Bill shorten poised to take negative gearing.

So do investors mate.

With all the investors on this form targeting Logan in QLD, Frankston in VIC, Elizabeth in SA ect and with all the Nathan Birtch's of the world buying up many lower priced property’s, I'd say there is a large demand for lower priced property’s from investors. If these laws come into place, some of those investors will be less likely to invest in these lower priced property’s thus freeing them up for first home buyers to purchase. With less demand from investors prices will likely fall or stagnate letting first home buyer save a deposit and get there foot in the door.

These new laws would be good news for Australia and I hope the do come into effect !

 

I don't think it will make a huge impact as you may be expecting, as the very same reasons many fbh cannot afford homes will still be there - unable to save a deposit, casual incomes, high expenses/other debts, fast population growth and possibly higher expectations than in the past. Prices may drop in high investment areas a little, however the fhb dream/hope of them falling 10-20% is simply not going to happen. Many investors are not even relying on negative gearing, because those areas have attractive yields independent of that. If you also knew a bit more about what is happening in the finance space in the last 12 months, you would understand that any investor relying exclusively on neg gearing to grow their portfolio is going to run into serviceability issues pretty quickly in the current environment.

You also need to remember that often investors are buying up rundown places fhb completely turn their noses up at, renovating them, making them attractive to buy/rent, and selling them for profit. Not much to do with neg gearing at all. This will continue.

And speaking of the Goldcoast, where prices have been stagnant, and falling in many cases for the best part of 8 years (until maybe the last 18 months)... Do you really think the reason fhb haven't been able to/have not wanted to buy there for all that time was due to all of the investors bidding up the prices during that time? It is simply not the case.

 

Funny because people in this fourm sure are kicking up a fuss about something many of them don't use ?

These new laws have been long overdue. When you take away the bias the people in the fourm obviously would have towards keeping the current laws. There are more benefits than disadvantages for Australia as a whole. If anything its interesting to see everyones negative reaction to something that will make life more positive for younger first home buyers to live the kind of life the older generation has enjoyed for decades. Its fun watching the people that rely on neg gearing squirm at this news.

 

What bias? Seems that most people want it gone from the survey below.

Do you think negative gearing should go?

Obviously you would like negative gearing gone, and that's fine. It's your opinion.
I just believe that your idea that first home owners will be better off is wrong. But that's just my opinion.

 

well keeping it sure wont help them now will it. With it gone it can only help the situation

 

It's not actually that cut and dried....

If axing NG was such a simple solution to housing affordability....it would have happened by now....

The only long term way to make housing more affordable in Australia and slow capital growth is to stop our quickly growing population from wanting to cram into 3 or 4 big cities...

Good luck with that!!

 

Getting rid of it, keeping it, doesn't make a difference to help fhb get a home. Savings will. This is nothing but a political stunt to gain leadership. Look past the smoke and mirrors.

 

you know as well as i do that the politicians and their mates at the big end of town have been reluctant to remove it as allot of them use NG and also have been to afraid to lose power by hurting the big earners that also use NG.

 

like i said before, it will lessen the demand from investors of established propertys. house price growth will fall, as investors wont be pushing it up with more demand. This will allow low income and FHBs to save for a deposit quick enough instead of having house prices grow faster than they can save. As has been the case for a good while now.

 

Whether it's true or not, the fact that negative gearing exists in Oz, is not the only one reason why our property prices have increased.

I also doubt removing it completely is a simple"solution"

 

keeping it isnt a solution either. Its clear to see that it will have a big effect on the behaviour of property investers in Australia, which will be a welcomed change for low income earners and FHBs

 

We probably need to stop thinking of negative gearing in isolation, I know I sound like a broken record but it's part of a much greater vision for tax reform in Australia.

Both sides of government are well aware of recommendations made during the Henry Review (now known as Australia's Future Tax System Review). I promise it won't be the most exciting read but I do think anyone interested in wealth creation through Australian investments should take the time to read it.

Something I also didn't know until recently and worth noting, is that Lucy Turnbull is a board member of the Grattan Institute. You can just imagine the dinner table conversation.

The way I see it is that NG will eventually either be capped or grandfathered and completely removed, a broad-based land tax will replace transfer duty, the CGT discount will be wound back, the family home (above a certain value) will be counted in the pension asset test, older Australian's will be presented with incentives to downsize and income within super will have a taxed component.

We'll see momentum toward investment into business (big and small) and solutions to housing our growing population in a way that encourages them to be productive. It might not happen this election but the fact that things are changing should be obvious to all.

 

Speaking of the Grattan Institute. I think the work experience kid has hijacked Domain

I never thought I would see the day when Domain/Fairfax reposts something from The Conversation. Sometimes the truth really is stranger than fiction.

Three myths on negative gearing the housing industry wants you to believe

 

I guess you're right that keeping it isn't a solution.
If it ain't broke, don't fix it.

 

Concur with your observations. NG, CGT and APRA guidelines need to be analyzed as a collective upheaval and not in isolation. The more I think about it, the collective changes underway appear to be similar to tax reforms in USA in 1986 [Tax Reform Act 1986-TRA 1986]. Tax Reform Act of 1986 - Wikipedia, the free encyclopedia. Similarities

• Similar (among other) Objectives:
  
  • Remove tax lurks in rental properties.
  • Reduce CGT exemptions / raise CGT.
    
  • Reduce marginal tax rates.
• Similar reforms (as related to RE): Italic is Australian equivalent
  
  • Reduction in marginal tax rates. Our treasurer is already making noises for similar reduction in income tax in the forth coming budget.
  • Reduction in standard deductions. Has already happened in Australia (2012-13 ?)
  • Depreciation provisions were amended to encourage home ownership rather than rentals. Not too sure about Australia. Hopefully others can fill in.
  • TRA 1986 eliminated distinction between Capital gain and other type of income however with a provision of 125000 lifetime tax exclusion for housing gains. In Australia we (both political parties) may well be headed towards phased reduction in CGT exemption.
  • Anti shelter provisions: Passive loss limitations i.e. passive losses could be offset only against passive income. Takeaway from this is that real-estate partnership sales declined by 90 % between 1985 and 1991. The ALP proposal appears to be a bit hazy but if on similar line wherein, the RE losses can be offset only against RE income, the effects will be monumental.
  • Other Provisions: Removal of amortization of interest on builder bonds and limits on tax-exempt financing for housing development raised the cost of rental construction. APRA guidelines are having an eerily similar effect of encouraging OO loans against investor loans.
• Similar outcomes ? Have a read of what happened in USA as a consequence of TRA 1986 at https://www.bostonfed.org/economic/conf/conf36/conf36g.pdf. It reads on the same line as this thread wherein:
  • Experts disagreed.
  • Projection models were difficult to construct and unreliable
    
  • Majority expected the rentals to rise in direct proportion to reduced rental constructions
  • All doom and gloom associated with the recession. It is worth noting that the recession was more due to effectiveness of federal reserve to contain the inflation rather than TRA 1986. Nevertheless the impacts of TRA were:
    • Residential investment remained unchanged. In fact employment in building sector grew.
    • Cost of capital for ownership for middle to high earners increased but the increase was insignificant.
    • For low income earners cost of capital for ownership fell from 17% to 40% below the cost of rental from year 1980 to 1988.
      
    • Vacancy rates for multi unit residential buildings increased by 50% resulting in collapse of rental returns.
      
    • Passive loss rule stopped high leverage tax shelters in real estate.
    • Passive loss rule caused dumping of property (housing, hotels, offices etc) onto market accompanied with fall in prices
    • Financial Institutions: The reduced asset values weakened the balance sheets and in some extreme cases lending institutions were bailed out. In other cases the ability to lend was diminished

Will the outcomes be similar in Australia ? Even if the impact is not as dramatic as USA some consequences should seamlessly transfer through.

Opinions (other than this is not America) welcome.

 

You are right, gravity doesn't exist and prices will continue to double every 7 years in Australia because we are the lucky country / immigration / quality of bricks

Regardless, - it's less about FHB and more about generating growth in economy (what does tax avoidance achieve), and getting more new houses built. Oh and giving the Govt an extra $40b to spend . . . which will become increasingly important

 

I would expect similar outcomes-- and with increasing budget pressure, tax revenues rapidly declining, reform to this effect will arrive sooner rather than later.

 

Smoke and mirrors hmmm. It's a highly politicised issue sure, but it will also increase Govt revenue by ~$40Bn and increase supply of new houses

Liberals will most like adopt it in some form now, the public wants it.

 

I'm all for increases in gov revenue. Just don't like hearing BS to try and achieve it.

 

I think it's fair so say there is more amounts of BS on the side trying to keep NG. Eg Hysteria around how much rents will increase, concern for "poor people" all of a sudden from property organisations hahahah