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But an owner-occupier would, management and land tax excepted, be spending just the same, possibly more in that as an investor you look to maximise your return whilst an OO might well spend an extra $10K on a kitchen just because they like it.
When critics of the current NG arrangement talk about it being unproductive, they're not talking about the lack of money being spent by investors on their properties but the inflated capital that investors have to put into these properties that could have been used more productively.
Investors vote where to put their money by profitability measures grossed from yield and capital gains for their efforts. Profitability to investors is the reality and it beats productivity by economists based on their definition of productivity. To investors they serve a market need of transient workforce and temporary workers regardless of rhetorical productivity.
But the myth being bandied is that residential property investors are being given a 'concession' from the public purse and so it is open season for the NG 'rort' to be outed and subject to public ridicule. In my previous posting I am just calling this faddish quasi analysis bah humbug!
Say you have invested 500K of capital into an IP. If houses prices were 10% lower you could have owned exactly the same property with only 450K capital outlay and used 50K to invest somewhere else eg. in shares. As a result you'd have more capital invested in productive assets which overall would be better for the economy.
This is weird if the productivity argument is at the bottom line to effect enhanced profitability to investors and equating this as good for the economy! But, I for one am doing just fine with my spread in shares and properties. Shouldn't Government be more concerned about balancing its own budget without diluting its focus to meddle in mine with obfuscation about 'concessions' on NG, etc?
OK, the reality is a bit more complex than that but you get the gist (and I'm not talking about the consequences of a 10% price drop here, just trying to explain how wasteful this all is).
Because your capital outlay is primarily financed by debt what happens is that a 50K portion of your debt is returning nothing. It's a dead weight on your personal finances but more importantly the nation as a whole is paying for its costs through NG and getting little benefit out of it.
I have called this a myth. Cutting NG is creating inequity based on distorting equitable principles of tax and accounting principles. $50k portion returning nothing? LOL.
Individual profit doesn't equate with common good. Plenty of profit-making schemes that are harmful to a country and its economy.
What myth? Plenty of countries living this "myth" right now.
Funny the faux concerns expressed by NG proponents for renters who supposedly will have higher rents (they won't, but anyway if you really believe that isn't that good for our investments? ) or the increased social housing costs (won't be) or more people on the pension (or even living on the streets ! )
The biggest concern of course is to their own back pocket and not renters, FHBs, social welfare or the economy.
But if you're not over extended yet and plan to buy more property in the future you should see the removal of negative gearing as a good thing since yields will be higher as a result of lower house prices.
It is true that there will always be a large pool of lifetime renters who either don't have a high enough income to save for a deposit or who have a high enough income, but not the discipline to save it.The bottom 10% in wealth of our community will not be able to afford to buy a house regardless.
Does anyone have any evidence that prices fell when NG was removed back in the '80s ?
It is true that there will always be a large pool of lifetime renters who either don't have a high enough income to save for a deposit or who have a high enough income, but not the discipline to save it.
That said data from the ABS / RBA suggests that the last time negative gearing was removed it allowed a large number of young buyers (presumably not in a position to bid against investors) to buy their own home as is indicated by the bump higher in home ownership rates:
Someone in WA writes that NG is a positive for the economy:
http://mccarthygroup.com.au/negative-gearing-stephen-appears-australian-financial-review
It may provide some information to help make sense about NG.
Someone in WA writes that NG is a positive for the economy:
http://mccarthygroup.com.au/negative-gearing-stephen-appears-australian-financial-review
It may provide some information to help make sense about NG.
"Negative gearing does not subsidise investors. It, in fact, subsidises the tenants. If you had a widget that cost you a dollar to produce, why would you sell if for 80 cents?"
Maybe a potential opportunity for unit trusts. Will the legislation be worded such that interest deductions to acwuire units in a unit trust which in turns buys a residential property might be excluded. Will be interesting to see things closer to the date if anything does happen and maybe a potential opportunity at the same time.
When it was abolished last time, how did the carried over losses work?
This sends a sginal to me - Perhaps the end of the 50% CGT discount on property ?