originated in the U.S. in 2007 were sub prime, or near 20% in some of the worst affected areas.

Demand from this group was able to help push prices to stratospheric heights, and bring it back down again.

The 19% in Australia is significant. It's a number that would grow when interest rates rise again, exacerbated by the fact that a lot of NG property owners are on interest only loans.

"Sub-prime" has got to be one of the most misunderstood and misused terms relating to property ever.

I said this effect of this group is "sub prime like", not sub prime themselves. They wouldn't be dumping properties onto the market at the same rate of sub prime defaults did but there would still be a high proportion of distressed sellers in an economic downturn from this group.

 

[Weasil007]

that still leaves 81% of properties with reasonably sound financial foundations; if NG is removed.

that's some "sub prime" crisis you got there.....

http://www.couriermail.com.au/reale...able-for-aussies/story-fndbosu3-1226499423831

We are in for a rough ride, with rising delinquencies on these record low interest rates (and the plebs complaining that banks not passing on a 0.25% rate cute is killing them!) where the hell are we gunna be if variable rates go up to say 9%

Wasn't it rising rates that unstuck the yanks after the low interest periods they had locked in as sweetners when they took out the loans originally?

 

[BayView]

Now you're saying that the effect of negative gearing is minimal either way?

By George; I think he's got it.

Neg gearing has little impact on prices of properties. I keep telling folk here that.

Folk (sooky lala Trolls) here keep saying us greedy specufestors are pushing up prices; we aren't....

Whether neg geared or not.

I said "that a lot less rentals would be available" - this would have an effect on rents.

Would more investors jump on board if the rents went up?

I reckon not; it's still too big a risk and bother for the average pleb; far easier to whack a G on the stocks, or the nags, or the Tatts draw.

 

[BayView]

Wasn't it rising rates that unstuck the yanks after the low interest periods they had locked in as sweetners when they took out the loans originally?

Clarification; they were on ARM loans with honeymoon rates which then reverted back to the original rates after say; 3 years.

The decreased interest was tacked onto the existing loan balance, so they now had a higher loan amount to repay.

And, in many cases the values of the property had not gone up in line with the new loan, so neg equity was the result.

 

[Weasil007]

Clarification; they were on ARM loans with honeymoon rates which then reverted back to the original rates after say; 3 years.

The decreased interest was tacked onto the existing loan balance, so they now had a higher loan amount to repay.

And, in many cases the values of the property had not gone up in line with the new loan, so neg equity was the result.

Yeah..dem da ones i mean...