All signs point to a house price hike

[nhg]

http://www.theage.com.au/comment/si...-dreams-of-finding-a-home-20130404-2h9i4.html
not a hope in hell that a part time student could do that now

I did, and that was 3 years ago. Tho it only lasted a few months cause frankly, living in a 1km radius is a little depressing.



Meanwhile, enough with the Gen-Y crap. I'm sick of hearing baby boomers who had it sweet through every boom cry about how much Gen-Y complain.

Most people whinged then, most people whinge now. There is no difference. Just different things to whinge about.

 

[Blacky]

Its just easier to say "I cant do that - and its not my fault" than it is to figure out a way of actually doing it.

There are plenty of examples of people who have done it, now, and in the past. Its about using your brain and making a few sacrifices. But why do that when the gov'ment will pay us not to? (and oh - btw, they dont pay us enough).

Stop whinging, pull your big kids panties up and do something about it.

BTW - Im at the tail end of Gen Y (depending on which birth bracket you go from) so I am allowed to say that. If anyone from the older generation says anything the standard response is "it was easier for your generation".
Sadly, Im mostly embarrassed by my generation of Australians.

Blacky

 

[MichaelW]

especially with no link back to the article, nor signature for SEO.

Hi Aaron,

He did mention it was in the Business Spectator though and that the author was the Kouk. The thread title is the article title. I'd read this one myself already some time ago. For those still interested, here's the link...

All signs point to a house price hike

The reasons behind my expected strong rise in house prices this year (The top 10 big issues for 2013, December 24) are linked to issues associated with housing affordability (interest rates, current house prices and wages) plus the consistently low unemployment rate, a tight rental market and a likely positive wealth effect from what has been a strong lift in the stock market. An acceleration in population growth is another factor that is likely to add to underlying demand for housing.

The Kouk's had a fair bit to say on housing in the Business Spectator of late and is very upbeat. Here's one of his more recent pieces...

Architects of Housing Fortune

House prices are surging and the rate at which prices are increasing is, if anything, accelerating. This should not only kill off the remaining iota of hope for a further interest rate cut, but it could see the Reserve Bank of Australia move to a bias to hike interest rates before year end.

According to RPData, house prices in the five major cities have risen a stonking 1.4 per cent so far in March (annualised pace of close to 20 per cent) and are now are up a solid 2.7 per cent year-to-date in 2013 (annualised pace of 12 per cent). It seems uncontroversial to be thinking, given this strength, that house prices will rise 10 per cent this year. The risk is building that the rise could be significantly more.

Stonking? Really?...

Cheers,
Michael

 

[tambourineman]

"I'm tired of explaining to my peers how negative gearing works, and then explaining why allowing investors to speculate on the housing market is to the detriment of our generation"

how does he figure that subsidised housing is to his detriment?

negative gearing doesn't subsidise housing.

the whole argument that it reduces the cost of housing is a farce.

it doesn't stimulate construction of new stock, it stimulates speculative investment in existing stock. making it apply to new homes only I could agree with, or removing it and increasing depreciation or something would be ok too.

infact, taking it away might have the effect of prompting investors to put homes on the market, therefore increasing supply and reducing prices.

I cant see any possible way in which removing negative gearing would make housing less affordable. and the whole argument about keating doing it and rents going up is crap as well.

 

[Ausprop]

negative gearing doesn't subsidise housing.

the ATO / treasury disagree... the mulitbillion dollar tax bonanza as it was so aptly put. doy ou seriosuly think rents would be this cheap without it?

the whole argument that it reduces the cost of housing is a farce.

it doesn't stimulate construction of new stock, it stimulates speculative investment in existing stock. making it apply to new homes only I could agree with, or removing it and increasing depreciation or something would be ok too.

ignores economic fundamentals - if there is a price disparity between existing and new, people will buy new. TIC recomends new by the way

infact, taking it away might have the effect of prompting investors to put homes on the market, therefore increasing supply and reducing prices.

yes possibly, yields would come to reflect commercial reality, there would likely be a combination of rapidly rising rents and falling cap prices until an equilibrium was met

I am a huge supporter of abolishing neg gearing

 

[tambourineman]

the ATO / treasury disagree... the mulitbillion dollar tax bonanza as it was so aptly put. doy ou seriosuly think rents would be this cheap without it?

tax bonanza doesn't mean that it is subsidised, it subsidises the investor not the person renting it, and it subsidises the loss only. you need to give me a reason why they wouldn't be cheap without it? if the government took it away tomorrow, the houses currently negative geared would still be there.

as for building new, its another myth that it is more expensive to build a new house compared to buying an existing home.

 

[Ausprop]

tax bonanza doesn't mean that it is subsidised

yes it does - no subsidy, no bonanza

it subsidises the investor not the person renting it

no investor, no renter

you need to give me a reason why they wouldn't be cheap without it? if the government took it away tomorrow, the houses currently negative geared would still be there.

but not on the rental market

as for building new, its another myth that it is more expensive to build a new house compared to buying an existing home.

not sure where you are going with this?

 

[Aaron Sice]

negative gearing doesn't subsidise housing.

the whole argument that it reduces the cost of housing is a farce.

what the furkin are you smokin?

take away neg gearing and the costs of rent will double, treble in some areas.

when you rent, you ARE subsidised in the current australian housing market - the LL pays the difference between your rent and the mortgage then asks for a tax deduction based on that private subsidy provided.

if you don't want to give the tax deduction, then the LL isn't going to subsidise you living there..... now cover the mortgage or buy it yourself.

 

[tambourineman]

what the furkin are you smokin?

take away neg gearing and the costs of rent will double, treble in some areas.

when you rent, you ARE subsidised in the current australian housing market - the LL pays the difference between your rent and the mortgage then asks for a tax deduction based on that private subsidy provided.

if you don't want to give the tax deduction, then the LL isn't going to subsidise you living there..... now cover the mortgage or buy it yourself.

Rubbish - this is one source and there are numerous others without vested interest to support this view http://www.ahuri.edu.au/publications/projects/p80647

Plenty of countries don't allow the same form of concessions as Australia does

 

[HiEquity]

Plenty of countries allow tax deduction on PPOR debt too. Does that sound like a good idea?

The idea that negative gearing only has an impact on house prices and has no impact on rents defies logic. The two are both part of the same property market - you can't influence one without impacting the other.

If negative gearing was abolished, it is obvious prices would come down and rents would go up. Many investors would sell up - adding supply to the purchasing market and reducing supply to the rental market.

People currently renting who are able to buy at these lower prices will be able to make the transition - no problem. But plenty of people currently renting will not be able to make the transition, even at lower prices. Bad credit, no job, family breakdown - the list of reasons are endless. These people will be left competing for fewer houses in the rental pool but a lesser reduction in demand (as not everyone can make the transition). This will increase rents - no doubt. People will have to rent by the room and use other strategies (move further out etc) to be able to continue renting.

Cause and effect - negative gearing provides a rental subsidy to the most vulnerable in our society, at the cost of a higher threshold for home ownership. This should always be the goal of public policy - to provide decent rental accommodation at an affordable price for everyone. The idea of making it affordable for people to buy houses is an order of magnitude less important than giving the bottom rung of our society a decent place to live. There has never been a "right" to home ownership for everyone.

 

[Francesco]

Investor wanting to buy IPs partly because of NG helps the state governments collect land tax and stamp duties to help its budget needs such as subsidised housings. Looking at impact linkages at the federal level is only part analysis of the impact of NG on the economy.

 

[Dan_p]

Sometimes I wonder, why new member posted this type of information.
Who are they?

Especially with name like guru...

I would be very cautious re article.

he has been on the forum a fair bit longer than you

 

[Dan_p]

The idea that negative gearing only has an impact on house prices and has no impact on rents defies logic. The two are both part of the same property market - you can't influence one without impacting the other.

If negative gearing was abolished, it is obvious prices would come down and rents would go up. Many investors would sell up - adding supply to the purchasing market and reducing supply to the rental market.

please excuse my ignorance. If rents go up wouldnt that make most of the negative geared properties into positive geared properties?

If this is the case why would landlords sell up all of a sudden if they are making a profit? This defies logic to me.

The only reason I can see is the possibility of negative equity, but then that leads to the argument of whether a bank is willing to let you stay in that position if you are comfortably paying you mortgage

 

[HiEquity]

please excuse my ignorance. If rents go up wouldnt that make most of the negative geared properties into positive geared properties?

If this is the case why would landlords sell up all of a sudden if they are making a profit? This defies logic to me.

The only reason I can see is the possibility of negative equity, but then that leads to the argument of whether a bank is willing to let you stay in that position if you are comfortably paying you mortgage

?????

I'm not sure whether you realise how much the majority of resi properties are -ve after all costs are considered? A hike in rent from say $300pw to $400pw doesn't make much of a dent to a starting yield of 3.5% net. Still way negative... but no tax benefits this time. Some will still hold - but many won't.

 

[knightm]

I am a huge supporter of abolishing neg gearing

Im with you ausprop, people will have this debate till after the cows have already come home, but I can see a future either way - and if ng was abolished those prepared to stay and play on the new field would do VERY well.

 

[tambourineman]

yes it does - no subsidy, no bonanza

Bonanza? Like the Bonanza in Ireland, Spain, the US and the UK - it ended well there.

no investor, no renter

but you see that's the whole point, moving people from reliance on renting to home ownership, less investors, more home owners.

but not on the rental market

I am not convinced this would be the case, depending on your point of view and assuming you are correct and that all of these rental properties are put on for sale, then the increase in supply would lead to lower prices.

not sure where you are going with this?

we were discussing the fact that negative gearing does nothing to support increasing the supply of houses, which is what most of the people who defend it argue - ie without it there wouldn't be houses to rent etc - its crap. I don't oppose negative gearing by investors who build new homes, I just don't agree with it for existing homes - not sure how the government would administer it but I am sure someone would figure it out.

I understand the concept applied to share ownership, applying it to investment in existing houses makes no sense at all - the only reason it hasn't changed is because it would be politically unpopular for it to change - but with changing rates of home ownership, I imagine that in the future it probably will.

 

[tambourineman]

Im with you ausprop, people will have this debate till after the cows have already come home, but I can see a future either way - and if ng was abolished those prepared to stay and play on the new field would do VERY well.

yes, but its always a polarising debate!

 

[lyndon01]

I'm not sure what people really mean when they say they want to abolish negative gearing.

Do they mean removing the ability for people to offset investment losses against their PAYG income? I guess this might make some sense, but all it really means is that instead of this tax incentive being available for the majority of australians (who are on PAYG), it is only available to business/company owners (self-employed?) who will be able to buy the investment under their company and offset the losses against the company profits. This seems to me to be less fair than the current system, as only those who own a profitable business (a minority of australians i'm guessing) will be able to take advantage. It's making it easier for the wealthy to gain more wealth, and harder for the average person.

Do they mean removing the ability to offset expenses from revenue in general? I hope not, that would just be weird.

Do they mean removing the ability to offset expenses from revenue specifically only for housing? That also seems weird.

I think too many people look at negative gearing as a cause, rather than a symptom. It isn't the negative gearing tax incentives that makes property investment speculative, it is the capital growth associated with property that makes it so. Being able to offset personal investment losses against PAYG just makes this incentive available to more people. I worry that abolishing negative gearing would simply result in more wealth being accumulated by the already wealthy, while making it even more difficult for the average PAYG worker to invest and eventually fund their own retirement. Which in the end, for the government, means save tax dollars now, only to spend them on pensions in the future.

I also don't think negative gearing has a large impact on affordability in the first place. Abolishment isn't going to reduce the amount owner-occupiers (majority of market) are willing to spend, however if rents did increase it would increase owner-occupier demand.
It's not likely to result in a massive sell-off by investors, at the lower-middle end of the scale, where affordability is an issue. The majority of investors own only 1 or 2 properties, and they are (at a guess) comfortably paying the monthly expenses from their rent+salary. Negative gearing doesn't change these monthlies, it just returns a small bonus at the end of the year (which i'm guessing may not be spent on neccessities).

So, to end, I don't think negative gearing has such a massive impact on buying affordability for the lower end (which is what we're concerned about right? FHB?). Existing houses are going to keep experiencing capital growth regardless. I think there's a bunch of things that can be done that will have an impact (building up, reversing pop. growth, encouraging business investment outside CBD nearer fringe suburbs), but negative gearing is just a symptom of the chase for capital growth.

Cheers

 

[Dan_p]

?????

I'm not sure whether you realise how much the majority of resi properties are -ve after all costs are considered? A hike in rent from say $300pw to $400pw doesn't make much of a dent to a starting yield of 3.5% net. Still way negative... but no tax benefits this time. Some will still hold - but many won't.

I dont know about everyone else but I try and buy properties only slightly negative where $100 a week, $5 grand a year would easily make it a positive geared property in cash terms.

How many investors would buy multiple properties at that sort of loss a year?

 

[Ed Barton]

If NG was abolished it's likely it would be done in the same way as last time. Quarantined and grandfathered. Thus there would be no rush for investors to sell, no sudden dramatic fall in prices or sudden dramatic rise in rents. There would be upwards pressure on rents and downward pressure on home prices.