And -ve gearing is to encourage private investment in the property market to provide rentals.
Who do you think provides rentals?
It’s not large corporate entities.
If you think the rental market is bad now imagine if the property investors get out.
There will very few rentals available at all. It’s not going to fix supply.
People don’t realise that the best way to get into the property market is to beg borrow or steal enough funds to buy a small investment property on 5% deposit, keep it for 10 years putting money in week by week religiously because it will probably require that input. Sell after ten years and you’ll have a deposit for a home you want to live in.
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Lol. Boy have I got an investment property bridge to sell you.
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New Construction provides homes.
Rental or otherwise.
Old mate buying a house as an investment preventing a would be renter from exiting the market doesnt create more available rentals
Because in terms of dwellings its net neutral.
Its just old mate if hes financing the property to such an extent it is costing all taxpayers 22bn a year.
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Fixed
Discussing what tax deductions a mining company might make still has nothing to do with a home for someone to live in.
Property investment is still an admirable thing but negative gearing does not help the market. It distorts it and costs taxpayers(ie everyone working) more money to subsidise.
Wait until renters after paying 50k a year for their rental to a landlord also work out that a cut of their income is also being used by the government to pay their landlord as well.
Its a ■■■■■■■ rort
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Plus all the people on rent assistance …essentially taxpayers subsidising rents …maybe if govt stopped paying landlords rent and used that $$ to actually build homes and create a public housing asset we would be better off, create more supply, rents come down in prviate sector and thus house prices come down. Potentially gives avenue for lower income people to buy homes off govt too.
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How do we know that these renters would even get a loan much less be able to service.
There are also plenty of people who prefer renting for one reason or another and have no interest in owning their own home
Yep and people wonder why workers paying income tax pay the most as a percentage of the governments tax take in the world.
Ending negative gearing is an easy start.
The time to do it is when interest rates are cut to rock bottom. Because noones negatively gearing then.
And none of this grandfathering crap. Bin it all
There is another way the Labor Government could "fix’ the negative gearing into housing.
Using section 11 powers (Which the Labor treasurer tried to hand back to RBA) - they can tell the banks to stop lending to property investors of existing property and only new builds/developments.
That should take some heat out of market.
Doesn’t effect anyone with existing loans.
Theres also plenty of people who would like to buy.
Dont you get it. Negative gearing only increases the appetite an investor is willing to pay for a property.
The only thing that decreases rent is an increase in new dwellings. More dwellings than people looking.
It might be a foreign concept but most countries dont have negative gearing yet they have plenty of property investors.
You’ve got no idea
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I don’t negative gear so wouldn’t be fussed if it was removed. I just think it’s laughable that investors still wouldn’t invest in housing. Might force a few minor investors out but those with large portfolios will snap them up.
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Im not suggesting investors wouldnt.
Homes would just adjust to providing more normal returns.
And there would be more owner occupiers purchasing a percentage of dwellings
Last time they did similar, make it harder to lend for investment purposes, house prices still went up.
Not saying don’t try, but the market doesn’t seem to react the way people expect sometimes.
Go on then enlighten me as to why its a good idea.
You know for the property market.
Or more broadly the investment market as a whole over other asset classes?
This is the main point really. The government makes taxation rules to create incentives. And it adjusts those rules to incentivise people to do what it wants them to do. Sometimes the government gets this right, and sometimes it gets this wrong, and later makes adjustments. But most policy that has been in place for a longer period of time is there because it generally brings benefits that the government wants.
In Victoria, for example, the recent change in land taxes has resulted in investors contributing to 25% of all real estate sales, as many investors in this state exit the market. Which is part of the reason that property in Victoria hasn’t risen as much as other states in recent times. More supply always does that to a market temporarily.
Of course, the downside of investors leaving the Victorian housing market is that rental availability is getting even lower, in an already very lean rental market, which will continue to push rentals upward as the remaining investors try to account for the extra taxes they’re now paying, and the larger number of renters have to compete for fewer resources.
As mentioned earlier, most investors don’t want to make a loss on property, and the gains to be made by an investor in a small loss or gain from rental income pale in comparison to the gains made in capital growth over time.
Savvy investors with multiple investment properties, buy second hand houses in markets they believe will rise faster than the average. Most of these investors are currently buying properties that are very slightly negatively geared, but will become positively geared within a year or two, making this particular benefit almost negligible. It would be almost zero disincentive if it didn’t exist.
The investors that get a larger benefit over a longer time from negative gearing are mainly higher income earners, who are buying new housing off the plans, as a tax write-off for their high income. By buying new, they maximise their tax write-off by being able to claim maximum depreciation for those properties.
The main reason the government has kept negative gearing on property is that it encourages enough new housing projects and renovation/development projects, that all the taxes they recoup from tradie wages etc are much greater than the taxes they’re conceding to stimulate more work. Outside of the net gain the government makes by allowing a tax concession, there are also the additional benefits of more houses added to the market, for rental or purchase, from which they make even more taxes, and more work created for Australian workers and companies.
In short, for every dollar loss to negative gearing, that dollar grows in value and changes hands enough extra times that the tax gains are greater than the initial loss. Investors aren’t exploiting any accidental tax loophole the government aren’t aware of, they’re actually doing exactly what the government wants them to do by creating that incentive in the first place.
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The only good thing for Victoria is if their policies continue to encourage construction.
Otherwise the economy will eventually shrink.
The biggest builder in the country. Had stated he sells about 3/4s of his homes to owner occupiers.
Negative gearing is predominantly used on existing housing stock. In places workers would like to live.
Funnily enough those workers who would love to buy their own home.
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Agreed. And negative gearing has been around long enough to be a proven stimulation.
I’m less convinced about the more recent changes to land tax. I suspect that may be a short term money grab that results in less market stimulation, and more difficulty for renters. I guess time will show how that move plays out.
Note: Agreed to the first 2 lines, which was all you had written when I started my reply.
Stimulation of what?
Not construction. The government will forgo over 20bn in tax revenue this year.
Meanwhile builders are going bust all over the country.
Because it doesnt help construction.
Cheaper land, labour and materials does.
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So 25% of new homes are added to the rental market by investors? Is that bad?