Why Australia's housing sector is different..

[Different Here]

The one thing that we should all have in common, however, is a love of property investing because this site is a Property Investing Forum.

I suspect you are completely wrong (again) about this, but I will agree to leave the forum if a moderator or administrator backs you up. I'd like an administrator to please verify Skater's claim about it being necessary to have a love of property investing, in order to participate on this forum. Is a love of property investing really something we should all have in common to participate here?

What I personally find so offensive about this poster is what I find offensive of others of his elk. The thought that somebody so ill informed could come here and through his rantings <snip>

Who is ill informed? Forget my elk [sic], and give me one example of a false statement I have made here. One will suffice.

 

[Player]

It's different here because of the FHOB. The market was horrid just before it was introduced and down quite a bit. At that stage we were no different to the US and the UK.

The damage this did is create excess stock out in the boonies in Melbourne at least. It may have had minor spillover impact into infill development. I dare say (and I don't have the figures, merely some anectdotal musing of Melbourne experiences) most of those who took advantage of the FHOG and incentives probably bought new house and land rather than infill apartments........I could be wrong

The only major metro place where the market is undersupplied is Sydney ergo rents going up and vacancies tightening.

The FHOB is gone and things are turning bad again. It’s slower this time because there is less panic about the global situation and also because there is less activity to set new market prices.

The only reason there is perceived less panic is because most people have short memories...wait till the next thrilling chapter of GFC unfolds.

It is this lack of market activity which will ultimately drag it lower then then before though as low volumes almost always precede sharp drops in any market.

People are confused and sentiment thwarted, therefore they are saving and sitting on the guidelines doing nothing. That's why there are low volumes. There are buyers out there however over much of the nation right now there are in control

As for the other points, negative gearing does not provide extra housing, it simply distorts the price of available stock as you can pay more because your holding costs have been reduced.

This has been done to death. It may not provide extra housing, however it provides accommodation to those who chose to rent where they feel like living (rather than pay extra for a mortgage) or those who perhaps have no choice

At its simplest negative gearing is not an investments strategy, its subsidised speculation.

Really?.......how about the American system where they can claim interest deductions on their home mortgage? Do ya reckon that doesn't create more of a bubble to those who aspire to bigger and better trophy homes. This will lead to even more McMansion developments out in the boonies where the infrastructure and amenity is lacking.

For the most part, it is cheaper to rent where one wishes to live than to purchase there and furnish mortgage costs and not have the luxury of landlord subsidised rates, insurance and so forth.

Personally I think negative gearing should be abolished, but at the very least it should only be applicable to new developments .................which will create excess stock that will then lead us down the US experience of building too many dwellings; there may be big grins from developers however this will fuel another speculative bubble that you allude to earlier.........so it will at least achieve its original goal of creating rentals. Its won’t happen though, at least not any time soon.

I am no bull right now. It's not yipee kayay from where I sit, however negative gearing provides accommodation and takes quite a burden off the governments hands. In the hands of private investors, resi rental accommodation is far more streamlined and efficient in its provision than say state housing I do not provide comment on the homeless and certainly don't trivialise their plight........it is a topic for another thread. I am talking about those who can pay and are in the mainstream of the populace who occupy housing.

We have a system with rules. We learn/know the rules and play by the rules. The only place that needs substantially more new housing right now is Sydney.

Showing my age by use of date and nomenclature........I will sound like a broken record to some however I have been calling 1991 for some time. We are in a sideways pattern (for the most part with exceptions to Sydney at present and some mining regionals). It's not roses, however neither is it Armageddon. Finance and credit costs will be the issue moving forward for both investors and developers. We are reliant on outcomes in the Eurozone and the US for this credit supply as a global concern.

...........my 0.02

 

[MathBoy]

Most of us here are open to rational discussions, however the particular poster in question has proved that this is not what he wishes.

I read his original blog post it was well thought out and logical, there were more than enough numbers in it to support his opinion.

While not able to answer for others in this forum, I feel a little used and abused when he takes my words and installs them into his own blog for his own purposes. That is more than a little wrong in itself.

You did make a public statement by posting on the internet, he has every right to make a public response. If you don’t want to be quoted on the internet don’t post on it.

The one thing that we should all have in common, however, is a love of property investing because this site is a Property Investing Forum.

Is investing really about "loving" one asset class?

What I personally find so offensive about this poster is what I find offensive of others of his elk. The thought that somebody so ill informed could come here and through his rantings disuade somebody new to the game that is just in the learning stages. Newbies deserve to learn the good and the bad and ask questions of the more experienced investors, not get a bombardment of missinformation. If the experienced investors don't stand up and "tell it like it is" then all the newbies get is the views of DH.

Again my first point, most of his information seems solid enough, your just not happy that he is “preaching Budda in your house of Christ”.

I would argue that the new guys need a counter view to form their own opinion rather than have a potentially wrong assumption reinforced simply because it looks like consensus.

 

[Token Funder]

i'd like to see how those that oppose neg gearing would structure the new social housing requirement as private rentals are pulled from the market as investors move back into them so they can cap their CGT on sale.

Shift the billions in transfers from NG investors to increase supply by reducing the costs to developers et al and weaning the states off property and development-related taxes.

Investors can only live in one house at a time. If they're currently renting and move into their IP they have released another one to the rental market.

after all, no private rentals would see rents skyrocket and supply dwindle which would force many marginalised people into social housing (sorry, the queue for social housing) , as the missus doesn't want some dero living in her house if they're just going to move back there in 6 month's time.

See above. Increasing supply of new stock is the key.

scrapping neg gearing was tried before and it failed, abysmally. why?

It failed politically as most attempts to reduce government largesse to significant interrest groups often does. There is no evidence to suggest it pushed rents up or reduced supply

because partially funding an investor's shortfall is 20x cheaper than wholly funding new homes and maintenance of social tenants.

See above.

It follows, presumably, that if it could be shown that on the balance of probabiliites that moving the funds currently subsidising negatively geared properties elsewhere would increase supply and lower the cost of housing whilst maintianing rents, you would be a supporter of removing NG?

 

[Aaron Sice]

It follows, presumably, that if it could be shown that on the balance of probabiliites that moving the funds currently subsidising negatively geared properties elsewhere would increase supply and lower the cost of housing whilst maintianing rents, you would be a supporter of removing NG?

i think with regards to the first position, you're also implying that most people who own property are neg geared, when in reality, those that bought even 5 years ago are now CF neutral and not relying on govt assistance, merely taking advantage of it. ie, someone's rent covers a mortgage and the depreciation covers outgoings but the interest is still tax deductible - remove the tax deduction and it would still hold together (i seperate depreciation and tax deductibility on interest because depreciation is across multiple asset classes). i imagine that cost to the govt would be....what....$3k a year on an average house? roughly? what would the cost of a social property manager be, plus maintenance, plus shiny office rent, plus plus plus etc be?

if the above quote were to eventuate, abso-freaking-lutely i would be in support of it. but that's a fancy-free world you talk of, because no real estate lobby body in their sane mind would allow that to happen; and would rain public and political pressure on any party trying to change anything from the "me not want think me just want money money" mentality to actually thinking about effective and fiscally sustainable ways to invest in property.

i am all for affordable housing. but with any capitalist society, you have to take form the left to give to the right, so to turn a buck land prices would fall accordingly to make houses affordable plus the 20% profit margin in providing such.

 

[listoffallacies]

i think with regards to the first position, you're also implying that most people who own property are neg geared, when in reality, those that bought even 5 years ago are now CF neutral

-Making up figures when they are already available.

Most people who own property ARE negatively geared, and overall, the landlord industry makes a loss.

 

[bluestorm]

-Making up figures when they are already available.

Most people who own property ARE negatively geared, and overall, the landlord industry makes a loss.

And now with that negative gearing loss being compounded by CG losses, and the inflation factor, property in the near term does not look like a good investment. When this realisation fully kicks in then I think we'll see an acceleration of the property market correction as people exit out.

 

[Tony3008]

And now with that negative gearing loss being compounded by CG losses

You might end up with a CG. I recently sold a Central Equity flat bought off plan in 2003 for roughly what I paid for it (and thought myself lucky to get this - MICM had several in the same building so I went with Hocking Stuart). However since moving to Australia I've claimed around $25K in depreciation which translated into a CG of this amount, fortunately only 50% of it taxed.

 

[Aaron_C]

You might end up with a CG. I recently sold a Central Equity flat bought off plan in 2003 for roughly what I paid for it (and thought myself lucky to get this - MICM had several in the same building so I went with Hocking Stuart). However since moving to Australia I've claimed around $25K in depreciation which translated into a CG of this amount, fortunately only 50% of it taxed.

Which Central Equity apartment was this? Was it a 1 bedder?

 

[Different Here]

I suspect you are completely wrong (again) about this, but I will agree to leave the forum if a moderator or administrator backs you up. I'd like an administrator to please verify Skater's claim about it being necessary to have a love of property investing, in order to participate on this forum. Is a love of property investing really something we should all have in common to participate here?

Who is ill informed? Forget my elk [sic], and give me one example of a false statement I have made here. One will suffice.

Silence from Skater. Good, I'm glad you now concur that this forum should not be limited to those with a love of property investing.

No examples of any false statements I made either. Excellent.

 

[Different Here]

And now with that negative gearing loss being compounded by CG losses, and the inflation factor, property in the near term does not look like a good investment. When this realisation fully kicks in then I think we'll see an acceleration of the property market correction as people exit out.

Correct. It makes little sense to hold on to a negatively geared 'investment' property when capital gain is off the table for the foreseeable future.

 

[Aaron Sice]

-Making up figures when they are already available.

Most people who own property ARE negatively geared, and overall, the landlord industry makes a loss.

nice graph.

show me the empty homes versus those rented; and the balance between the two.

because you will find empty homes, while less in number, actually require disproportionately more input.

the graph also conveniently leaves out wage growth, whereby one is moved into a higher tax bracket accordingly therefore the refund amounts are more - of which i am CERTAIN is evident from 2000 to 2012.

 

[skater]

Silence from Slater. Good, I'm glad you now concur that this forum should not be limited to those with a love of property investing.

.

I most certainly DONT concur anything with you. You know I do have a life outside of the computer.

This is the Somersoft Property Investment Forum. You will notice the Investment part of the name. Thusly, if you have no interest in learning about investments, discussing investments, have no wish to buy/sell/talk about investments then I'm sure there are plenty of forums that are much more suited to you.

 

[Fifth]

Even if the graph isn't 100% accurate, it would appear that investors as a collective are negatively geared.

It's quite amusing trying to explain negative gearing to, say, an American. But why would anyone buy property if they're losing money, they ask. Capital gains, I reply. At which point they merely shake their heads. Different strokes for different folks.

 

[bluestorm]

the graph also conveniently leaves out wage growth, whereby one is moved into a higher tax bracket accordingly therefore the refund amounts are more - of which i am CERTAIN is evident from 2000 to 2012.

Your clitching at straws there if you are somehow trying to make out that the high level of negative gearing in the current flat to falling environment is good.

The wage growth pushing people into higher tax brackets would have been outweighted by the rental income growth and CG growth in the same period. So technically, people should in fact be more positively geared.

 

[Token Funder]

nice graph.

show me the empty homes versus those rented; and the balance between the two.

because you will find empty homes, while less in number, actually require disproportionately more input.

the graph also conveniently leaves out wage growth, whereby one is moved into a higher tax bracket accordingly therefore the refund amounts are more - of which i am CERTAIN is evident from 2000 to 2012.

The graph is just showing the net rental position. Wage growth is irrelevant for that calculation.

Bracket creep would be a relevant input to calculating how the $8b translates to the loss of tax revenue.

 

[Different Here]

I most certainly DONT concur anything with you. You know I do have a life outside of the computer.

This is the Somersoft Property Investment Forum. You will notice the Investment part of the name. Thusly, if you have no interest in learning about investments, discussing investments, have no wish to buy/sell/talk about investments then I'm sure there are plenty of forums that are much more suited to you.

But you have concurred with me, because now you've changed your position. First you said it was necessary to have a love of property investing, and now you concede that it is fine to simply have an interest in discussing investing (which I have).

I also note you couldn't find any false statement made by me, despite your earlier claim.

 

[joanmc]

I wonder if those who bleat about negative gearing are also opposed to say a shop keeper who borrows money to buy his shop claiming the interest on his loan. Or a share investor who borrows to buy shares and claims his interest. I personally don't see any real difference between any of them and a property investor.
Most small businesses don't make much money in the first year or so but they persevere in the hope of making future profit, negatively gearing their expenses along the way. A share investor doesn't expect to make money straight away , they buy with the hope of future gains. Same with a negatively geared property.
A shop owner supplies products or services and claims the expenses. A share investor is supplying capital and claims the expenses. A property investor supplies accommodation and claims the expenses. same same same.

 

[buzzlightyear]

I wonder if those who bleat about negative gearing are also opposed to say a shop keeper who borrows money to buy his shop claiming the interest on his loan. Or a share investor who borrows to buy shares and claims his interest. I personally don't see any real difference between any of them and a property investor.
Most small businesses don't make much money in the first year or so but they persevere in the hope of making future profit, negatively gearing their expenses along the way. A share investor doesn't expect to make money straight away , they buy with the hope of future gains. Same with a negatively geared property.
A shop owner supplies products or services and claims the expenses. A share investor is supplying capital and claims the expenses. A property investor supplies accommodation and claims the expenses. same same same.

Joanmc, the claim that NG amongst other things, causes more funds to be invested in housing, more than what is economically efficient due to the preferential tax treatment.

In Inside Business July 24th, the discussion was on fixed income investment and that our tax system preferentially deals with shares over fixed income investments. Australia is the most exposed to the sharemarket compared to other countries (although they do not cite references), meaning there is less domestic funding for larger scale business loans and a greater reliance on international funding, and therefore greater risks to our funding sources.

So does dividend imputation & franking also get the same critical examination for causing Australia to over-invest in equities?

 

[Ed Barton]

Silence from Slater. Good, I'm glad you now concur that this forum should not be limited to those with a love of property investing.

No examples of any false statements I made either. Excellent.

i asked my eight year old niece to have a look at this site. she agreed it was an INVESTORS place to discuss property investing, good and bad.

would you like me to book an appointment with my niece?