To the contrary Joe NG is subsidy to the tennant by the LL. Saves the government from having to run a budget deficeit or cut spending in other important areas to build and maintain public housing and then adressing all the social problems public housing creates. Or increasing tax on payee taxpayers to pay for it. The landlord pays rates, and taxes on insurance and other imputs, creates employement, so the government collects taxes rather than hand it out in dole ques. Look in any place and see how many people are employed as real estate agents and how many tradesmen, builders, suppliers and service people get a large majority of there income from investors and look at the flow on effecct. All property must eventually be transfered to new owners and usually a tax on 50% of capital gains will be paid. You only have to look at how much money the government wasted and how much building costs went up with the government got involved with the stimulus package. A house that 140k before cost 200k after and it cost the goverment 30k . Schools halve built with no funds for completions although enough been spent on them all ready, that should have been able to build 2 schools. If NG is abolished investors will just invest in other tax friendly areas that are already better investments than poor yeilding property. Joe property is used by specualators to store their wealth and balance their investment portfolio. The wealthiest people have better ways to create wealth
Is it the end of negative gearing
- Thread starter Dan_p
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To the contrary Joe NG is subsidy to the tennant by the LL. Saves the government from having to run a budget deficeit or cut spending in other important areas to build and maintain public housing and then adressing all the social problems public housing creates. Or increasing tax on payee taxpayers to pay for it. The landlord pays rates, and taxes on insurance and other imputs, creates employement, so the government collects taxes rather than hand it out in dole ques. Look in any place and see how many people are employed as real estate agents and how many tradesmen, builders, suppliers and service people get a large majority of there income from investors and look at the flow on effecct. All property must eventually be transfered to new owners and usually a tax on 50% of capital gains will be paid. You only have to look at how much money the government wasted and how much building costs went up with the government got involved with the stimulus package. A house that 140k before cost 200k after and it cost the goverment 30k . Schools halve built with no funds for completions although enough been spent on them all ready, that should have been able to build 2 schools. If NG is abolished investors will just invest in other tax friendly areas that are already better investments than poor yeilding property. Joe property is used by specualators to store their wealth and balance their investment portfolio. The wealthiest people have better ways to create wealth
Who the heck "hoards" land and property if there is a potential to make money? Get real!
Upping land tax will do nothing but stop further development as people then don't even "hoard" (as you put it) but simply no on buys anything.
Better the carrot than the stick
Yes - council rates are a "tax" to provide services and infrastucture. What else do you think taxes are used for - asides from providing cheap lunches for pollies? *** edit as explained by Kathryn below ... in Canada the tax on property is used to provide the council services.
I agree totally that the solution is to allow more med/high density development - townhouses, villas etc. Properties that elderly or single/couples want to live in, with a bit of land for a courtyard and space for a car.
I still don't understand. Explain the link between negative gearing on new housing only and how that discourages the maintenance of old properties...
There is no link.
In Canada, maintenace and repairs are claimable in the current year.
Renovations must be added to the building, and depreciated.
All properties, no matter the age, can be depreciated.In general, after the first year, it is 4%.(excludes value of land. The building is the most valuable, generally) Of course when you sell, it is payable.
In Canada, we do not have negative gearing. Certain losses are allowed to be used against income, but if there are years of losses, they can be denied by revenue canada. It needs to have the expectation of profit.
People will do maintenance to their properties, because it is in their best interest, to keep properties in good repair.
In Canada when buying we have a 1.5% land transfer tax, and every year we have a tax which is based on the assessed value of the property.
This would also include, garbage removal,street lights, sewer,traffic lights,etc.
Property tax is used to fund our schools.
There is a less "it's ok, it's a tax deduction" attitutude.
I certainly did not get into property investing as a way to evade tax. We dont pay much anyway (except on petrol). We also expect to be making profits in the near future, we werent expecting prices and rents to decrease like they have in the last year.
For many people, especially if they cant just drive up to Bendigo or Mildura on the weekends, locating property that is cash flow positive from day one is not going to happen, but getting into the market is the first step to creating wealth in the future.
Is this another way of saying that those who are already wealthy dont want any newcomers to be able to access the same benefits they had available to them in a previous generation?
For many people, especially if they cant just drive up to Bendigo or Mildura on the weekends, locating property that is cash flow positive from day one is not going to happen, but getting into the market is the first step to creating wealth in the future.
Is this another way of saying that those who are already wealthy dont want any newcomers to be able to access the same benefits they had available to them in a previous generation?
I'm sure someone with your experience has heard of land banking lizzie... how about you get real!
If this land was more heavily taxed it would be an incentive for developers to either build or sell the land to those more likely to develop it sooner.
You're also kidding yourself if you think the same thing hasn't occurred on a smaller scale in suburbia with investors either holding onto a block of land or empty home to speculate on capital appreciation. Just because it's not part of your plan or something you've done doesn't mean it's not happening.
It would also encourage those with vacant properties asking too much rent to either lower their expectations or improve the property to get it tenanted.
Exactly, but some on this forum seem to be able to draw whatever ridiculous links or property myths they like to support their poor arguments!
Being heavily taxed wouldn't mean the land would be developed sooner IF IT'S NOT PROFITABLE TO DO SO.
It means that land will simply not be released to bank in the first place.
And those who buy vacant blocks in "the hope of capital gains" very often get stung as you cannot claim tax on expenses on vacant land (non income producing) - have to pay CG tax on gains - and the number of people doing such would be minute in the scheme of things.
I am realistic
No they wouldn't - your suggestion of "big stick" would not encourage anything.
Incentive and positive outcomes would make appropriate development work - not punishment and disincentive.
Quite simply - if there is no money to be made on a development and you get the bejesus taxed out of you, land will simply not be released by farmers/fringe owners, no one will buy and land bank, so no tax would be paid, and no developments would go ahead.
And how would you qualify a "land banker"? Is it some poor farmer who just happens to own a property that the suburban sprawl has now encroached on? Or is it the developer who would love to develop and make his profit, but who's application for subdivision is held up in government red tape for 5+years (which regularly happens)?
In the same way as managing people, positive reinforcement always wins againts criticism. You get a better response from somebody by making them feel as though they are doing the right thing.
What about this idea?
Indian govt encourages people to buy their first home by providing tax benefits. All interest paid on PPOR is tax deductible, so that low income family also can afford to pay mortgages. Rents are very high because Landlords do not get NG tax benefits.
Can we solve affordability issue by this way?
Indian govt encourages people to buy their first home by providing tax benefits. All interest paid on PPOR is tax deductible, so that low income family also can afford to pay mortgages. Rents are very high because Landlords do not get NG tax benefits.
Can we solve affordability issue by this way?
I think you'll find yourself welcomed by our cousins in the land of the long white cloud......[/QUOTE]
No Capital gain tax as well.
Seriously ?????????
I'm sure they could make specific exceptions to ensure that it was fair. Bit of a petty argument to try and make TBH...
plus one......
hobo-jo,
I suspect your very polished arguing skills (over many years now) are still missing two vital but linked factors. These factors dictate that you will always win the moral argument you put forward in cyberspace, but always lose out in the real world ;
They are ;
1. Out in the real world, the name listed as the registered proprietor on the title deed for that particular piece of property always takes precedence and priority over the general public.
2. The aims, goals, ambitions and intended use of that particular piece of property by the registered proprietor must outrank the very noble housing agenda at all costs thrust upon them by people with your view.
If a person has slaved their guts out for their entire life to be in a position to purchase a choice piece of real estate, be it a vacant block capable of housing 20+ families, and then sit back and watch it appreciate over many decades, they have the inalienable lawful right to do so, however much it rubs you up the wrong way.
With your obvious goal of housing everyone in Australia at the cheapest possible price, I'd highly suggest you spend less time on here and more time buying low cost housing and lowering the rent to the folk at the back end of the public housing queue.
There must be at least a hundred of the very worst families across Australia whom have been kicked out of their public housing commission houses. You could round them all up and offer them free rent and quick reliable maintenance in your own properties.
Think of it as your entire life's noble work. I'm sure they'll thank you for it. Go to it !!!
where i live(vic park zetland) there is only 2 or 3 apartments vacant out of about 2,000 and rents have increased about 10%+ in the last 6-9 months. I call that massive demand
In the real world the government will change rules and govern based on whatever pressures are currently prevalent. Sometime the biggest money will win. Sometimes the majority people will win. A single investors name on a title is of no consequence when it comes to changes in tax law.
I don't have a personal issue with the land banker/developer/property speculator holding a property (vacant or not), but I do think the government has a social responsibility to ensure that it's constituents have access to affordable property.
Negative gearing isn't even at the top of the list of things that could be changed to ensure more affordable housing in the future. In my opinion removal of the First Home Owners Grant would have a greater effect.
I've bought a property before and I will buy property again. So whether they remove negative gearing or not is of little consequence to me. In fact should residential property return to what I consider fair value and NG is still in place then there's a good chance I will use this benefit to my advantage as well.
I can put aside my personal situation, motivations and goals and independently assess what I think the government should do for the greater good, seemingly something that many here cannot do.
lizzie, I know of quite few very wealthy people that like to buy land. They are also very clever where they may have cows grazing so they don't pay land tax and can be even subsidies by government. Others may hold plant nursaries and so on..... and many developers may hold large parecels of land.
Land actually appreciated by about 20% on average (more than realestate - obviously I am generalising here), so personally if I had very large capital I would be just buying land...since I don't I buy realestate with land component and am able to afford with some help of the tenant and government.
Much ado about nothing.....
A practical example of NG impact and why i believe this is much ado about nothing in the end.
A $400k house rents for $350pw, and interest rate at 6.5% and a marginal tax rate of 30%, $2000 outgoings, no depreciation & 7.7% property management fee
Gross return = 4.55%
Net Return (before tax) = 3.05%
Net Return (after tax) = 3.5%
In dollar terms, the tax benefit is $1800 per annum. Assuming you could recoup this loss of tax benefit through increasing rents immediately, this would mean in this example, rents would need to increase by ~$35pw or 9.9%.
Variables such as level of debt/gearing, personal marginal tax rates effect what you would need to get to sustain your after tax return in a NG environment. In the end, the market will find an equilibirum but rents would increase and would be more reflective of the true cost of rental.
Its effect on prices, if they adjusted immediately would mean that the purchase price for this to achieve the same after tax return would need to reduce to $373k. A 6.75% reduction. Given the state of the market, for any one property a couple of keen purchasers could wipe out that 'reduction' in any negotiation or auction.
I don't believe NG adds to supply of housing in any material way, nor has any altruistic positive effect on the housing market as claimed by its advocates. However I don't think its removal will fundamentally change much in the long term. But it is a subsidy to both LL & tenants. Both will be effected in the short & medium term, if NG is removed.
I would argue, that any proposal for the removal of NG and the monies saved should go directly to reducing state stamp duties to remove another "interference" in property market. But do you trust different levels of government to deliver this?
And given the state of politics and political leadership in this country, who do you think will have the chutzpah to propose & deliver on this change? It will need the most unlikely of political circumstances ie bi-partisan support.
So, everyone get back and focused on making money....Nothing to see here
A practical example of NG impact and why i believe this is much ado about nothing in the end.
A $400k house rents for $350pw, and interest rate at 6.5% and a marginal tax rate of 30%, $2000 outgoings, no depreciation & 7.7% property management fee
Gross return = 4.55%
Net Return (before tax) = 3.05%
Net Return (after tax) = 3.5%
In dollar terms, the tax benefit is $1800 per annum. Assuming you could recoup this loss of tax benefit through increasing rents immediately, this would mean in this example, rents would need to increase by ~$35pw or 9.9%.
Variables such as level of debt/gearing, personal marginal tax rates effect what you would need to get to sustain your after tax return in a NG environment. In the end, the market will find an equilibirum but rents would increase and would be more reflective of the true cost of rental.
Its effect on prices, if they adjusted immediately would mean that the purchase price for this to achieve the same after tax return would need to reduce to $373k. A 6.75% reduction. Given the state of the market, for any one property a couple of keen purchasers could wipe out that 'reduction' in any negotiation or auction.
I don't believe NG adds to supply of housing in any material way, nor has any altruistic positive effect on the housing market as claimed by its advocates. However I don't think its removal will fundamentally change much in the long term. But it is a subsidy to both LL & tenants. Both will be effected in the short & medium term, if NG is removed.
I would argue, that any proposal for the removal of NG and the monies saved should go directly to reducing state stamp duties to remove another "interference" in property market. But do you trust different levels of government to deliver this?
And given the state of politics and political leadership in this country, who do you think will have the chutzpah to propose & deliver on this change? It will need the most unlikely of political circumstances ie bi-partisan support.
So, everyone get back and focused on making money....Nothing to see here
One more thing.........in the scenario that I painted above, and rents increased, what do you expect would be the calls from various interest groups saying how expensive rents have become, our young people today can't save for a house because rents are so expensive. And that we need the government intervene and help people to make rents more affordable?
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