Its the masses that drive the property markets up in value. Do you think there a more property investors or more home owners in Australia?
The Abolishment of the Negative Gearing Debate
- Thread starter Rixter
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Its the masses that drive the property markets up in value. Do you think there a more property investors or more home owners in Australia?
I thought that the article that dinkumnet linked to was pretty easy to understand. Maybe I'm missing something. 
Chris Vedelago's argument was that the government is putting money into the housing market through three channels:
Other countries don't have the same level of intervention, and have cheaper property, so these schemes are distorting the market. However, the government seems to be pinning the blame elsewhere, such as on foreign investors.
Was that really so difficult?
I don't see negative gearing disappearing, because of the sheer number of investors taking advantage of it, but I could see it being curtailed. It's currently costing nearly $5 billion a year, and has been rising for some years, so the Treasury might seek to cap its cost by placing restrictions on it.
Chris Vedelago's argument was that the government is putting money into the housing market through three channels:
- First Home Owners Grant
- Negative Gearing
- Rent Benefit (claimed by 50% of tenants)
Other countries don't have the same level of intervention, and have cheaper property, so these schemes are distorting the market. However, the government seems to be pinning the blame elsewhere, such as on foreign investors.
Was that really so difficult?
I don't see negative gearing disappearing, because of the sheer number of investors taking advantage of it, but I could see it being curtailed. It's currently costing nearly $5 billion a year, and has been rising for some years, so the Treasury might seek to cap its cost by placing restrictions on it.
Do you think its emotionally driven home owners or analytical investors who pay more for a property?
Both, the two groups don't have a monopoly on those characteristics.
Plenty of irrational investors & careful home owner buyers. I've seen many home buyers lose out at auction to investors willing to pay more, pushing up prices.
It's not so simple as this though...we just bought a property off a vendor who desperately needed to sell, I know I got a good deal regardless, BUT with no negative gearing I may not have considered it as worth my while, but the seller now gets his needed funds, I was not competing with any other buyers, so I did not deprive someone of thier potential own home.
Like a lot of things related to the property market there is no black and white clear cut one size fits all answer for anything, especially the pros and cons of negative gearing!
Where did you get this information? Just based on my experience all my IPs bar one were bought new. Regardless, if investors buy existing homes they need to spruce it up or renovate it to increase equity for refinancing. Investors buy in the market and get the property at the market price. Investors increase the dynamics and fluidity of the market with more demand.
Sale prices do not automatically drop with the removal of NG because it is un-Australian for governments to have retrospective legislation. The effect of the new policy will be phased in and hence existing IPs will likely be unaffected by the new policy and need not be dumped in sale into the market. However, the new policy will impact on the investment feasibility of buying new residential IPs while the rent will go up with the drop in new stocks. The abolition of NG is likely to harm governments as there will be clamour for more public housing, at the same time there will be less land sales and stamp duty for the state governments to fund it, while the tight housing situation will favour existing PIs who will likely raise rent. Sure the federal government may get more revenue but it will have to use the revenue to solve the problem of declining economic activities because of lessened desirability of investing in housing. PIs can invest elsewhere or overseas. Who is the party likely to be smiling - tenants, state governments, federal government or existing PIs?
I've never paid the full asking price for any property I've bought, and never bought at an auction.
So if I'm yer typical investor, then the typical investor hasn't pushed up prices...ever.
I think the stat is something in the order of 5% of Property Investors own more than one IP, and 1% own more than 5.
I think out of the rest about 50% are holiday homes that only get used by the owner now and again, so; read my sig.
There were investors around when I was a first home buyer back in the 80's (no FHB hand-out either), and I've never been a high income earner for any length of time before or since, and I still managed to buy my first home...
Now in PPoR no.5
Now I'm one of those bloody greedy specultors pushing up the prices.
Lots of people do not deserve to own a home. It is a massive comitment which many of the masses cannot achieve or comprehend. It takes social elitists to provide housing at a subsidised rental rate for these peasants.
Only joking there, however during the days of when low doc homeloans were rife I remember seeing a large amount of defaults in the lower end of the market.
It is pretty easy to sit back and blame property investors for the failings of others who have not bought a property. I thought each and everyone was in control of their own destiny.
One of their more popular comments was "he got lucky".
LOL.....mate with comments like that, just confirms you're not up to speed if you planning on making a success in wealth building using property as your chosen vehicle. Good Luck!
How does an observation that there are irrational property investors (which is true if we are to discuss this topic rationally) affect the ability of wategos to succeed with property?
It doesnt on its own, but thats not the context its being used.
Subsidies are going to first home owners not investors.
They pushed up the market with people getting 25k + stamp duty to buy a house.
Those dumb enough not to use it can wallow in their own swill of resentment.
Neg gearing will never be abolished, compartmentalized at most.
Not quite because everyone has to live in Toorak otherwise it's just considered un-Australian to be pushed into suburbia.
Rubbish.
Investors buy at the best prices they can, and are, on the whole, much more analytical that owner occupiers.
So on the money , that is me as well.
Firstly, the ratios has always been around 70% owner occupiers to 30% rental overall. FHOG here, sSD saving there , even low docs, or low start.. NG in and NG out, Public Housing in and out, why no change.
In the end, I think, it is a mindset. You either are the type of person to take control of your life and hence investments or you are not.
By that I don't mean we successful investors are all Alpha Type with money, income and big "b#lls"to pull it off. It means we take the safe, secure, controlled route.
We teach ourselves, I remember as a teenager from a bogan family forcing myself to try to understand the Financial Review because I knew I had to. The very fact I am here on SS is to learn.
Property Investors are actually risk averse and pretty humble. An informal study on SS found many of us are first born from poor background and self made persons.
So if asked, what is my greatest fear: I honestly say, being poor. I saw my mother and father struggle all their life to put food on the table. When my brother died they could not afford all the costs to bury him so Mum ironed the shirts of Funeral Directors for years to pay them back.
Mum still has nothing but her son does and thankfully I have subsided her living costs for over 15 years now and I damm, proud I can do so.
Yet my sister never understood and has let money fall through her fingers like water. Never made an investment in her life and expects the Government to look after her. She has more than one opportunity and me telling her how. In the end, she does not want to take responsibility for her future. That is her greatest fear: not being able to blame someone else for her lot.
And there is the point:
You either take responsibility or your don't.
Responsibility means scrimped and saved. This year we go Overseas for the second time, the first being in 2010. We are 45. Why becasue when our 20 something friends were traveling the world we were buying our first PPOR.
Don't means saying I am not buying a house now because the prices are too high, going down, to flat, wrong time, shares are better, I want my lifestyle, insert excuse here. If I had $100 each time I heard those excuses I would have a deposit for a new IP.
This happened a lot and especially each time we bought such as in 1989, then 1995, then in 2000. I remember succinctly being told by work colleagues who were "land economists", so highly educated in property, that I was foolish to invest here because the Tech Boom was easy Money.
Then when I sold in 2003 making a bloody motza, writing off all PPOR debt and setting us up for life, the same tech Investors ( less some serious $) told me why are you getting out, you fool, we are getting in. They lost again.
Driven by greed, not a plan. Following the herd not their own judgement.
So Wategos, if what you are really saying is: that those in serious need (aged, ill, disabled, thus chronic socially economically disadvantaged) deserve assistance, then I agree.
And , Negative Gearing is assistance with Affordable and Gov Housing. I have worked in these areas providing for those persons.
In today's world, with easily available credit, First home owner grant, stamp duty saving , etc...the average majority not those above, who seriously want to get a home can get one.
NG keeps rent down. It brings new stock into the market but it does very little to raise prices in my opinion and experience.
If you disagree explain this:
I have an apartment, 1 bed with carpark, pool, balcony, 50m2 in Chippendale last sales here is $420k.
Yet 3 block away a new development ( Sydney Central) is selling the same thing like hotcakes for $600k.
SO when I see reports, it is so expensive to buy in to the Sydney CBDm they are asking $600k!! I say here is one for $420k. 15 years older but essentially same space, location and you can renovate for $10k and look great and they say, but that is OLD! I don't want to compromise my lifestyle. They feed the Developers pricing, not me.
The same applies to a couple buying oversize Mc Mansion on the fringes with double garage and media rooms, and and and... when they could buy a smaller house for a lot less.
If the Gov wants to abolish any thing, abolish stamp duty. Investors don't care how much it is and we get to claim it back. What it does do it holds stock form the market because many will not sell lest they pay stamp duty. If there was more old stock then prices would drop and less people would rent and rents would go down.
But that assumes people are willing to start with something more affordable like all us investors did.
Regards, Peter 14.7 and yes we are in the 1% with more than 5 investments.
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They don't need to remove NG, they simply need to completely do away with the FHOG and other FHB concessions. Without the means to leverage into properties (that they wouldn't otherwise be able to afford) FHBs will be in a position where they can't pay as much and prices will drop to accomodate their limited purchasing power. This price hit will flow through to property in all higher price ranges as well, with lower prices being paid for the bottom rung, each higher step on the property ladder will need to fall to meet the market below it.
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