Federal Budget Negative Gearing

HotRod said:
Interesting piece here, albeit from 2012, but still valid.......

Here

Turns out what I have been suggesting is used in the UK. Dirty thieves. :mad:
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But in the UK tenants pay the rates which were 60P a week in 2001 when I visited a friend there so 3000P per annum which at the time was $9000 AUS.

Anti NG Protesters fail to mention this stuff when they say, only AUS does it.

Peter
 
And we never hear about the Prop Investor who buys at the top of market , NG losing 60C in the $1 lose for 5 years, pay rates, pays insurance, losses on lifestyle and then sells for same price or less.

Always it is assumes we double our money with CG.

And anyone who thinks Gov will pick up the slack in rental housing is dreamin! I work in this area and private developers can build for 50 to 80-% less than government. Look at the BER Schools Halls program $600k for toilet block snad storage sheds. In may cases the onsite (sheds, fencing) and consultant costs exceeded the build costs.

Again, none of this matters to politically driven persons, Peter 14.7
 
As I have mentioned on another thread I think they are more likely to follow NZ and no longer allow depreciation to be claimed on buildings.

Also possibly no 50% discount on capital gains on shares or property could be a target.
 
I wouldn't be in the least bit surprised if an incoming Abbott government didn't abolish NG in its current form: "we were told that the deficit was $19bn but now we've looked at the books it's much worse than this and so, although it grieves us to do so, we have take an axe to tax concessions". Sure there would be screams of protest but no real political cost - after all those affected aren't going to rush off and become Labor supporters since Labor wouldn't reverse the change if re-elected.

I suspect that any change would be to move to a UK-type system where losses can be rolled forward against profits from the same asset class (in UK, UK and foreign property are treated separately) with perhaps a grandfathering treatment of existing IPs and perhaps some special treatment of new-build homes (though some form of stamp duty rebate would do the same).

Would the rental market collapse: I don't believe this notion for one moment. Are you going to sell an ordinary house because its holding cost goes up from $30 to $50 a week? If your IP is a $1m house in Hawthorn yielding 2.5% you might, but if you do the government gets a nice slug of stamp duty and perhaps CGT.
 
I have a lot of 20-something 'friends' on Facebook (I'm barely out of the 20s myself) and I've observed a lot of chatter lately among 'the young folk' about how the government needs to wind back negative gearing, so that the 'greedy' property investors can stop monopolising the market and let the first homebuyers get a foot in the door.

I saw the same sentiments in an op ed in The Age by a young journalist who moves in similar circles.

I understand their pain, but if this benefit is wound back I can see investors selling up en masse and property prices in some markets going into freefall. Which then devalues the remaining stock held by investors as well. Which (and I'm no math whiz) regresses a lot of so-called 'equity' which then hurts the finance sector... yep, it would be a very brave pollie who tried it.
 
Please let them get rid of negative gearing. It'll have little impact on my bottom line and will give me an excellent opportunity to put my rents up 20%. I'm also quite cashed up and ready to buy if there's a hit to the market.

Whatever they do, it'll be the tenants that pay for it in the long run.
 
Tony3008 said:
I suspect that any change would be to move to a UK-type system where losses can be rolled forward against profits from the same asset class (in UK, UK and foreign property are treated separately) with perhaps a grandfathering treatment of existing IPs and perhaps some special treatment of new-build homes (though some form of stamp duty rebate would do the same).
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That's how it happened in the 80's 'removal' and it's how it would likely happen again.

I just can't see it happening. There may be some chipping at the edges, which has already occurred (adding back losses for some of the extras in the tax system). Perhaps capital works depreciation will be abolished, or restricted - that wouldn't have the political perception of 'ending NG'.
 
PT_Bear said:
Please let them get rid of negative gearing. It'll have little impact on my bottom line and will give me an excellent opportunity to put my rents up 20%. I'm also quite cashed up and ready to buy if there's a hit to the market.

Whatever they do, it'll be the tenants that pay for it in the long run.
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Ditto Peter
 
Rixter said:
Wouldnt make much sense from a business perspective abolishing negative gearing....for every $1 they give in negative gearing deductions back to investors the govt generates another $4.50 indirectly in other taxes.
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If this 1 in 4 figure were correct Im sure there wouldnt be chatter about changing NG. Yes, a negatively geared property investor pays land tax and stamp duty, which might have offset some of the PAYG taxes negatively geared, but so do positvely geared investors.

Lets just agree negative gearing is a net loss to the economy, an inefficient tax break. If anyone can prove otherwise, Im sure all those economists who refer to it as inefficient would like to see their evidence.
 
tobe said:
If this 1 in 4 figure were correct Im sure there wouldnt be chatter about changing NG.
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Pollies dont think logically. They think politically, thus the reason behind their initial 'chatter'. Then the media jump on it because it gives them fodder to report on so as to keep food on their own tables.
 
PT_Bear said:
Please let them get rid of negative gearing. It'll have little impact on my bottom line and will give me an excellent opportunity to put my rents up 20%.
Click to expand...
If you think the market can withstand a rise of 20% why not do it now ? The market determines rents & they wouldn't increase with the removal of negative gearing. Sure some owners making a loss might try to increase rents as a form of 'protest' but they might find themselves with empty properties.
 
wategos said:
The market determines rents & they wouldn't increase with the removal of negative gearing.
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You are correct the market dictates rents but what's the underlaying fundamental that dictates what the market dictates? Supply & Demand ratio.. Now what happens when the supply side of that equation drops off due to investors sell off?

You guess it - market demand increases which dictates and puts upward pressure on rental yields.
 
Rixter said:
You are correct the market dictates rents but what's the underlaying fundamental that dictates what the market dictates? Supply & Demand ratio.. Now what happens when the supply side of that equation drops off due to investors sell off?
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But the investors sell to someone either on the demand or supply side so the balance does not change.
i.e.
- they sell to another investor - still the same number of properties for rent, no drop in supply
- they sell to a previous renter - one less property for rent but one less renter also

In both cases the Supply & Demand ratio does not change, so no upward pressure on rents.
 
wategos said:
But the investors sell to someone either on the demand or supply side so the balance does not change.
i.e.
- they sell to another investor - still the same number of properties for rent, no drop in supply
- they sell to a previous renter - one less property for rent but one less renter also

In both cases the Supply & Demand ratio does not change, so no upward pressure on rents.
Click to expand...

So what does the population increase do to the demand side of the equation?
 
Why not abolish FHOG as well?
That'll drop prices wont it?

Oooohhhh Nooooooooo we cant have that can we.....:rolleyes:

How about these young'ns have a protest to local and state government about the high costs involved in development.

Easy pickings to target evil specufestors....yeah, lets get the rich to pay.
 
Rixter said:
Also what happens the supply/demand ratio when the investor sells to an owner occupier not previously in the rental market?
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The previous dwelling of the owner occupier either becomes available for sale or becomes a rental, in both cases no change to the equation. If these owner occupiers are new to the market then that's in the same category as population increase and unrelated to the issue of investors selling.
 
wategos said:
But the investors sell to someone either on the demand or supply side so the balance does not change.
i.e.
- they sell to another investor - still the same number of properties for rent, no drop in supply
- they sell to a previous renter - one less property for rent but one less renter also

In both cases the Supply & Demand ratio does not change, so no upward pressure on rents.
Click to expand...

Most logical post so far - Reminds me of a debate I was having with my wife on an unrelated but not dissimilar topic last week - The impact that changes in interest rates has on rents .

Those who are forced to sell because of lack of affordability under a higher interest rate regime certainly increases the number of properties on the market, but the negative impact of that is offset by the need for those families to find a property in the rental market- a zero sum proposition.

The overall size of the pie hasn't changed , it's just that the shape of the various components that make up the pie are different.



Good post wategos
 
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