Potential negative gearing changes

But; currently; you own none and are trying to find something of good value/cheap?
Yes, but as I said, my position won't change post purchase.
Just on the Gubb; you blame them for the high prices?
I see the combination of their policies being the enabler.

Just look at when the major price swings occurred (i.e. after CGT discount bought in, after FHOB, when interest rates are lowered, etc).

It is their responsibility to make changes given the high level of influence they have.
 
Yes, but as I said, my position won't change post purchase.

I see the combination of their policies being the enabler.

Just look at when the major price swings occurred (i.e. after CGT discount bought in, after FHOB, when interest rates are lowered, etc).

It is their responsibility to make changes given the high level of influence they have.
Ok, I'll go with that.

Let's say we abolish all NG, FHOG, CG discount as of today; what do you think will be the situation in 12 month's time?
 
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Ok, I'll go with this;

Let's say we abolish all NG, FHOG, CG discount as of today; what do you think will be the situation in 12 month's time?
It would never happen like that (flipped switch, so pointless to speculate) and the scenario you provided isn't detailed enough for even the most experienced analyst to answer...

The Senate enquiry into Housing Affordability was a start on finding the right policy mix to correct the imbalances, but if history is anything to go by they'll just ignore all the suggestions and keep on with whatever they think will achieve the most votes.
 
The Senate enquiry into Housing Affordability was a start on finding the right policy mix to correct the imbalances, but if history is anything to go by they'll just ignore all the suggestions and keep on with whatever they think will achieve the most votes.
Given that investors are usually around 30% of the property market, and O/O's approximately 70%, I'd say there's a bit of a chance it might get through...

They took it away in '85.
 
Given that investors are usually around 30% of the property market, and O/O's approximately 70%, I'd say there's a bit of a chance it might get through...

They took it away in '85.

Given that some of these investors you are talking about would be Pollies, I think not.
 
Given that investors are usually around 30% of the property market, and O/O's approximately 70%, I'd say there's a bit of a chance it might get through...
The Senate Report on Affordable Housing is here.

The report has 40 recommendations....

Recommendation 13 is...
The committee recommends that, to the extent such matters are not addressed by the White Paper on the Reform of Australia's Tax System, the Treasury should prepare and publish a study of the influence of negative gearing and the capital gains tax discount on home purchase affordability and on the rental market (including the effect on security of tenure for renters), the effect of these arrangements on revenue, and their effect (if any) on economic productivity. This study should examine the likely effects of alternative taxation treatments of investor housing. Alternative approaches considered in this study (including, where appropriate, in combination) should include:
(a) a housing - specific 'quarantine' approach, wherein losses for investment properties can only be deducted against rental income, with provision for losses in excess of rental income to be carried forward and deducted against future rental income and capital gains;
(b) a broader 'quarantine' approach, wherein interest expenses on all investments, including but not limited to housing assets, are only deductible in any given year up to the amount of investment income earned in that year, with provision for losses in excess of this amount to be carried forward and deducted against future investment income and capital gains;
(c) limiting the application of negative gearing arrangements to new housing stock, or designated new affordable housing stock;
(d) limiting the application of negative gearing to a certain number of properties (assessing options for various limits in this regard);
(e) options for phasing out negative gearing on investment housing;
(f) applying the savings income discount recommended in the Henry Review to investment housing, with consideration given to the impact of this approach both with and without the implementation of the Henry Review's recommendations in relation to housing supply and housing assistance; and
(g) reducing or removing the capital gains tax discount for investment properties, or reverting to the pre-1999 system of taxing real rather than nominal capital gains on investment assets.

...and down on page 421 the response by Govt Senators...

The recommendation is not supported as the issue will be addressed by the White Paper on Reform of Australia's Tax System.

Looks like we'll be waiting for another report before any changes will even be considered.....
 
The Capital Gains tax discount was withdrawn suddenly for non residents in 2012. It was the main reason I sold a while later as the non-discounted period was eating into the capital gain as time passed (pre May 2012 remained discounted).

I expect the same will happen for residents before changes to Negative Gearing, so you would probably see a lot of investor sales and some price drops, which may be a good thing in the long run. NG may be restricted more gradually as the cost becomes too much to bear and calls to wind it back become louder.
 
I too saw those figures, was a little surprised & dug a little deeper.....
According to JP Morgan....



I reckon it's those damn broker churning..... :eek:

Hehe, and I'm betting that a significant number of investors are refinancing or doing equity pulls, which will be included in that figure. Speaking of myself, I know I am. My borrowing has increased quite a bit, but the funds are sitting in offsets, so technically my borrowing has increased(on existing stock), but in reality it hasn't, if that makes sense.
 
My borrowing has increased quite a bit, but the funds are sitting in offsets, so technically my borrowing has increased(on existing stock), but in reality it hasn't, if that makes sense.

Exact same for us... except we use a more streamline LOC financial structure, as opposed to IP loans with a savings account off setting it.
 
The Capital Gains tax discount was withdrawn suddenly for non residents in 2012. It was the main reason I sold a while later as the non-discounted period was eating into the capital gain as time passed (pre May 2012 remained discounted).

I expect the same will happen for residents before changes to Negative Gearing, so you would probably see a lot of investor sales and some price drops, which may be a good thing in the long run. NG may be restricted more gradually as the cost becomes too much to bear and calls to wind it back become louder.

Indeed you would. That would make the effective rate of CGT in Australia about 44%, way above the OECD average of about 18%. Right now it is about 22% for residents, which is above average but in the middle of the pack.

I am also a non-resident. I didn't sell, but only because I intend to return soon. Otherwise investing in Australia would be a non-starter for me.
 
Now, here is the critical factor in this argument;

BayView, I wasn't arguing anything. I just gave some numbers which I know.

I have no problems with NG. It is legal. Cigarettes and alcohol are legal too.

Millions and millions are spent for television advertising against cigarettes. Thousands die each year because of smoking. But cigarette is legal. Because good money is made there. Same with NG.
 
Exact same for us... except we use a more streamline LOC financial structure, as opposed to IP loans with a savings account off setting it.

I am doing this at the moment too! Most with heaps of equity and planning to live off some equity in the future would do it, right? Whether planned to invest more or just have buffers in place!
Who pulls out equity when there's not much growth?
 
BayView, I wasn't arguing anything. I just gave some numbers which I know.

I have no problems with NG. It is legal. Cigarettes and alcohol are legal too.

Millions and millions are spent for television advertising against cigarettes. Thousands die each year because of smoking. But cigarette is legal. Because good money is made there. Same with NG.
When I say "argument" I wasn't referring to your post specifically; it is the overall view (not yours either) of those who oppose NG.

The statement you made about the houses sold in the street is no doubt correct...

I was merely pointing out that this in and of itself means possibly nothing relating to the prices of those houses; hence I asked the question about what they paid.

But; the anti-NG's will take those sorts of statements and twist them to make it look as though all the sales were possibly massively inflated, and/or the FHB's were shut out yet again.
 
When I say "argument" I wasn't referring to your post specifically; it is the overall view (not yours either) of those who oppose NG.

The statement you made about the houses sold in the street is no doubt correct...

I was merely pointing out that this in and of itself means possibly nothing relating to the prices of those houses; hence I asked the question about what they paid.

But; the anti-NG's will take those sorts of statements and twist them to make it look as though all the sales were possibly massively inflated, and/or the FHB's were shut out yet again.

Well, as Sanj pointed out, NG is one of the factors pushing the price up.

And my post was anti-NG as well because I did not mention some other numbers. ;)

I mentioned a $400k property in Huntindale and how it is hard for someone working in Canningvale or Maddington industrial areas to buy such a property. But they can buy slightly further at Armadale for around $350K. Or an older property in Gosnells or Maddinton. If there is will, there is a way.

But they think about the traffic getting to Canning Vale from Armadale.

What I don't like about NG is that such families end up getting rent assistance as well. Tax revenue is lost by NG and more money is spent paying rent assistance etc. This money is wasted twice resulting in higher property prices instead of being invested in infrastructure.

If there are more high ways, train lines etc, people wouldn't mind buying further away.

But instead of that all (investors as well as renters) get some money from government and the country is going backwards.
 
Well, as Sanj pointed out, NG is one of the factors pushing the price up.

And my post was anti-NG as well because I did not mention some other numbers. ;)

I mentioned a $400k property in Huntindale and how it is hard for someone working in Canningvale or Maddington industrial areas to buy such a property. But they can buy slightly further at Armadale for around $350K. Or an older property in Gosnells or Maddinton. If there is will, there is a way.

But they think about the traffic getting to Canning Vale from Armadale.

What I don't like about NG is that such families end up getting rent assistance as well. Tax revenue is lost by NG and more money is spent paying rent assistance etc. This money is wasted twice resulting in higher property prices instead of being invested in infrastructure.

If there are more high ways, train lines etc, people wouldn't mind buying further away.

But instead of that all (investors as well as renters) get some money from government and the country is going backwards.
I think it was pointed out earlier in this thread, or the other NG thread that the Gubb make much more through having NG than not having NG?

If it was the other way around, my guess is they would have gotten rid of it looong ago.

Also, consider this; the NG revenue collected by the Gubb can/might also be used to fund the rent assistance for those in need.

If NG pushes up the prices as folks say, then the revenues from GST, stamp duty, rates etc are increasing too.
 
Who pulls out equity when there's not much growth?

The SANF buffer is to harvest sufficient equity to last you 10+ years and then have it sitting in your LOC's as available funds, prior to leaving full time employment .
 
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Kudos.

Removing NG for individuals (that is what we are talking about) would further make private rental an investment option for wealthy individuals or collectives of individuals (joint ventures of individuals) - all using company and trust structures.

There are already plenty of examples of this situation in continental Europe and UK. A good study show be able to highlight the outcome of this.

I gather the outcome would be:

1) higher rent environment in terms of rental yield - tenants are losers

2) private rental becomes an investment activity of companies and trusts (used by HNW individuals and joint ventures) - an entry barrier for low and medium income earners to invest directly for their future, likely more government welfare payments for aging

3) affordability of housing is no clearer - it is unaffordable at least in UK

4) less OO housing - rental for life and intergeneration becomes a common reality

A good study should courageously cover the more successful countries as well, eg Singapore.

Quarantining rental losses would certainly raise barriers to entry for small-time investors and to some extent favour institutional investors. Also, since effective tax on rental property would be somewhat higher, it is bound at some point result in somewhat higher rents.

Some are touting this (specifically the move towards institutional investors) as a good thing because it would tend to improve security of tenure for those renting. Not sure I totally agree, but they have a point.
 
APRA have already started removing negative gearing by stealth.

The pressure on the banks has caused them to cut all the policies that allowed multi-property investors to pass serviceability checks.

Now that investors can't pass serviceability checks whilst negatively geared, we need to wait until positive geared to get another loan/property.

Also things like Bankwest requiring 20% deposit for IPs are creating positive geared investments faster than 90% LVR investments.

I bet some investors will end up "moving in" each investment property they buy for a small period in order to qualify for "owner occupier" pricing and policies :confused:

With these new policies, I think any changes to negative gearing are going to have slightly less effect in the short term. In the long term though - it will be a problem since banks always reverse policy changes after a while.
 
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