Yes but only in proportion to the value of the home. If you’re planning on downsizing from a 900k home to a 450k home and the market drops 20% you’ve still lost a hell of a lot of money.
Oh well, that’s life. It doesn’t really come with a profit guarantee.
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How many houses have owned ( or buying) in your life ?
Many have a first home that is their last home. I am not sure what point you are trying to make.
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…trying to think of someone I know under 70…
20% is a bit of an extreme example, I really doubt that’s going to happen because of changes in taxation policy.
This is where you are getting stuck in a rut. The $900k house drops 20% so sells for $720k, the question I have is, “How much did they pay for their home and how long were they there for”? If they paid less than $720K, and it is a fair chance thats the case if they have been in the house for more than 5 years, what exactly have they lost? Sure, they might not have made a massive profit, but that isn’t why you purchase a house to live in in the first place. All these people in Sydney that are sitting in multi million dollars properties in the Eastern Suburbs that they purchased 60 years ago for 5 - 10,000 pounds didn’t buy it back then thinking I’ll be a multi millionaire one day when this house sells for tens of millions. They bought thinking, this is a nice home and I want to live close to the city and the beach. Conversely, that $450k home is now only $360k, halving the impact of what you consider to be a loss of $180k but which as stated, isn’t actually a loss unlees you paid more for the home than you are selling for, in which case you wouldn’t sell.
The other point is, if property prices dove by 20%, that downturn would be extremely short lived as new buyers would flood into the market, both investors and homeowner alike. A property market that was out of reach for many, either as homeowner or investor, suddenly becomes a more viable option. The young couple that have been saving diligently but could never quite get the deposit to keep up with the market rises, and who 6 months ago could only look at a two bedroom apartment, all of a sudden have access to a three or four bedroom home in a possibly a more desirable location for less. There are always three sides to every story, the best, the worst and what actually does happen.
Negative gearing should never apply to a company. As I have stated before, it should only be available to small investors for their first investment property only. If they want to buy a second investment property, then no subsidies at all on any of their properties. And make the interest on a family home tax deductible to encourage first home buyers into the market, but only on a principal and interest loan, not an interest only loan. Stops people buying a home they can’t really afford, paying interest only on the loan and holding the house for two to three years hoping to make a significant profit, while having effectively lived in their house for free for the duration.
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I think…property price impact will depend on how the government introduces the cut to negative gearing…
If they say “We’re introducing it gradually from 12 months out”, some investors may rush to buy before the deadline, providing temporary price support…
But once it takes effect…I’ll guess at a 15% additional property price decline, probably more…buyers will see prices falling and say “I’m just going to stand back and see it find its new floor - no need to catch a falling knife - don’t want to sign a contract, and then have the bank valuer come out and cover their rear with a low valuation”…if you get secondary effects, like forced sales by over-leveraged investors, too many construction workers unemployed, GDP slowdown from loss of consumer confidence, then I’ll guess at 20%+ price declines.
Lastly…I think fear about the impact of the negative gearing changes is the only issue that could cost Labour the next election.
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It may be a bit hippy of me but I believe the house you choose to live in should be the least costly.
If your taxable income can’t cover a rental or your fist home, that’s when tax assistance should be given. Not when your taxable income can’t cover your investment.
Peace
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Negative gearing is one of the biggest cons devised by the government but not for the reasons most people in this thread have said.
A financially sensible one? Unless you have explicit plans to pump out the babies very shortly.
You can keep up with the Joneses, or you can have a very substantial extra sum for (early?) retirement.
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True, I considered that later.
I do feel like they would be most prone to value fluctuations, though.
Thanks for your reply. I’m enjoying having an actual conversation about it, not just smart ■■■■ comments. I agree with a lot of what you said.
These are all hypothetical people we’re talking about (my fault) so it’s kind of easy to make a point either way but i’ll try not to ramble on.
My point on the people looking to downsize is, it’s irrelevant what you bought the house for. I don’t think many people bought their house 30 years ago with the idea of it becoming their retirement fund but the reality is that for a huge amount of people, especially the ones approaching retirement now that haven’t had the benefit of super guarantee their whole working lives, that there houses are very much there retirement plan. A 20% downturn is a life changing amount of money.
I’ll say this again, i’m not a fan of negative gearing. I don’t own investment properties so i don’t have a dog in the race. My whole point is that a lot of people have life savings tied up in their home. The market is already going backwards so it would be crazy to implement a policy to drive down property prices. It would be like putting up interest rates when inflation is diving. The policy made more sense when the market was running hot. Surely if they want to scrap negative gearing there will be a more appropriate time in the future to do it. The whole “pull the band-aid off” approach could cause some serious problems for a lot of people/families.
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There was a point, 6-7 years ago, where banks wouldn’t give you a mortgage for one room apartments in Melb
There was a huge over supply, vs demand.
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Not in the cities they don’t. The nature of living in highly populated places is that you will prob have to move occasionally. Whether it be for better work opportunities and changing family size etc etc. Young people start families need more space. Retirees families move out and they downsize? That’s all pretty obvious.
Are you asking me how many i’ve bought? Or was that rhetorical?
Well, indeed.
Yep. But only if they were under 50 Square mts. Anything over that the bank was fine with. There were way too many of those filing cabinets being built.
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Legit, can anyone name the deputy PM?
Tim Fisher?
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Well PM is Rupert Murdoch, not sure on deputy
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Not rhetoric at all. You post with such great knowledge that I assume you own multiple properties