Is the end in sight for negative gearing ?

[wategos]

It did not happen that way last time around in the 1980's,at the time there seemed to be a logic in such incompetence of the experts around that time
but ASX investment class stayed the same the only cab off the rank was investment property

Margin loans didn't exist back in the 80s so it wasn't an issue, they only started being offered to retail investors in the early 90s (I think Leveraged Equities were the first to offer them).

I think this time around margin loans could also be restricted and negative gearing disallowed. An interesting approach could be to treat the two classes combined as investment income, so losses in one could still offset income in the other. ..but this could have loopholes.

 

[perthguy]

The argument is that negative gearing is driving up the price of residential invesment properties and that removing negative gearing would bring down the price of residential housing.

Is negative gearing also responsible for driving up the price of shares? If so, they should remove negative gearing on shares so that I can afford to diversify my portfolio.

 

[willair]

Margin loans didn't exist back in the 80s so it wasn't an issue, they only started being offered to retail investors in the early 90s (I think Leveraged Equities were the first to offer them).

I think this time around margin loans could also be restricted and negative gearing disallowed. An interesting approach could be to treat the two classes combined as investment income, so losses in one could still offset income in the other. ..but this could have loopholes.

It would be clearly a complex system,with webs of interdependence but looking at some of the dividend statements that come in over the past week and the franking credits already paided then they may find it hard to take on multi national ASX listed companies,,i think something gotta give before they take on different economic classes..imho..

 

[baby blue eyes]

I think ng removal is going backwards, I can see this as a strategy people use for a few years and then they are positive. Helps some reduce their tax, to hold their portfolio, any removal may slow down this kind of investor in the accumulation phase, but should not stop them investing.

Never ever have been a fan of negative gearing, it's quarantining of losses won't affect me or my investment plans. However it should be applied to all passive investing like the non commercial loss rules; that said there are various outs with non commercial losses that still allow you to apply the losses against other income, this may be the case in any changes considered.

Removal of depreciation for buildings will also change capital gains tax outcomes as well. Going to be an interesting budget night!

 

[sash]

Yes...get rid of neg gearing...this would be awesome for me!

As usual very short sighted....what people don't consider is by phasing out neg gearing...property will reduced supply in the rental market. This is because fewer people will buy places as it is less attractive.

Do you think govt will get back into providing housing given budget constraints?

Here is what will happen...

1. Rents will go up as less housing supply
2. This in turn will push prices up
3. Higher rents and higher prices will mean less can afford to buy


Bring it on........ I feel like a carpet bagger...from the old itmes....

A smarter policy would be to get rid of stamp and state land taxes. Replace it with a small property tax on every property in Australia...say 1% of the value of the house irregardless of wheher is investment or owner occupied. Use this to partly fund affordable housing...that is better policy.

I very much hope they will start to phase it out.

It will NOT be political suicide, a lot of people are now in favour of getting rid of it including young people continually being outbid by investors/speculators who now dominate the market and are responsible for pushing prices up. It used to be something that couldn?t be touched, but no longer. It?s great to see the issue adressed frequently in mainstream media these days. The damage it?s doing is too obvious to ignore.

I will personally vote for whoever commits to getting rid of this regressive policy, and I know many others will too.

 

[Singo]

I don't really understand the potential rental supply/demand changes.

Say there are 100 houses and 97 families. 60 houses owned as first homes and 40 as investments. 3 are vacant.

So when the NG is removed say 10 IPs come to market. Those 10 will be bought by either as homes or IPs.

The number of houses and number if families don't change. There shouldn't be a shortage of rentals because even though the number of rentals will come down, the number of renters would have come down as well.

 

[sash]

Well consider this......

1. Why do banks continue to lend because they know the underlying asset in capital cities will rise 5-10% pa.

2. Immigration in Australia is 200k per annum how will they be housed? If ther is no neg gearing it will be harder to borrow money as this now included in finance calculations. The immigrants coming to Australia now are very skilled so they can offer to pay more.

3. Current system keeps housing consistent....but can be improved further by what I have suggested.

Time will tell....be assured the govt will not make up the shortfall when investors leave the IP market in droves.

I don't really understand the potential rental supply/demand changes.

Say there are 100 houses and 97 families. 60 houses owned as first homes and 40 as investments. 3 are vacant.

So when the NG is removed say 10 IPs come to market. Those 10 will be bought by either as homes or IPs.

The number of houses and number if families don't change. There shouldn't be a shortage of rentals because even though the number of rentals will come down, the number of renters would have come down as well.

 

[impala67]

...be assured the govt will not make up the shortfall when investors leave the IP market in droves.

+1

Not fussed either way..."Is the end in sight for negative gearing ?" ...not going to happen.

 

[D.T.]

Instead of abolishing negative gearing, they could enact bank regulations to only lend on profitable ventures.

Itd be just as pointless but theres options

 

[wategos]

Time will tell....be assured the govt will not make up the shortfall when investors leave the IP market in droves.

Actually there will be less social housing costs for the government since in the longer term more people will own their own home. Instead of a speculator owning 5 homes 5 families will.

If NG is kept for new developments only then more demand and activity in that sector, so more homes. Investors leaving the market means nothing for existing properties (although prices would fall), the demand supply equation remains the same.

 

[D.T.]

Actually there will be less social housing costs for the government since in the longer term more people will own their own home. Instead of a speculator owning 5 homes 5 families will.

If NG is kept for new developments only then more demand and activity in that sector, so more homes. Investors leaving the market means nothing for existing properties (although prices would fall), the demand supply equation remains the same.

Or they could offer a stamp duty discount for new ppl buying homes
Or they could increase the resi density in inner areas and increase the land supply in outer areas, with the aim of both to increase the supply / demand ratio.

Oh wait

What they actually should do is tell the gen y whiny bitches not to expect a waterfront 2 storey first home.

 

[Singo]

Whether there is NG or not, the investors will invest.

Those who earn too much and buy property because their accountant told so will stop buying (if NG is abolished) and that is good.

In 2010, our household income was $560 per week and we were renting a house for $310pw. It was a private rental at that time as no REA were willing to rent a house to us. It was negatively geared of course. And it was sold a an year or so ago when the interest rates started to fall because those investors were horrified to pay more tax as the property moved into positive territory.

 

[melbmeg]

I hope it goes

There are social issues to consider (unlike with most other assets which can be negatively geared). Not all assets can (or should) be treated exactly the same.

I agree. It needs to go. Housing costs in this country are ridiculous. I would love to see a major drop. It will be painful in the short term but ultimately better for the economy and society. We should not have so much money tied up in a non-productive asset.

 

[ashes]

If they really want to stop second hand houses from going up in price. All they have to do is remove the tax free status on the PPOR. This is something like 70% of the market, and would have a big effect on the people who are actually bidding up prices.

Removing NG won't actually raise the government any money, Investors will still pay approximately the same amount of tax, they timing will just be delayed. As any loses will have to be carried forward to future years. (Just like Capital Loses).

And removing the tax free status of the PPOR will raise the government quite a bit of money, unlike removing Negative Gearing.


Will never happen of course.

 

[macca446]

If they really want to stop second hand houses from going up in price. All they have to do is remove the tax free status on the PPOR. This is something like 70% of the market, and would have a big effect on the people who are actually bidding up prices.

Removing NG won't actually raise the government any money, Investors will still pay approximately the same amount of tax, they timing will just be delayed. As any loses will have to be carried forward to future years. (Just like Capital Loses).

And removing the tax free status of the PPOR will raise the government quite a bit of money, unlike removing Negative Gearing.


Will never happen of course.

Well only this week Government looking at pensioners PPOR to be an asset in the means test .

 

[keithj]

And removing the tax free status of the PPOR will raise the government quite a bit of money, unlike removing Negative Gearing.

A couple of problems with that idea -
Mobility of labour is an obvious one - no-one would ever sell their house & incur CGT, and therefore only ever be able to work within commuting distance of their PPOR. Not good for productivity or the economy.
As no-one would ever sell their house (until one of the DDDs happened), where are the current renters going to buy ? I think everyone would hold onto their existing PPOR & leave the least desirable locations for them.
And as no-one sells, stamp duty & CGT would plummet. Anyone remember the disaster NSW Labours Vendor Tax back on 2002(?) was ?.

Will never happen of course.

I agree - it's another really shortsighted idea.