Updated February 29, When it comes to bubbles, Australian property ticks pretty much all the boxes. If there is a sharp correction in the eastern states it will have a devastating impact on our banks and economy, writes Ian Verrender. The high tide of prosperity will continue. Mellon, US Secretary of the Treasury. They build slowly, generally last longer than anyone imagines, and are often accompanied by regulatory complacency and political inertia.
It's a different story when market bubbles burst; quickly and in spectacular fashion, as a crushing stampede for rapid exits results in enormous casualties. Despite what many economists continue to proclaim, financial market crashes have far reaching and long lasting impacts on the real economy. As we learned nine years ago, asset market meltdowns can be even more devastating. The property market collapses that swept the US, then the UK and Europe rippled through credit markets and ultimately brought global banking and the world economy to its knees.
Valuations that stretch into far reaching galaxies, fuelled by a debt binge that long ago unshackled itself from any kind of relationship with household incomes, all encouraged by monetary authorities and an accommodating tax regime. Could it all blow up in our faces? It's happened elsewhere in the western world in recent years, and it's happening right now in Australian mining towns that saw real estate values skyrocket during the boom.
Is it certain to blow? Nothing ever is certain. But the odds are increasing as the economy faces serious headwinds, not the least of which are slowing global growth, a protracted collapse in commodity prices and a rapidly cooling Chinese economy. Should sharp corrections in Sydney and Melbourne real estate values occur, it would have a devastating impact on our banking system, given its extraordinary exposure to residential property. And that would shake the economy to its core.
A week ago, the Australian Prudential Regulatory Authority, released its latest statistics on home lending. The numbers were nothing short of alarming. In the intervening years, not only has the number of mortgages ballooned, but the average size has grown as the property market has kicked into overdrive.
That doubling in Australian housing debt is remarkable and concerning, not just because of the short time frame and the fact it partly has occurred during a period of the lowest wages growth in history, but because a great slab of it has been struck at record low interest rates.
At some stage during the next two decades, either interest rates will rise or a recession will occur. Under either scenario, you can only imagine the impact of rising defaults on our banking system. Even my old chum Maurice Newman agrees. Last week, in spirited defence of his former boss's economic credentials, he had this to say:.
With Australia's total debt to GDP ratio third only to Japan and the EU, it would seem a ratings downgrade is on the cards. While he's absolutely correct, the fundamental difference between sovereign and private debt appears to have eluded him. Where Japan and the European Union have stratospheric levels of government debt, Australia's problem is private debt. And that debt is all about mortgages. According to Parliamentary research, and a point rammed home by Tony Abbott towards the end of his time as prime minister, Australian government debt pales into insignificance when compared to Japan and Europe.
What is most concerning, is that a large and growing chunk of those mortgages is funded through offshore credit markets. If credit markets tank as they did inour banks once again will be forced to run to Canberra for a taxpayer bail-out, which certainly will impact on our credit rating. For almost a decade, a chorus of international and local bears have predicted a calamitous drop in Australian residential property prices. That it hasn't occurred has given ammunition for those who believe it never will.
But that's a false argument that merely breeds complacency. In andyour diarist was ridiculed by the bears for arguing that a medium term crash was unlikely, and the more credible scenario was a gradual unwinding in property values.
During that period, there was a sustained easing in real estate prices across most capital cities as the eastern states laboured under the weight of a surging currency, courtesy of the resources boom. A year later, and everything changed. The Reserve Bank, mindful that resource project investment was about to collapse - as the construction phase of the boom came to an end - began cutting interest rates.
It was a deliberate attempt to fuel an eastern states construction boom, to help take up the employment slack from the looming collapse in mining construction. As Sydney and Melbourne property values once again began to soar from already ridiculous levels, the central bank stood by and watched, clinging to the mantra that its mandate simply was to maintain full employment and contain inflation.
Throughoutgovernor Glenn Stevens repeatedly brushed aside calls to impose controls to curb housing prices. But last year, in a sudden about face, he described Sydney housing as "crazy" and within months, the banks were forced to restrict investment housing loans. Investors, who accounted for 39 per cent of all new mortgages in June last year, now make up 36 per cent. That measure was combined with a crackdown on the rorts surrounding foreign property purchases, where a flood of money out of China appeared to be pouring into established Australian housing.
Foreign investment rules were not enforced, nor was any real data collected. At the root of the problem, however, is our tax system. Given the family home is exempt from any form of tax, Australians naturally have flocked to real estate as a means of transferring wealth to their children. But the introduction of negative gearing and the discount on capital gains tax, now the subject of intense and angry debate within the Government, has added an almighty accelerant to Australian real estate and created a powerful lobby of vested interests determined to maintain the status quo.
Unwinding those tax incentives is vital. Such a move would direct investment into more productive uses and help curb business costs, including wages. Doing nothing, ignoring the warnings and pretending that it will all somehow work its way out, is a recipe for impending disaster. Ian Verrender is the ABC's business editor and writes a weekly column for The Drum. First posted February 29, As Mr Abbott was one to not merely to support the bubble, he derided Labor for thinking it was a bad thing, we can only conclude that it must be a very positive and good thing for the economy.
In which case the divide is the LNP who want to maintain it and negative gearing because it is such a wonderful thing - and the doddering old farts in Labor who disagree. As I have been in a boom and a bust of the property markets myself, - when I got richer and my sister got poorer - I can only shrug.
I think it is a negative thing myself. But who am I to teach economics to the greatest financial managers the world has ever seen? They must know what is good - after all, under them, the home mortgage repayments will always be lower than Labor. I reckon some common sense policy reform is the way to go.
Let a little steam out of the market before it is too late and we all suffer. I like the push to investment in new housing and I like that there will be less government interference in the market. Ideally I would like to see negative gearing gone and CGT concessions knocked on the head because we cant afford them anymore but that would create a market shock so maybe a gradual wind back over 10 years would be the way to go.
The other option is to let things run as they are and to risk a gigantic pop that will mean pain for everyone, even those who are not greedily rorting the system to get rich on the taxpayer.
This is a test for Turnbull - did he mean what he said about prioritising fairness, or was he he just paying lip service to the concept? It's not fair that the majority who don't own investment property have to pay higher income taxes than necessary so that a group of property speculators can write down their taxable incomes. It's not fair on the young people who don't own any property to be barred from the housing market by the insane prices caused by the negative gearing fueled property speculation bubble.
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The coalition and property investment council claim that changing the NG and CGT arrangements will distort the housing market, and completely fail to recognise that the market, as it now stands with record levels of unaffordability and massive national levels of private debt, is plainly distorted right now.
It is time for action. Vested interests must be called out, with their data manipulation exposed for the lies that they propagate, else all others are left to pay when it goes pear shaped! Without asset markdowns, industry would have been paying more mining tax during the Labor years. Maybe we have all vested our interests in what is an unaffordable - and completely distorted and distorting - system. Perhaps Economies' as we know them are malignant creations and we have to rethink entirely what we want from this 'sector' of our public society.
We need pretty much the same things. Some of them require producing - well let's produce them and distribute them according to needs. Some of them require the steady effort of living properly - friends, family, happiness, joy things and the avoidance of patent stupidities: Leave people free of entirely unnecessary economic constraints to live good lives. We want pretty much the same things. Within limits, we have the potential to produce what we want and to distribute it fairly so that we can spend part of our lifeworks in expressing our 'wants endowed' selves fully - which is to say, to create a diverse amd sparkling humanity.
We understand that in taking what we do to achieve all these things that we must leave nature and the biosphere with plenty to permit them express themselves sparklingly too, and that their needs limit the indulgence we should make of our wants but there is plenty to go round if we are not entirely stupid and selfish. Now what in this needs money or finance as we have known them? The 'economy' can only do so much and it should only do so much. Should what it does be at the whim of those who have money, which is something that only has any value because we 'think' that worth into existence?
Can any economy work well when it can be diverted from the production and distribution of needs and wants, within the limits of nature and the planet, to the production and distribution of what serves the purposes of money and its holders, and with no regard for its social, natural or planetary environments? Who needs a great part of the infrastructure we build? The Mistaken Idea needs the overheads that shape our physical existence. The Mistaken Idea needs our servitude.
The Mistaken Idea needs the sacrifice of our imagination, our better humanity, and of nature and the biosphere. And the Mistaken Idea now threatens to collapse and take us with it. We need and want a vibrant economy - but we have this awful Mistaken Idea instead. We need and want a vibrant society but we have this Thing instead.
They have no good bone fides. We endure them besause we have not had the concert of imagination to think them out of existence. We are all invested in Ways that do not work. If we want a better world we have to think in ways that make that normal. Politics and Economics as we know them are structural elements. SM, the philosophic approach you seem to favor will work for the individual, that is you the reader. The 'Mistaken Idea' you mention is I believe none other than each individuals' Achilles heel, their separative sense of self or ego.
Egos in congregation become what we see today, a bit of a mish mash of wants competing for the high ground at the expense of whoever is not of one's 'in-group'.
The 'mistaken idea' can drop, for the individual, but not be dropped by the individual, if that makes sense. Meanwhile, the collective will continue on its merry way, it needs not my criticism, but what I can do, a creature of habit?
My dear, you have a grossly Mistaken idea of what money is, and what the economy does. The first problem of economics: In the history of mankind, no system has been able to produce as great an amount of wealth, nor as wide a distribution of that wealth, as the free market.
Voluntary exchange, where both parties benefit. That is the key. Coercion, for whatever good intentions there may be, leads to poverty and loss of freedom. Dear tfm, The 'free market' doesn't exist, anywhere, and never has. It's amazing that in an article that explicitly talks about government intervention in the market we have people saying how wonderful this so called 'free' market is! The most successful economy are ones that balance free market ideals with government intervention in the form of regulations.
Regulations are required as evidenced by the GFC. Even the outed 'free trade agreements' are anything but Why else do they have s of thousands of pages of, what is, in essence, government intervention by way of legislation. We certainly need regulation as well as market freedom, providing the mix is right.
It seems to me though, that the balance that has allowed and encouraged important industries to go off shore or be privatised,has been overdone in favour of the free market. Examples are the privatisation of the Commonwealth Bank, and the consequent loss of earnings and economic influence to the Commonwealth. The privatisation of Telstra that has led to loss of income to the Commonwealth and the loss of employment with outsourcing of jobs to Asia.
Is the next privatisation important sections of the work of Medicare?. The loss of the car industry is an enormous blow to the strength of the economy, not least in the area of defence.
The free traders in the coalition want cheap foreign ships to replace our coastal shipping which in wartime becomes our Merchant Marine. A historic dockyard at Williamstown in Victoria will possibly be closed because of a lack of work from the Commonwealth. A privatised electrical industry in Victoria has caused unemployment and hardship in the Latrobe Valley while electricity has dramatically increased in price.
We have had the withdrawal of protection for Australian industry with tariff removal and dubious free trade agreements over a thirty year period. This has left Australia without jobs in manufacturing, and dangerously weakened our defence capability. The point that free trade agreements can allow challenge by multi nationals to our laws, shows that the free traders agree to regulation when it suits them, and that such agreements can lead to a loss of sovereignty.
Young people are not barred from the housing market! Instead of spending their first years in full-time employment saving towards a house, they are taking overseas holidays and getting a skin full every weekend.
Then cry poor about not being able to buy an expensive house in the best suburb. Give me a break! Yes every weekend we witness the abhorrent self destructive behaviour of young people getting a SKINFULL instead of not drinkingnot having fun, not socialising and not complaining as even some of them do about the Nanny State and the Lockout Laws and the demise of the music and pub and night club scene that employs thousands.
What we need is the good and fair to all Conservative Free Market policies. That's right no Nanny State and Opportunistic Winners and Business and Corporate and Investor types be able to continue unabated to increase their wealth at every one else in society but more so to the point of excluding the young so that their Profit taking continues unabated. Now once again I fully concur the young people going out and getting a SKINFULL. Its all the fault of the young as society offers them greater opportunity to own their own home than any previous generations.
So what do the young do? They are counterproductive and get a SKINFULL. If the -young they bring it all on themselves if their parents aren't wealthy well Stiff. There is great example to follow if we wish to decrease the cost of capital cities real estate: Just do what they did.
Then put a 2. Commentators talk like the bubble is Australian wide. From what I've see it isn't. However it is also true that it is NSW and to a lesser extent Victoria that are keeping Australia growing the majority of the country seems to have a flat economy and housing market. It doesn't matter if the 'bubble' is restricted to Sydney and Melbourne. Is those two cities go Say goodbye to the rest of the country. The rest of the country have been suffering for some time, why only start to worry about them now?
Yank, You make a very important point. House prices in a few capital cities are far too high. So, we need to implement targeted solutions that tackle these specific markets, rather than whole-sale tactics against national housing. Tactics such as increasing transport infrastructure, moving headquarters and government out of capital cities.
On another note, we need to build circuit breakers that allow individual bubbles to burst, without allowing it to affect the wider economy.
We also need to accept that Sydney and Melbourne house prices are too high and need to come down. People who own these houses are going to feel pain. Buying a property whether a home or an investment is a financial decision, and all financial decisions carry risk.
Others should not be expected to pay for that risk. Jay, one way to reduce the exponential demand for capital city housing is to substantially reduce our immigration in take. Its the demand driving up house prices in capital cities not the lack of supply, that the real estate industry and politicians who benefit from developer donations keep arguing.
Even lefties like Bob Carr are saying it. Our cities are being destroyed by the record immigration rate. Plus our environment and lifestyle. Look at those benefiting from it and to whom they pay political donations The migration increase is less than 1 percent a year.
Prices are up doubled digits in Sydney and Melbourne. Same goes for London, Vancouver, Auckland and other high-migration cities. These migrants do provide a floor under house prices: This would be small at first, but would shatter the 'house prices always rise' fallacy, cause a pause in purchases, and the frothier parts of the apartment industry start to fall off the cliff, dragging real businesses and overall prices down with them.
People stand back and wait for the price drops to end, which of course only accelerates the falls. So migration is locally important, provides a distorting effect on prices and their removal form the equation would precipitate a significant correction - and perhaps even their presence will not prevent it anyway. Some people seem to think that building new houses will create jobs. Well they're right of course, it will, for about the time it takes to build a new house - then what?
OK if you're a developer and got an endlessly growing, burgeoning, demanding population to supply housing to. Makes about as much sense as starting a civil war so we can create rebuilding jobs from the resulting destruction. Hang on a minute, that happens doesn't it, or do they call that opportunity? The problem is that stimulus packages to encourage people to build earlier than they would otherwise have been able to afford to.
As the stimulus is wound back there will be a gap in demand. Add to this the huge unemployment trend, partially Liberal Govt driven vehicle manufacture and China dumping its stockpiles of our resources, and we have a recession well under way.
I think the worst decision Abbott and Hockey ever made was to cease to support the car industry. The second was to involve us in a costly conflict on the other side of the World. Now we are committing to a huge defence budget and irritating China. I foresee immense trouble ahead for Australia. Absolutely- billions of dollars are spent keeping a few boat people away whilst overpeople are making their way into this country by plane every year.
Over 30 families are moving to Melton each week. If people are complaining about road congestion- look no further than our government. If people are complaining about our housing bubble- look no further than our government. I don't like the idea of too much growth, but there are many country towns which have benefitted from migrant populations.
Some of these towns are dying as the young move away for employment opportunities. The new migrants are prepared to start up small businesses and farms and regenerate country areas. Not necessarily, Adelaide is spreading like a cancer into the once beautiful southern areas What is wrong with living in Geelong?
Yes it may take you 1. There is also a lot of reasonably high paying jobs in these cities. Jane2, satellite cities are a nice idea, but have many drawbacks. Second, if people living in these cities are just those who want to live in the capital but can't afford to, it is likely to lead to enclaves of disadvantage. That is distinct from people living in Geelong or Wollongong because they actually want to. I like your last sentence: Jane, I have had to travel for an hour or more to get to work and that is 10 hours a week or hours a year, in essence you are commuting for I bought a house in a lovely rural village, I work about 30 hours a week and I walk to work in about 10 minutes.
I don't need a huge salary because houses are realistically priced, I see my kids grow, I cook and help out at home. Happy wife and all that. Oh a no crime, the back door is always unlocked and the car is safe with the windows open and neighbours care, my advice don't move to Geelong, go further and enjoy life as it was meant to be. There aren't enough trains to move the volume of people between the cities to do what you are describing, luckily because I was moving against traffic I avoided most of the extremely heavy traffic going into Melbourne from Geelong but it would be a car park on the freeway up to Werribee quite frequently.
I haven't been going to Geelong very often since the Regional Rail Link opened up but there would need to be a significant increase to the number of trains on the line to significantly reduce the inconvenience of living in Geelong and working in Melbourne. Also that's 55 minutes on an express train not stopping until the city loop which is a mite inconvenient to someone wanting to stop at Sunshine for example. If the infrastructure for connecting regional areas to Melbourne existed I'd have no doubt satellite cities would crop up all around Melbourne, I can't speak for Sydney as I've never liver there.
PS Almost forgot to make such a Geelong to Melbourne trip viable for large numbers of people, Geelong itself would needs a better public transport system to get people from home to the train station. People are moving to Sydney and Melbourne for work. They have no choice, as jobs in provincial areas are disappearing. This is a discussion that the nation really must have. Property prices have already crashed in many areas because of this. The Whitlam government was the only one to take decentralisation seriously, Albury-Wodonga one example.
But this all stopped, due to the sheer weight of votes in the big cities. Real action by government, by way of tax incentives, tax holidays, to promote decentralisation is the way to stop the inexorable rise in property prices in Sydney and Melbourne. It's all supply and demand. Stop this and you stop speculators. You are making a lot of sense. As long as jobs can only be found in Sydney and Melbourne, people will go and stay there.
Let's start with government departments, then put a special tax on business that could well operate from a regional centre but insist on expanding in the big cities.
You need to look further than just Australia wide to perceive a true perspective here. Even Perth in WA - that used to keep Australia growing my, how things can change - is still one of the most expensive places globally to buy into, and people still have ongoing mortgages there for when prices where even higher during the boom. So property disposal there is beginning to be problematic. Australia is one of the most expensive nations to live in. A property market fuelled by poorly regulated foreign investment, ticking the same essential criteria as the GFC: Check out the international stats in the bigger picture to see how the bar here is being set far too high now for an affordable standard of living in this country; particularly for future generations who can only look forward to inherited wealth or now increasingly inherited debt to maintain it.
And we are mugs to put up with it, mainly because we only look locally for our comparatives and never see the true dimensions I think it's called 'can't see the wood for the trees' of how we are so naively sucked in to this enormous, vicious cycle of debt as we self delude that this is the price we must pay for 'the good life' by getting now no matter what the price; and paying for the privilege for decades in our 'lucky country'.
So what, you are some noble creature who doesn't weigh up profit when deciding where to put your money?
Mainly with people from Sydney retirees and young people seeking a cheaper house and the builders in town cannot keep up with the demand. People are waking up to the fact that if you want to get ahead in the housing market, go to the country. Smaller cost of housing plus smaller salary makes for a worry free life. House prices started rising in regional Australia at about the same time they started rising in the capital cities late s, after the capital gains tax discount was increased.
Some regional towns rose even more rapidly and unevenly if they got caught in the mining boom, but all regional areas saw price increases. And the only places that prices have noticeably decreased are the mining boom towns. The prices of houses in other regional towns are still at least three times as high as they were before all of this started. Regional towns might have missed out on the very latest insanity in Sydney and Melbourne, but that doesn't mean that they're not part of the bubble.
It is most interesting that almost every word I wrote was a lie. Abbott did not endorse the housing bubble - he just used it as an excuse not to do anything and have a swipe at Labor. LNP has not got a policy where housing bubbles are good things - and Labor is not usually opposed to it. The lie that the LNP are the better financial managers is a lie - which does not imply that they are bad - they are not.
But it also does not imply Labor are either super bad or super good - they also are not. The lie that the LNP will always have lower mortgage payments which proves they are the better financial managers is also a lie. The problem is that in all these many lies - we have finally have had to try to deal with a couple of problems - one is the speculation in the housing market - and another is the mechanism of negative gearing which encourages investment in the housing market, but not in housing supply.
What I was trying to raise was that because of the lies of the past - we are often trapped. They did not have a magic answer that cannot be challenged. Sometimes, only long term analysis can see what the problem is. I often wonder that politicians do not realize that saying "we tried this in the past and it did not work" is a bad thing.
Economically, investment in real estate prevented slums. Without SOME investment, we will end up in slums again. But unrestricted investment in real estate makes it a social failure, which ends up making it an economic failure. Housing prises and rents are the biggest cost in the price of the workers. It is "cost of living. Don't be trapped by the lies or the past.
Learn from our mistakes. Think outside the circle Neither party has a magic wand. Wherever did you study economics? But then 6yrs of Labor govt and yet Labor never implemented any tax reform least of all, negative gearing. Labor was too bust spending Starnge that unemployment also rose in the 6yrs of Labor from4.
Dear CP A word of advise Proverbs 17 28 Even a fool, when he holdeth his peace, is counted wise; and he that shutteth his lips is esteemed as a man of understanding. Claudius the LNP has been in power for quite a while now.
In that time they have have done nothing to fix any of the problems in the economy. The train that is the runaway economy was started by the ALP not the LNP Yes the ALP was at fault for not fixing some of the issues that were apparent back then, but do you think for a moment that the LNP would have assisted with the fix?
I would say getting rid of the Carbon Tax shows the LNP are not great economic managers. Our revenue troubles would have been mitigated if the carbon tax had remained. I gave a piece on lies - and how they can trap us. A Lie is always a false belief about what is real. You are trying to create a belief about reality which is not reality. But people who know it is a lie, and decide they want to believe it anyway - have chosen that they do not want reality, but a delusion, a fantasy world.
But the fantasy world has to conflict with the real - and the person refuses to deal with the real and so they have to "fudge things" to get them to fit, and they do this with more lies. Eventually their fantasy world is built, line upon line, on lie upon lie. And the person refuses to leave it.
I pointed out that they are trapped by lie and their life is a lie. CP is most upset over this - and he is trying to assert that his delusional world is real - and asking me to join him in his fantasy world. Even to try to get me to disprove it. But I have already pointed out that it is a fools choice. You are to tell them that they live in a fantasy world - but if they refuse to listen and cling with all their head and heart to lies, there is nothing in the world which can break them free.
They cannot change, and if you persist, it makes them uncomfortable. They have no choice but to hate you. CO knows all of this. He hates me all the more because I do not like lies and expose them - which is the essence of my post. A lie - and then an EXPOSED lie CP saw red and attacked. What else can he do? Not even HE believes the things he writes. He knows it is a lie, knows I know that he knows it is a lie.
It is just his defence mechanisms coming into play. Don't take him seriously when he talks to me - he doesn't, and I don't. The LNP is now going to howard for economic advice. Considering what he did to the economy in the 70s and 80s as treasurer and then as P. No-one has a magic bullet, but malcom seems to be mired in the inaction of infighting between the non-existent factions. The wasted money given away under the current climate policy could easily be seen as corporate welfare and government subsidies to exporters which could violate various free-trade agreements.
At least the carbon tax was revenue positive and I'm still waiting for my power unit price to drop. Consumers - same as with every other guvvament-imposed charge. And the consumers were compensated. The Libs cancelled an income but didn't repeal the compensation to the consumers no? Lies lies and damned lies - how theatrical!!! Labours spending increased exponentially following Howards ousting.
That is a fact not a lie. Howard left us with a surplus. Labours incompetence left us with a huge deficit aided in no small part by their idiotic and calamitous stimulus payments yet fools on this site blame Howard for the parlous state of our finances. What treasonous disgraceful claptrap. Should Howard have reigned in spending even further as a prelude to the subsequent economic vandalism wrought by Labour??
And low interest rates have driven house prices through the roof making credit easy to obtain. Negative Gearing has been around for decades before housing prices shot through the roof in the early 's. My home has trebled in value in the past 15 years unfortunately my income has not!!
Not all consumers were completely compensated. Everyone else had their tax bill reduced or received additional benefits, it was purely a wealth transfer scheme from business and average to high income earners. I just used less carbon. Amazing how a hip pocked signal focuses the mind. Should have left it in place. Since the purpose of an economy, at least to many people on here, is to maximise revenue for the guvvament, rather than allow people to use their talents to succedd, let's put a tax on breathing - and daylight!
Imagine how much that would raise! If you want to tax the whole of a capital gain as though it was ordinary income, then all of the ownership costs along the way must be treated as the cost of producing that income and hence be deductable.
And so there we go again with inflated expenditure claims and encouraging living on the proceeds of borrowing.
Those people working for a living cannot deduct the cost of getting to and from work or their interest on the money they put into the bank such as it is. Negative gearing allows people to defray their costs not only against their investment but against their other income. This encourages over-expenditure on the investment to improve their capital gain at the expense of the PAYE taxpayers.
Deductability of costs against the cost of the investment itself is not removed with removal of negative gearing, only the ability to write down their other taxable incomes. Coming up with some new ideas, common sense in transitioning policies or grandfather clauses is the only way to objectively deal with housing issues and related tax policies. The difficulty here is in getting conversations going without being shot down by vested interests especially when the politicians and their masters have skin in the game.
There are other options that could be considered such as transitioning out negative gearing or only allowing deductions against rental income or capital gains for investment properties not all income. And in its place allow for mortgage interest deductions on the primary residence for owner occupiers with some form of capital gains tax on the family home in these cases being applied at sale for those that have had this concession.
It would help to alleviate mortgage stress from interest rate fluctuations and might help first home buyers in the market. People will trade up or trade down at some point and it is possible this creates a broader base of tax despite the interest deductions allowed. And in theory could still be applied on inherited family home properties.
Changes to capital gains tax for the length of time a property is held may not be unreasonable and could put a handbrake on mass exodus from investment properties and see more long term rentals in the market.
CGT changes on the family home could be more palatable by changes to or removal of stamp duty. Number of properties held might be a criteria for treatment as well - should holding 80 properties be treated the same as 1 or 2? Perhaps at some point this gets deemed a commercial operation and has different rules. Overall some modelling and numbers on various options would be helpful. People want to believe changes are fair and thought through properly and allow for appropriate financial planning.
It should be noted negative gearing and capital gains tax applies to other asset classes e. In any event, it was the real estate and property developer funded Coalition government who uncoupled the idea of home that we used to have and instead unleashed our inner property speculator.
That is, viewing our sanctum more as a liquid asset.
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Subsequently we became a society that eats its young. As property prices soared the winners were those that could buy up more on more on spec like a string of dominoes creating the expanded landlord class and tenants as an outlier class, typically couples seeking to make a family becoming increasingly desperate about ever owning a home. Local councils are complicit in this process. One looks at the mediocre building quality of the apartments mushrooming in my east coast city here in Oz and it would seem that they have a life of maybe years max and then all that is left is the land value.
More stone, I agree that the standard of new apartments is woeful. But they are only meant to last about 50 years. Then they knock em down and put up even more, even higher. In Brisberg currently there is a huge glut of new apartments and units. And more are approved to oversupply the market for years to come. I believe the same is occurring in Melbourne.
I would never live in a unit and certainly would never by one. As an investment they are a joke. Supply and demand says that there will never be an undersupply of units as they can be built by the thousand readily. What is not being supplied is free standing houses close china stock markets wiki the CBD.
They are being knocked down by the thousand to build units with the approval of the city council. There double bollinger bands mt4 indicator be a collapse in the inner suburban unit market, which will be made worse if the ALP plan is enacted. There will be no collapse of the inner suburban houses as the demand is exponentially growing as our population exponentially grows.
And the supply is diminishing due to the guvamant policies to knock them down to build unit blocks. I've lived in a few of them and they really are terrible quality, but if the Queensland government continues to insist on concentrating everything in the Brisbane then high density housing is needed. Geo, there are pleasent islands in Moreton bay not far from Brisbane where land prices are quite reasonable and the climate is superb and forex trading software .net ferry services are reasonable, this could provide a viable choice for people who want low cost housing.
The housing market is an essential component of the Ponzi scheme called perpetual growth fuelled by an ever-increasing population. There is another elephant in the room regarding apartment building life spans and that is the issue of strata title and group decision making. It is a problem that has worried me for a couple of decades - ever since the boom in inner city development.
At the moment in most cities in Oz that I am aware of it is a requirement that all strata title owners in a multi apartment complex agree to the group sale before the building can be demolished and redeveloped.
So you only need one owner who simply wishes to stay in the original building to stop any sale. I believe there are plans in some areas to change strata title law to allow a substantive majority to decide, but this brings into play all sorts of problems - moral and commercial.
Is it right to force someone from their apartment because the rest of the owners want to sell? If you try and resolve this issue by offering the reluctant owner more money the consequence is going to be lots gmcr stock price premarket people refusing to sell in the hope of forcing up prices. What is this issue going to do to apartment prices in buildings that are nearing their end of life?
Personally I would not touch a strata title property - especially if you are even remotely thinking long term. At the moment all rented properties, new and established, have the ability to be negatively geared but only new constructions can also claim depreciation for 8 years on the cost of construction to the tune of s of dollars. This, plus negative gearing, plus low interest rates have made investments in property so appealing.
As well as the fact the currently there are is nowhere else to put your money. If you are brave. Removing negative gearing from established properties may make it exclusive to the high income earners, who can borrow more and are more likely to get a loan. Either remove it for all or limit it to a percentage of taxable income. Residence too ought to be taxed when inherited.
The talk of a property bubble have been going on so long it is hard to imagine it NOT happening. I can easily see a sluggish market, price wise, but a complete collapse? IO just currency exchange rates sap table know. Yes yes I've read both sides but IK am online trading academy professional stock trader dvds not convinced.
What would bring on such a situation is the increase in interest rates especially with the exchange rate indian rupee uae dirham of debt people are carrying and their pay only growing at inflationary levels.
My advice, don't buy a house unless you are really secure in the job and an increase in interest rates might hurt you. Be careful in other words. It is a complex problem Yank, especially for those trying to buy their first home, because while they should prudently consider the current low interest rates as unusual and allow for increases in planning their loan - in many cases it is only the low interest rates that are allowing new buyers to enter the market.
We all know interest rates will eventually go up and the gamble is being constantly made by mostly younger buyers that it won't happen until their own incomes have increased enough to cope.
But we have record low wages growth too. Prices are where they are, regardless of how inflated many may think them to be and new buyers need current very low interest rates to even contemplate meeting those prices. There are young couples out there with eye-watering mortgages that would be costing at least all of one salary to service. And what singles are doing I do not know, you can't sublet the spare bedroom in a one bed unit.
I have never understood the logic behind expecting to become wealthier and wealthier just by owning something and nothing else. Don't know about the month but if you bother to look it up year it did start in and has been going up ever since. Oh and we are talking about Sydney and to a lesser extent Melbourne and much less Brisbane not Australia wide. The rest of the country has been more stagnate then inflated. Prior to the only suburbs going up in Sydney were the east and the northern suburbs.
The rest went backwards or did nothing for 5 years. Having a house for 5 years and not making a penny on it is NOT funny. Property is not a huge ROI except in exceptional times like the last 4 years. It is well behind stocks and shares and sometimes less than cash rate. BUT it hopefully keeps the rain out. Follow the media, where a disaster will always be blown up and a decent profit is theft and a financial loss another disaster to be blown up.
I can see the headline 5 years hence "What happened to the security of home ownership? Mark, I have been of that opinion too, but it seems if the banks do increase rates they will be left with so many defaults they may well be qatar currency exchange rate in pakistan themselves in the feet.
But on the other side of the coin, with the government cost cutting and attempting to increase taxes, this all could be a sign the government needs money for a big taxpayer funded bank bailout in the near future. Big business and governments have been known to collude. Yep, banks are also too highly geared in resi prop - if they raised the rates too high the tidal wave of defaults would shoot them in the foot. It would be a great auto binary options trader 300 seconds for many if interest rates do go up.
How to win in binary option xposed review robot 1 for what the family home might or might not be worth on the market, many of us couldn't care less, because our home isn't for sale.
That's right Keith, if your house goes up, others probably will too, so if you sell, you will have to pay more for a replacement. So a lot of times, unless downsizing or moving to a stock market performance democrat vs republican area, the gains aren't terrific.
It's just another way for the rich to rob the poor. It is also the easiest way, and the laziest way. Invest your money in exchange rate indian rupee to us dollar history honourable that cost average effect forex produces something.
So what are you invested in Bizbob? Woolworths, Telstra, Com Bank? I have worked with all these companies and apart from Woolworths who USED to be one of the best companies in Australia, Telstra and Comm Bank could not could not organise a Pee up in a Brewery.
That would involve risk. Can't have any of that here, thank you!! Tax payer subsidised speculation only: Seems to get ahead one needs to be ready to milk the systemand willing to fleece their neighbours and their employees. Chubblo Yeah, bring back the good old days when there were thousand Tesltra technicians driving around doing maybe 3 hours of work a day for Telstra, and the rest doing their own work on the side, or hiding. Yes, they were the days of guvvament-owned glory.
Your distaste for the public service is evident and more than likely completely unwarranted too. You also forget that lyrics to make money lloyd banks the government still owned Telstra we wouldn't be buying back all the rotting copper infrastructure at an forex kursy szkolenia price for the Liberal's forex fnb contact number alternative to an actual NBN.
The only investment I have is my home. I've never had enough money left over to invest in anything else. My employer on the other hand is rolling in it. As he should be, he put his house and his kids education on the line. On top of that, they have to work bloody hard at least the small business people I know. If you ain't got em! Be terrible if they had to start off on the same footing as the ordinary "great unwashed" and rely on that basic free education the government supplies, wouldn't it, they would never be likely to survive would they.
Next they will be expected to eat from a plastic spoon. I suppose you accept the idea of a state based, poilitical education raising the masses to a grand socialist future? Of course this is complete with a PC awareness and full education on the advantages and concern for Aboriginals, Gay, lesbian, transgender and the rest of the minority twaddle.
An understanding of our white heritage is way too much to ask apart from invasion day, greed and self interest If only they had a clue about English, maths and science, combined with some philosophy and an understanding about how the economy runs and how to make money, as opposed to how to get a government pension, Australia might have a future.
Forex forward guaranteed settlement far better to control the inevitable slide than to lose that control and have it imposed on the market.
Unfortunately the LNP and Labor as well appear unable to overcome their fear of losing seats, and potentially an election, to agree on policies that are so obviously in the best interest of the economy and the voting public. Self interest always rules in politics. The irony is of course that those so called investors who have made a financial killing by speculating in the housing market at the expense of first home buyers are also ruled by self interest. Money for nothing is such a powerful motivator.
This was a time when there were no hex debts and only the academics went to university. My point is this It has now come to a time when the country is suffering due to people wanting to make money out of other peoples misery. The baby boomers have had free energy and placed the world in a terrible debt and greed fueled mono-culture.
It is now no longer possible to be using peoples shelters as a means of making money. If you need to make money stop rent seeking and invest in something real. No real estate is a term it is not an actual thing.
Lets break the mono-culture and become more educated in why we make money and how we do it. I suggest those negative gearing a not actually creating wealth anyway. What is the actual value of money. Numbers on bits of paper how to get free nx cash for combat arms 2016 these days a computer screen. Money is not wealth. Labor's negative gearing policy is even more malverti enrico trading systems automatici and urgent now and this proves it.
Reducing upward pressure on prices, incentivising new housing and all the jobs and economic benefits that come with it. Yes this is an opportunistic statement but what it proves is good policy is good policy and that is what politicians should be implementing. All the coalition are able to do is promote ideas and policies that are destroying our economy but they fit in with their bs spin.
Tax cuts for the lowest paid will go into buying the essentials and actually stimulate the economy etc. Since when did Abbott create or change rules to negative gearing or to that matter, anything regarding house prices? Abbott is as responsible as Rudd! It seems drum posters have a love how to earn easy money on clash of clans relationship with Abbott.
He was a PM. He made decisions as PM. Every PM has made some decisions I agree with and How much money do game designers make9130729289252514778 suspect anyone with half a brain will agree with some of any PM's decisions if they look into it.
In the mean time, can the ABC please get off its Abbott fetish. Abbott was a PM, a human. Despite what you may think of his diet and dress attire. One would think Abbott wearing budgie smugglers and biting into an onion has made the ABC posters permanently obsessed by him. A quick search tells me that Federal Politicians own an average of 2.
Of course some own none excluding the family home while others own multiples of that 2. Do you detect a conflict of interest at play here. Of course, the housing bubble could burst at any moment, and earn money student india it does it would be Armageddon But Labor's plan to tackle the issue of negative gearing for established dwellings will definitely help deflate the bubble without bursting it thus considerably decreasing the danger of a bust phase.
So, Shorten's plan on negative gearing will maintain the momentum for the building of new dwellings, to respond to the increasing demand, but it will significantly decrease the chances of a crisis by eliminating the incentive to speculate on established dwellings.
It would be good if speculation was removed from the real estate market, linking negative gearing claims to new construction is a wise move. But why stop there? Shouldn't claims for investment property be linked only to the income stream of the investment itself? Any losses could be booked to future capital growth. The whole concept of taxpayers funding semi-permanent loss-making efforts by "investors" makes no sense at all.
I agree that it would be better all together to just rid of negative gearing and the Capital Gains Discount. In terms of housing affordability I don't understand why we allow foreign investors to buy new constructions. This just locks out first home buyers.
I fully agree, Brian, and I can only hope that the current suggestion by Labor is just a first step in the process of getting rid of negative gearing altogether at some point in time in the future. Brian I often hear "speculators" being cursed, and genuine "invetsors" being praised - yet still, I am not clear on what the difference is. Could you enlighten me? Dear Lardo, you've asked the same question in another article about this very same subject.
The question was answered very well at the time. I am always suspicious of people who know the answer to questions but who ask the same question repeatedly anyway. Lardo's question appears to be quite valid, in my humble opinion. If it's been answered before, I didn't see the answer, so would welcome a repeat. I have no problems with questions being asked, Vkc forex chennai tamil nadu, and tend to ask quite a few of them myself.
The question is what is the motive behind the same question being asked repeatedly. Anyhow I suggest you google 'speculation vs investment' or 'what is the difference between speculation and investment'.
There is a mountain of information out there, some of the most interesting dating back to just before and just after the Great Depression for obvious reasons.
I've got one Keith. Speculators know that the actual prices depend on other investor's expectations. Maximising the amount of mortgage debt became the aim. Free from regulation speculative markets believed they could own the future. In fact the edinburg livestock market neoclassical idea revolves around short term profits gained at all odds by the individual and to hell with any consequences as the consequences simply don't apply to the speculator who will be in and out in no time flat.
This is why the logic of falling wages and rising prices eventually crashing does not rate a mention. Binary option robot 1.1 won't claim to fully comprehend, but think I get the drift. An american option pricing excel would have some form of recurrent income and may involve growth in the value of the asset, speculation would be a purchase where the investor's profit comes from the hope of being able to sell the same assert at a later date at a higher price, sufficient to justify the expenses incurred along the way.
CF Zero, that is a suitable definition for this case, but doesn't apply are binary option signals accurate netau general. The dot-com bubble was an example of people speculating on a revenue stream advertisingrather than simply capital gains -- excluding capital gains in shares, which are supposed to reflect the future revenue. I think the railway bubble of the 19th century was also speculating on future revenue.
To my mind, the difference between investment and speculation is the degree of risk involved. Speculation isn't necessarily bad. The problem is when "moral hazard" is involved -- the investor takes the gains when things go well, and someone else like the government or lenders suffer from the losses. Investment is putting money generally borrowed money into a venture that produces and good or service over hopefully a long period of time. It invariably generates jobs and if successful does not by itself fuel inflation.
Speculation is merely buying something in the hope that its price will rise over time and a profit is generated at that time. It invariably involves the creation of very little in the way of jobs. If it is widespread such as in todays housing market it actually fuels inflation. Even the LNP knows this but Shorten got in first and now the LNP has run out of ideas.
People negative gear 20 hoses is bound to create a bubble. The taxpayer would end up with the same amount of losses in total to write off against income, be it salary from year to year or the capital gain when the property is sold. The only difference would be that if the taxpayer is on a lower marginal rate of tax in each of the years in which they make rental losses, but are on the top virtual stock trading game at pse rate in the year they sell the property due to the capital gain pushing them into a higher bracketthen the tax benefit would actually be greater by deferring the losses to be written off against the future profit as the tax rate would be higher at that time.
I heartily agree that we don't need speculation in our economy, but I am not so sure about the second half of the sentence. I don't think that anyone is in earn money student india position to say that we need more houses or that we don't at the moment simply because the critical piece of information is missing. We really need an audit of national housing stock and homelessness before we can say for sure whether british gas plc share price history problem is a shortage of supply or a simple market failure caused by distorting influences like the First Home Buyers Grant, over-generous capital gains concessions and the ability to negative gear expenses incurred through speculation in residential real estate.
This may seem like nit-picking, but stock market hourly commentary is a very important economic and environmental issue. If we already have enough housing stock, it would be stupid and irresponsible to build a whole heap more.
Although Australia has lots of land, not much of it is suitable for agriculture, and much of this is close to the major cities and therefore under presssure from real-estate developers looking for land on which to build "greenfield" estates.
And Australia, with a small population, is always going to struggle to attract sufficient investment in productive activity just to maintain industrial capacity, let alone expand it at the pace required. The last thing we need is a significant portion of this available finance being syphoned off to pay for more empty residential prpoerties.
I am not saying that rabotv strategy for binary options DON'T need more houses - this could be the case.
But I think that it is worthwhile to find out whether or not we need them before encouraging another mad rush of development for no purpose. V, I agree that an audit would be a good idea. I think it's worth noting, however, that one can draw certain conclusions on the housing supply by simply looking at the rental vacancy rates.
The fact that this is at an historical high tells us that there is likely to be a shortage of properties in the areas where people want to live.
One can also look at the trend of children living at home longer and longer and the apparent increase in shared housing. House prices are one aspect that can be looked at, and it is a valid point if one is considering people buying into the typing jobs from home in michigan. But the forex leading lagging indicators aspect is demand from renters and if it is high so will the prices that can be demanded by sellers.
Edward, " I think it's worth noting, however, that one can draw certain conclusions on the housing supply by simply looking at the rental vacancy rates. Rental vacancy rates are a measure of vacant properties that are being offered for rent, not the number of vacant properties that physically exist. Now, in a theoretical setting in which the "free market" behaves as we are told that it does behave, there would be no great disparity between rental vacancies and the number of vacant residential properties.
But we do not live in a laboratory and, as become stock broker nasdaq result, the market behaves very differently to what the vapid theorists tellus. There are all sorts of influences pulling the market one way or another, and should i buy boi shares these is the misapplication of negative gearing concessions to speculative investments in residential real estate.
This has created a situation in which some "investors" find it more lucrative to sit on vacant properties, only letting them for short periods of time to ensure that the property qualifies as a "business investment". Bill Steamshovel's solution to the problem is elegant in its simplicity.
It will allow for a "graceful how to mathematically win the binary options trading of speculation in residential real estate that will progressively take the heat out of the market. But the best part is that it removes the incentive for allowing perfectly good residential real estate sit vacant while our fellow Australians shelter under bridges and in ATM vestibules.
Thankyou v for drilling down a deeper into the important detail in this debate. Rental vacancies in Melbourne were something that I studied over several years. The main source for that was the quarterly report put out by the then Office of Housing. It was vital information for mapping forex master method download availability of housing for lower income and disadvantaged people access housing which was part of my work.
The market is the main driver of this with so little invested in social housing. Recently I read in a newspaper, heavily dependent for its revenue from the real estate industry, that the profile of negatively geared mum and dad property investors were just ordinary salt of the earth working class and they backed this up by listing the main suburbs were most of these negatively geared properties were.
It was deceptive because it did not show where the owners of these neg-geared properties themselves resided. It was obvious that these property speculators had purchased older, cheaper housing stock in rundown areas of the west comparison of online stock brokers closer proximity to the city. A very lucrative move, thankyou taxpayer, particularly if then they can sell the land later for apartment building or develop themselves.
This then comes back to the need for the audit you propose v but if I am not wrong quite a bit of work has been done by Swinburne Uni on this already. Shorten is willing to tinker a little with neg gearing. Well, at least that's something rather than nothing. This will mean that property investments will split in to 3 categories: Property held prior to the change, eligible for NG, will lose eligibility if sold.
New Property, fully eligible for NG, best tax concessions in the property market. Old Property, no longer eligible for NG, least desirable tax breaks.
This will be the the breakup on day one of the suggested change. So what would probably happen is a spike in the purchase of existing property prior to the change and an immediate downturn straight afterwards. I don't consider this to be "progressively take the heat out of the market. I believe that NG and the CGT discount should be removed from the entire property market.
Stock market performance democrat vs republican would prefer an approach that gradually reduces the tax incentives over a reasonable period say 15 to 20 yearsuntil the tax incentive reaches zero. Unfortunately market skewing tax incentives are a bit like drugs to addicts, taking them away causes withdrawal.
It australian stock market crash dates you manage the withdrawal that makes the difference. And the obvious question to ask of any relative term is "compared to what", and the only credible and valid answer to this question in the current context is "compared to how things are at the moment".
And ANY change will cause such a skew. But who cares about "skew" anyway. If we could "skew" the capitalist market in a way that mitigated against, rather than encouraging the stagnation of wealth outside the market, this woul dbe a very good thing. Unfortunately we can't because the capitalist market is flawed on a fundamental level, but it illustrates the points.
And Shorten's solution addresses this fundamental problem by removing several of the incentives for anti-social behaviour that are behind the crisis. People will still be able making profitable calls on binary options signals buy up an dsit on houses that people could be living in, but the taxpayer will no longer be chipping in to cover their expenses.
Personally I am not so sure that the exemption for new housing stock is required of justified, but the logic behind the exemption is plain to see.
Building a new house with the intention of letting it out to long-term tenants CAN be viewed as an investment. But buying an existing house, sitting on it for a couple of woodstock ct pet adoption, and then selling it for a profit creates no wealth, does not add to the national housing stock, and how to trade the trend forex be considered to be "investment" activity.
It is clearly a speculative move and should be treated in the same way as betting on horses or feeding the pokies. It also removes much of the incentive to landlords for creating the artifical scarcity of rental properties that is at the heart of the problem. V, If people are playing the forex binary options case studies of only letting properties out for short periods of time and claiming deductions on the entire interest amount then I expect to hear of a massive crackdown by the ATO.
As I understand it you can only claim a deduction if the property is available for rent. The sort of think you are talking about involves sailing very close to the wind and it would be a very brave person to do it for any length of time. I would have thought that this sort of dodge would be very easy to pick up on. My tax accouintant explained exactly how to go about it and assured me that it is common practice and that he had over clients who were doing just that and, in his words, were "making a motza".
I always thought that "motza" was something that you sprinkled on pizza, but I could be wrong. By having ATO observers present at every negotiation between a landlord and potential tenant?
By reviewing all the "for rent" ads in the newspaper. It is dead easy to create enough evidence that you were attempting to rent the property to easily satisfy the ATO. Now I only know about this scam because my ex tax agent told me and inferred that I was a cloth0-eared git for not burying my nose in the public trough. This also explains why Advantages of binary options trading signals franco review returned what is golden cross and death cross forex filling out my own tax returns.
What you have to remember, edward, is that not everybody out there is as upright and public-spirited as you or me. Believe it or not, some people go into business purely for the sake of the money. Serving the public good does not even come into their considerations. When they hear legal but ethically shady advice from their tax accountant, they are likely to take it. And when you have governments attempting to make a virtue out of this prodoundly anti-social activity, then things get really dangerous and you end up with a massive housing bubble that everybody is too scared to prick.
How do realtors make money on short sales think picking up on a dodge that goes on for a reasonable length of time should be easy. Don't forget that the ATO has access to all sorts of data. As a start I would look at occupancy rates in the area under consideration and if a property is significantly below the average I would target the person for an audit. Secondly I would look at the rental ask.
If it is unrealistic that provides enough evidence to indicate that the "landlord" has no intention of renting the property. Third I would look at the practices of specific tax agents and look for patterns, and if there appears to be a "scheme" to avoid tax then I'd go for them under the anti avoidance provisions of the ITAA. All it takes is swing trading spy options little bit of smarts and a lot of data.
With technology and the amount of data available picking up on this sort of practice should be relatively easy. I think the problem lies in the resourcing of the ATO itself and at the end of the day they can only go after so many people.
Edward, "I think picking up on a dodge that goes on for a reasonable length of time should be easy. The simple fact is that the speculators in question are complying with the letter of the law. The ATO can only pursue those who step outside the law. In other words, the law is wrong because it encourages, aids and abets a very damaging and anti-social behaviour, and I am sure that you will agree that the purpose of the law is NOT to encourage such behaviours, but to prevent ati mosin nagant stock for sale where possible.
What Steamshovel Earn money student india has proposed is a change to the law that will disallow the most anti-social and damaging of speculative behaviours from reaping the benefits of negative gearing, which is a mechanism for encouraging and even rewarding genuine investment, not idle speculation.
And, compared to the rather extreme and ham-fisted "back of the envelope" solution offered up by Turncoat, you would have to concede that Bill's solution is both milder in its effects on the property market, and infinitely more elegant. And that's because he took the time 2 and a half years to get it right. Now Turncoat is asking for time to get his response together, which does prompt the question of what the government has been doing for the past two and a half years.
We know what Turnbull has been doing: But what were Hockey, Robb and Corman doing? Surely they couldn't have spent all that time smoking cigars. Hi "v", Mike Janda addressed this issue in an article here in The Drum last year: The question is how many standing but unoccupied buildings there are philippine stock exchange publicly listed companies also how many dwellings have more adults than the usual 2 or 1 living in them.
If people want to take a gamble and buy or build a house, and they lose, then that is their problem. And oppositely, if they make a buck then good for them. And also, your audit seems to have a base assumption that all property is publicly owned - are you against private ownership? Fair enough Lardo if the free market were really free but while the government is dropping tens of billions into the property market can you really call it free?
So, we, the taxpayer pay tens of billions per annum to create the problem and then we, donchian renko forexindo taxpayer, will again foot the bill when we, the taxpayer, suffer from the private debt being made public yet again because the banks are too big to allow to fail.
The only problem with the ALP policy is that it does not go far enough but that doesn't stop Mal from becoming "Tony in a top hat" [thanks Albo]. Why have legislation to subsidise a bad decision and make it seem like a good one? Just get rid of negative gearing and level the playing field.
Talking about the 'free market' when discussing an industry of speculation propped up by tax payer funded subsidies is kinda nonsense isn't it? What we are how to make club penguin faster about here has nothing to do with any so called 'free market'. Lardo, "Free markets punish bad decisions and reward good ones or sometimes just luck, admittedly.
I'm not going to go into all the ins and outs of why the "free market" is a fantasy. Suffice to say that the father of "free market" economics - Adam Smith - totally rejected the idea in his later works after seeing the operation of capitalist markets with his own eyes.
The simple fact is that what "free markets" do or don't do is entirely irrelevant to a discussion of the housing market in Australia or anywhere else in the corporeal universe because there is absolutely no possibility of a "free market" ever existing. Secrets of high yield currency trading pdf "free market" is a fantasy. If you look at "the market" and how it operates in Australia, it bears no resemblance at all to what Smith was talking about when he coined the phrase.
So, any party deferred stock options canada individual who bases their economic policy on the impossible assumption that the rules of a "free market" somehow apply to our economy should be immediately dismissed as a crank. Economic policy should be tailored to the REAL WORLD ECONOMY, not to some vaccuous theory that was even rejected by its own author.
Rather than simply chanting meaningless slogans with no real understanding of their meaning, perhaps you should think a little about what these slogans are saying and how ridiculous it is when applied to the real world. Lardo, "And also, your audit seems to have a base assumption that all property is publicly owned " What an extraordinary, and entirely unfounded, assumption.
Of course, my mention of an "audit" carries absolutely no information whatsoever about my views on property which I can assured you are far more complex and sophisticated that a simple matter of private vs public.
There is nothing mystical or magical about a privately owned residential property that would make it invisible to an audit. Local and state governments maintain extensive registers of properties, who owns them and what they are being used for, so it would not be a matter of sending people out to count houses.
We already have the data, it is just a matter of assembling and collating it all in a manner that returns useful information regarding housing supply and occupancy levels. I suspect that your problem, Lardo, is that you are so blinded by ideology that you react in a kneejerk manner to anything that you see as being at variance with your articles of faith. Perhaps if you took the time to really understand what people are writing or saying before spewing out your stream of nonsensical cliches, people may take what YOU say a little more seriously.
And what do unequal tax treatments do to "free markets"? Some people in the housing market get tax deductability for their interest while others do not.
CGT discounts give income from buying and selling property tax deductions not available to income from wages and salaries. With the absolute necessity for everyone to have one place to live, ie a house, and not many needing more than one, the "free market" in housing has many features that are not at all similar to the "free market" of most items.
Even the auto market, the other expensive purchase for people in our economy has few does scottrade have binary options with housing, as was pointed out the other day. So the "free market" does not work as you as you would like to pretend it does in the housing market, Lardo. It is unhelpful when the government gives tax incentives that does not help the working of the free market.
The current tax treatment of property encourages investment in rentseeking rather than in investment in desperately needed productive capacity in Swing trading strategies india. How is this ever a good idea? Hi v, they do that as part of the census, but as that only happens every 5 years the current data is quite out of date as the last census was in I would dare say that since the vacancy rates will only have dropped in NSW.
Homelessness was at about 28, per that census, with roughly 5, 'sleeping rough' in NSW there are a range of homelessness categories. It would be fair to say increasing the housing stock wouldn't be a bad thing, but the effect negative gearing availability has on this is negligible as greater drivers are availability of financing and changes in planning laws.
Lardo, Why is it taxpayers' jobs to subsidise private housing one block bac sic from the beach?? Why is it the taxpayers's job to finance private ownership through tax breaks and subsidies? In answer to your question though, the government is there to provide public services and we the taxpayers provide the funding for those services so that we may benefit from them.
I realise that going from the content of your various posts, you have this distorted tea party style ideology where I assume you believe that everything should be privatised, people and companies should be taxed less under less regulation and services should be provided on a user can i hold individual stocks in my roth ira basis.
Except the real world doesn't work that way. When companies are privatised for example their costs go up and their level of service goes down.
And it's absolute rubbish. I also assume you that you believe such public housing a block from the beach should actually be privately owned by an investor who would then receive tax breaks and subsidies from the government. Chubblo Yes, I think that most things ought to be privatised and that there needs to be much more "user-pays" in our society. And what's wrong with people paying less tax, and maybe seeing some brakes on the constant expansion of our parasitic public "servant" sic class. Regarding the block of flats one block back from the beach, I'm just thinking back to when I was young and was paying a market rate rent, and there were dozens around me who were paying public houring rent which is very little.
It always struck me as a little bit of a scam. And if there were more people stopped looking to guvvament to solve every problem in their life, then our society would be much better. Lardo, "Why is it taxpayers' jobs to finance public housing one block bac from the beach" Have you been to New York lately?
It is quite instructive. I went to a few "siver service" restaurants while was there last, and was amazed to be served my meal on disposable crockery and expected to eat my meal with disposable cutlery. I asked the waiter, who explained that rents were so expensive in New York, and wages for "dish-pigs" so abysmally low, that there was nowhere within commuting distance of the restaurant with cheap enough rent for someone on a dish-pigs wage could afford.
I used to live on Sydney's Northern Beaches, where nothing of value is produced. The dominant economic activity on the peninsula is speculation in residential real estate. As a result, the peninsula has a huge and bloated "leisure class" who live primarily off the labour of their tenants. But these people still expect to be served by waiters when they go to a restaurant, or by bar staff when they go to the pub. They still expect their local garage to have qualified mechanics and the shops where they shop to have staff.
It does not matter what the average rent of an area is, ALL areas require a varied socio-economic mix to maintain the strong communities upoin which we all rely for our comfort and security. The toffs in New York are no better off than the bogans in McDonalds - both get their meals served on disposable eating gear - but they still pay through the nose as thought they were still getting silver service.
What is really offensive in your attitude, however, it that cities and communities should be segregated along income and wealth lines. Could the answer be that private corporations have taken all the productivity gains from the past 40 years and wages are in such decline that the taxpayer has had to step in and make up for the failure of the private sector to adequately provide for labour?
What a strange proposal. Who in the hell would conduct such an "audit" and for what purpose. Why not a food production audit or a coffee shop audit? Are you suggesting that if the audit concludes that there are enough housing units probably because a lot stand empty we put restriction on building any more?
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Oh then we have an empty house police to allocate empty houses to people wanting somewhere to live? Supply and demand will always be the driver for housing stock but the major problem is land cost. The cost of construction has not moved much so it is the land component that has skyrocketed.
This is solely due to governments restricting the amount of land approved for housing construction. If much more land was available price pressure on existing approved land would evaporate. It is essential however for the market to operate properly negative gearing must be removed. The only purpose to negative gear is to speculate that prices will rise as a price rise is the only way you will get your money back.
The whole concept of negative gearing is based on speculative price increases which distorts the housing market. Peter, " Who in the hell would conduct such an "audit" and for what purpose. They are very good at that sort of thing. To answer your second question, this is self evident. The purpose of any audit is to find the answer to the question being asked. In this case, the question being asked is whether or not we need to invest in new housing stock, and if we do how many.
The good thing is that the data already exist. It does not have to be collected - just collated, organised and presented in a manner that tells us the answer to our question. Local councils and state governments keep extensive records of property ownership and occupancy, and these provide far more accurate and up-to-date information than Censuses which, as you point out, become obsolete in pretty quick time.
I suppose that the mention of a national audit does tend to invoke images of earnest chaps with clipboards roaming the coutnryside counting houses, but the collection of data is only the first step in an audit, and this has already been done in a number of ways.
In this case the audit would use existing data - data that has been available all the time but not assembled in a form that would supply us with the information we need.
In reality, a national audit of our housing stock would be a simple and inexpensive exercise, but the value of its findings would be incalculable. We could save our valuable agricultural land and redirect frivolous and speculative investment in real estate into productive investment in industrial plant and equipment.
On the other hand, if the audit finds that there is a genuine problem with supply, we can tailor our response to suit the size of the problem rather than the politics.
Your reaction to a perfectly sensible idea reveals a fear of the truth that is characteristic of Tory ranters. Agree, but I would go further than a housing audit.
It would be wise to pause and reflect on how Australia arrived at this situation - why are our house prices so high comparative to the world.
The housing market it largely driven by consumer 'perceptions' of 'value' - and 'wages' being adequate to stump up the cash.
The long-term growth of the Aussie economy has supported the housing market extravaganza - not the other way around. Now it seems Australia has become reliant on the housing market to prop up the economy - which spells BIG trouble. Perhaps our private property is all we have left to sell after our mining boom? Building new houses could be supported by Australia's increasing population - one silver lining.
Construction without demand in the wrong locations would be folly. Agree to a 10 year plan to stagnate housing prices.
This would force house prices to reflect the Nation's economic equilibrium, rather than being falsely propped up by foreigners and selling our soul in the process. Surely it's Australian's desperate efforts to compete with foreign investors that has caused these insane prices? But I think that it is important to concentrate first on basics.
How many people are there who require a roof over their head? How many houses are there in Australia? Do these two numbers match? If not, are we short of houses, or are we short of people to live in them?
There is no doubt that, from teh point of view of people suffering from housing stress of various kinds that there is a shortage of housing. And there is no doubt that starving Irish peasants during the Great Famine would have told you that they were experiencing a shortage of food. But, throughout the Great Famine, Ireland continued to export wheat and had several bumper crops that set new records for exports to Europe and Britain.
And this was not some sort of historical curiosity - such apparent anomalies crop up through the history of capitalism. Most of the countries in Africa and Asia where malnutrition and starvation are rampant, export large quantities of food. What we are talking about is "market failure". The market has one job and one job only: If this is not happening, the market has failed. The questions you ask need to be answered, you are right.
But answering these questions alone is not going to put one person's head under a roof. The problem at the moment is that there are lots of people who need housing who, for one reason or another, are unable to secure it. Finding out whether the problem is a genuine shortfall in housing stock or just another market failure is essential to solving this problem because the optimal responses to the two different possible causes are very different.
Agree Alpo, It's one of the most obvious policy changes needed, hopefully both parties adopt similar thoughts although Labor's policy is currently clearly superior. Getting rid of negative gearing doesn't really do anything to decrease the chance of a crisis Alpo, you're getting caught up in party rhetoric again.
If you actually understood negative gearing, you'd understand that the only thing that makes it a viable investment strategy is the CGT discount anyway.
The crisis will come when the existing mortgage holders who have interest only loans realise the value of their equity is retreating. They will find refinancing difficult and selling more difficult and that will be where it starts. Its the interest only loans that are the real danger now that lo-docs don't really exist and they have been on the massive increase in the last 4 years.
Like negative gearing, interest only loans are only a viable tool if CGT discount exists - there's no point in doing either if you don't see yourself making a capital gain to offset your outflows. When the capital gains plateau, be afraid. It's hard to see a way back from here, one spark is going to set the whole thing off, as once the interest only loans dry up, residential property developers will start falling over and there you have it, contagion. For the same reason they aren't drafting criminal codes to outlaw the boogeyman hiding in people's closets Jean Oliver.
While it might appease a nation of 3 year olds, you don't just create policy to combat some people believing in fallacies. Why that's an easy one Jean.
They are against it because, guess who has invested in residential property? That's right almost every politician in Canberra has and if the rules change they will have to pay tax on their massive salaries.
That's right almost every politician in Canberra has and if the rules change they will have to pay tax on their massive salaries" Perhaps that's why the Labor plan wants to grandfather all existing arrangements so that the politicians with property investments don't lose the benefit of their current tax strategies. Who gains most from negative gearing? Those on low wages? Those on high wages who want more than they earn?
Now, let me think! Those on high wages who want more than they earn, and support the LNP? Such an uneducated response from Ron. Probably the reason he is against negative gearing. Fact is negative gearing and CGT discount is the only reason people invest in property.
There would not be high turnover of property or houses available for rent in the best suburbs if you remove those incentives. Those people currently against negative gearing are likely to be renters or low socio-economic individuals and guess where they will end up living A long way from major capital cities if NG and CGT are removed!
I invest in residential rental property in CBDs and have a few rules. Never pay too much. Never borrow too much. Never negatively gear to lose money to lower tax. Why lose money to save a few tax dollars. It does not make sense. You are better off making money and paying tax and be damned that some punk gets some of it for free because you are free. Of course you might be right about people choosing to lose money to save a little tax.
People are entirely illogical a lot of the time. The only ones that will lose out will be the property investors, who out of greed bid a higher price for the property they own than an actual home owner could afford.
Actual home owners it wont effect adversely, sure they will still have to pay off their homes based on the price they agreed to pay for it, they can still sell at a loss at any time and buy another cheaply, even though the original debt they owe the bank will be carried forward, but that was the commitment they made to own their own home. It is the ones with second third forth properties and so one that will be bitten because they weren't bidding just to put a roof over their heads, they were bidding to enter into a sleazy scam.
They did so as in investment, they are therefore in business, and any failed business always has the option of bankruptcy, in which case the court will usually let them keep their principle place of residence their car and their personal effects.
I agree that a massive housing price drop should only affect those that have taken out speculative interest only loans from an 'asset' point of view, however, I also think that a drop in the housing market will also create a dent in jobs, which could very well affect those that are trying to pay off a loan should they lose their sources of income.
No sense building houses and leaving them empty like they have done in China. If profit can't be made by simply buying and on-selling property then it will only be profitable to build new homes for the owner occupier market and with property being of lower value building homes for the rental market. So the building sector will still do fine, in fact with lower land prices, employment in the building sector and building material sector will probably boom.
Now there are some real sustainable investment possibilities. Tech Getting rid of the NG will just mean that more owner occupiers will be buying the properties instead of speculators, and with lower property values landlords will not need to be subsidised, as the rents they collect will cover their costs.
How much more do you think people can pay before it's completely unaffordable?? Even if Labor pinch the bubble by addressing negative gearing there's a bigger bubble around the corner that of an aged population. They'll all be wanting the ground floor with no stairs in those apartments. They'll be wanting smaller houses with less maintenance.
They'll be wanting them set up with disability aids built in. The planning for the future is so bad on a government level I despair my own future.
Whether inner city investors like it or not their properties are not an investment of the future. Those innercity houses on stumps or apartments with poorly maintained elevators sat often idle because owners can't manage the stairs are not going to be a premium seller to aged buyers in the same position.
Then there's an even bigger.
Hi hoolibob, I don't want to excuse our current state of affairs, but although I agree that urban planning for an ageing population is still a long way from being spic and span, I know other OECD countries that are in a far worse condition than us. The current trend towards making our cities more liveable and more socially cohesive is a step in the right direction. Elderly people can live a pretty decent life if they enjoy the support of a cooperative community.
As for other issues that require more money public services, health, emergency assistance with food and bills, home care, etc. I wouldn't necessarily panic, let alone ask our elder workers to retire at increasingly older ages to pay for the bills. We simply need to have a smarter form of taxation and of investment of tax money to support our elderly Australians It is the whole of the first world fallen into the trap Alpo. I also don't see the believers waking up to the consequences until a terrible price has been paid.
I hope I'm wrong. This is why universal access building standards should become standard. Doorways and hallways with a certain minimum width. Struts built into the walls of the bathrooms so rails can be added without taking down the wall. They are fairly simple things that make ageing easier. Also what generally happens is that older people downsize and younger families move into the larger homes.
Young adults living in apartments and smaller places then they have kids and want to live somewhere larger. It is a no brainer that the combination of the negative gearing incentive and the discount on wealth generated by investment as compared to that generated by personal effort would distort the market drastically.
It does not really require Einsteinian insight to realise it would lead to severely over-priced real estate. Why a supposedly "free enterprise" party would support such gross government interference in the free play of the market seems unanswerable. Except of course that as the agricultural sector has known for decades, the LNP is not really "free enterprise". It has always accepted the premise that government must help some people get rich. It is just that it thinks people who obtain their wealth by investing are more deserving that those who obtain their wealth by working.
Freeing the investment class from taxation is far more important than a free market or tax equality. We are reaching the point where real estate commands prices that deny reality: In fact, the amount that they can afford to pay to rent them is not enough to pay the interest bills for the investment owners. The only things that keeps the real estate market going is the tax benefits obtained by converting income into deferred capital gains, the tax system that rewards capital gains in preference to income, and probably the influx of money from overseas investors, much of which now appears to be of questionable origin.
Like a cyclist, it requires forward momentum to avoid a crash. But, like the cyclist, it cannot keep moving forever. At some time, the self supporting house of cards will collapse. I suspect that when it does, it will be the taxpayers of Australia who end up paying the price, not those who have made millions through speculation nor those who have made even more by providing the framework of the current system: While I agree with Labor's start, my main problem is that it does not go far enough.
There is no real justification in a system the rewards people for investing in an asset that will never return the income that it costs to acquire and maintain it. That is not a business investment, it is pure speculation on capital gains. Though perhaps my main concern is that no-one has given any no thought to dealing with the aftermath of knocking down the whole edifice.
When and I really hope it is when the whole Ponzi real estate scheme is ended, what plans have been made to control the explosion that will accompany the end?
The speculators will try to move their funds quickly: I did see the clock go backwards for a few seconds at about 9: The wise speculators will already have an escape plan in place. What will happen is that the taxpayer will have to prop up the banks for a few years and our current budget deficit will be a fond memory, we will be Greece.
I hate to break the love in but I blame Howard and subsequent weak governments who jump at the first hint of a scare campaign. But Labor's plan to tackle the issue of negative gearing for established dwellings will definitely help deflate the bubble without bursting it thus considerably decreasing the danger of a bust phase of else people could buy existing property, call in the tradies to gut the place, and then rebuild it so its 'new', and then flip the new property to investors who can now negative gear it.
Not every house sold will get major work carried out on it as we don't have enough qualified tradiesbut the sell price for the new property will exceed the original already high sell price. IMO, the major point of labor's policy was to leave existing property alone, and its a great way to support the unions whose member will be turning old homes into new. A stretch at best Phil.
How many local tradies do you reckon belong to trades unions? If you are talking major mega construction then fair enough but people doing renos on houses are small business people. Easy enough to legislate in the tax law that new means new not renovated. It would need to be a knock down rebuild to be eligible. If people do it isn't necessarily bad. Builders get work and renters get a more modern, energy efficient house.
Why would it deflate the bubble? Those with investment properties will hold onto them as there is no ZERO incentive to sell them. These are in established areas where everyone wants to live. Lack of property on the market will mean that any property that does come on the market will become even more expensive supply and demand - lack of supply but increased demand.
Have you considered what would happen if the investor had to sell but could not? In short bank will end up with house and sell said house for much less than money owed on it. I This happens many times over it equals banks unable to pay their bills and they themselves become bankrupt This equals disaster for everybody for eerbody who uses the banks services. Bury your money now.
You need speculation else developers have no incentive to develop.
The forming of a theory or conjecture without firm evidence You speculate at your own peril, Lucy, but let's put in place a system where if you get it wrong it is you and only you who pays the costs, not me! Sorry Alpo but I and every investor does "speculate" at own own peril. It is OUR money we run the risk of losing if things go pear shaped. It is us who will go bankrupt if things go wrong.
However property investors have chosen to "speculate" on something very low risk and stands a reasonable chance of return. Even if property prices dive, there is still a building there that we own and can do things with. If you believe investors are costing you anything then you should be protesting against the tradie claiming tools, the restaurant employee claiming laundry and every other tax deduction out there as that is all NG is, a tax deduction.
As someone with a couple of NG properties this would represent something equivalent to 20 years of claiming a loss. Most NG investors are paying down the principal which means this is impossible to achieve. If the Labors proposed changes go through, the tax man will be even more ahead. In summary, the investor is paying more to the tax payer than they will ever get out as a tax deduction.
The investor pays you, not costs you. Why on earth would there be no gain, Lucy? You do realise that many proper investors have positively geared properties and that people were investing in property well before NG or the CGT came into effect, don't you? Or is this a tacit admission that some 'investors' actually speculators will only invest in property if subsidised by the tax payer confirming the fact that our housing market has been skewed by bad policy decisions??
Spacey, my response was to the quote. If the country doesnt need speculators, who will build the houses and apartments? Is everyone going to build their own house not going through a developer? Are they going to put in their own roads and drains etc as these are currently done by a developer, a developer who has bought a large lot of land on the edge of the city in the hope of selling it off for a lot more no guarantee there as the place could be unpopular and very hard to sell so that they make a loss by the time the infractructure is in place - happens very regularly.
Shorten and Labor certainly have the right idea with limiting negative gearing, though neither the greedy or the stupid are likely to support it. We have the chance and to ALP's credit to massage gently the bubble, whilst increasing new housing stock, kick starting new developments and hopefully easing pressure on young first home buyers. We should think of them always as a priority over those 5 home investors squeezing tax payers money in concessions. Meanwhile the waffler was playing cricket on the weekend and eating greek cakes, tackling the big issues!!
The growth has been in Sydney and Melbourne with a little in Brisbane. In fact if you look at prices outside the major population centres prices have been more flat then bubble. So the question should be what happens when Sydney's and Melbourne's market go bust? I don't think they will. It looks to me more like they will behave more like what happen in the late 's and early 90's, they will drop a bit and then remain flat for a number of years.
Too much talk of panic. What happens in Sydney will not translate across Australia. I wouldn't take this issue lightly and just rest on the assumption that a crash is unlikely. I prefer politicians who put in place policies to avoid the worst yet possible scenario, even if in the privacy of their homes they may "pray" for the best. The present NSW government only has eyes for Sydney and every time they splash yet more money in areas those areas prices boom.
Living outside Sydney I could care less if they went bust my area doesn't depend on Sydney money. Alpo, Let's hope the policy has been well thought out or we may end up with the law of unintended consequences, as Terry McCrann pointed out in the paper. For a developer to build a new house they are obviously intending to sell it at a profit. However, of course on selling it, it will no longer be a new house and so the new buyer will not be able to negatively gear it.
Net result may well be a reduction in investment in new housing which of course will have an impact on construction. In all these comments we continue to make the same mistake, whatever is done won't upset the status quo, which of course can't be guaranteed.
Beware extrapolating the present well into the future. Therefore the new investor has an additional incentive to invest in a brand new house. So the net result will be an increase in the investment in new houses, thus leading to the building of new houses. This initiative has been proposed for the exact purpose of upsetting the status quo, because the status quo is pretty bad. Fear not, RoxyR, the future will be in the hands of Progressives, we better leave Conservatives with the task of contemplating the past.
The reason we need more accommodation is because the government has a policy of increasing population at a rapid rate.
In addition, we are bribed thousands of dollars to breed faster. These policies are optional. They are not universally acknowledged as "great ideas".
In my humble opinion, they are not. CSIRO long ago told us that Australia entered the point of environmental deficit at a population of around 12 million. These things are not only possible. Or, perhaps I'm totally incorrect. Perhaps perpetual growth is actually sustainable. Only time will tell. House and land packages are now more than 3 times what they were in This was never sustainable. There has never been pressure applied by the media for local and state governments to explain the inadequate level of land development that fueled much of this rise.
There has been a shortage of rental properties over this 15 year period, not an excess. When this bubble bursts there will be a shock across the whole economy. But where the burst will likely be felt first is going to be in mining communities, especially in the west. In fact the exodus from the west to the east has already started. So keep an idea of what happens in Kalgoorlie, Broome, Mt Isa and other notable mining communities. In areas targeted by speculators who build their business on negative gearing those who want to buy their first home and I am referring to established dwellings have next to no chance!
Prices at auction can go to the roof, because investors have the capital to pay more and they are playing on the trend of raising prices for real estate. It's a runaway vicious circle that must be addressed and slowed down.
Investors accumulate many properties, thus leaving others out of house ownership. Yes, it is a lie Alpo. Negative gearing is not the problem - only the people who don't understand what it is think it is.
Getting a tax deduction on some losses is not the same as getting a bunch of gains tax free when you sell. I've worked as an accountant for many years and no one invests primarily due to availability of negative gearing, that is an utter fallacy perpetuated by media types and people like you who are loud but don't actually know anything about investment theory. Neither the ALP nor the Libs put adequate price controls in place around the housing market when it was a clear a bubble existed, despite the lessons learned in the GFC.
As the RBA's mandate is to manage inflation, one government should have realised that fiscal suppression was needed - the best form of which would be dialing back the CGT discount. Of course Labor are trotting out NG a solution - they realise it is the best way to suggest doing something while actually doing nothing Despite this, there was always a rule of thumb I used when evaluating business opportunities: Decisions made primarily or even largely for tax benefits were always, to my mind, dubious.
There are always options for using scarce resources that provide better outcomes that do not rely on what could be a transient tax benefit. And your basic premise is not quite correct. Those investing in negative gearing are not seeking to get deductions on losses: Which is course the conversion of income that they do not need at the moment but is subject to their highest rate of tax liability into a capital gain that will only be taxed at a far lower rate at a distant time of the investor's choosing.
Often at a time when they have no other income, or an income that is a fraction of their current income. No real loss is intended: All legal and above board. That is a very attractive proposition. Easy for some to sell, easy for others to buy. My basic premise is absolutely correct - the only thing that makes negative gearing viable is the fact that you get a return on sale that outweighs the amount you lost on your property, less the negative gearing tax return, which is what you pretty much surmise in your third last and second last paragraphs.
While you make a reasonable point about commuting losses, I'd remind you that property is actually a traditionally low growth industry most people can only remember the last 10 years. This makes a 'commuting losses' strategy relatively high risk because you've got to make gains later to offset your cumulative losses.
There's no point in a NG strategy if the market is going to dip and then plateau for 10 years. Read Tabanus reply again please. I believe the government has a revenue problem as well as an expenditure problem, but that's a different story.
The deferral of tax is a significant part of the revenue problem, hence the hand wringing about schemes that allow such deferments ie negative gearing and superannuation. This causes governments to look elsewhere for revenue, and unfortunately the can is always kicked down the hill not up it.
Basically, panicking about an aging population led to bad policy that sees huge immigration limiting the aging of the population but weak taxation legislation aimed at avoiding paying pensions being rorted for profit. Matthew, I get that you can commute taxable income from one year to another where you have lower income using NG. What you don't get is: NG is not why people invest in property - it is an added advantage for a small amount of people that would have invested in property anyway.
You still don't get it If you own relatively more of those lower value assets you are still significantly better off than those who hold less or none of those assets.
Commuting as you put it your gains on that asset therefore still ends up being beneficial, indeed purely by minimizing your tax costs over your lifetime. Anyone who invested in managed forestry schemes was really only attempting to avoid tax, as well as attempting to gain leverage from the investment based on legislation only, without any other really solid investment principle.
I am not saying that negative gearing is pure evil, but I am saying that it distorts the market towards those with disposable income and also increases prices.
Those people who would have invested anyway, would have done so on a more level playing field and at a lower price. Thanks Matthew, I think you and I are essentially saying the same thing, although we differ in our opinions of how much effect NG has on the market. I don't think we need to legislate against negative gearing, what we should be looking at is reducing the CGT discount. Of course it depends what you mean by dubious. If you mean poor investments unlikely to make money, well the opposite has been shown to be true.
Your and my taxes support this scam and meanwhile young people have no hope of entering the market because of these scammers. Seems to me we need to think about future generations a little more in spirit and deeds. The real estate trade an lobby group working hard to keep this stuff alive and active - great commissions to be earned at taxpayers expense.
Mick, if they are not being rented they can not be negatively geared. They need to be earning to be permitted a deduction. I think most are talking about the combination of NG and CGT discounts.
They have a wonderful positive feed back on one another helping create the perfect low risk until now? I wouldn't think many posting here would think it is NG alone, you don't make the profit till you sell and collect the CG. And it is wonderful that the tax is discounted. Unless you can't get in the gravy train yourself. Most people rage against NG as a separate thing to CGT discounting and my point on here is always that if you fix CGT discounting, you don't need to do anything to NG as it will automatically adjust as a result of the reduced capital gains from property.
If you reduce CGT discounting, it will effectively reduce negative gearing discounts as well without you needing to update specifically against NG. I've sold negative gearing. That was my job for over 12 months. I may not understand the fine print but I understood my customers.
All of them being high wage earners mining, public service, Uni teachers, etc. All of them interested for just one thing TAX minimisation. Negative gearing costs this country billions and if you haven't noticed, due to living in yor own personal Ivory tower. Negative gearing is a failed government initiative ad should be overhauled until it does what it is intended to do.
Negative gearing is one of the problems along with superannuation tax dodges. It needs fixing now. Agree Alpo and the speculators don't really have the capital on hand but they have a real estate portfolio, based on borrowing, that allows them to borrow more in an ever growing cycle of debt based on government hand outs.
It is unsustainable and when it all goes bad the properties will be worth much less, the speculators will declare bankruptcy and the banks will be left with huge losses. Who will have to bail out the banks to save the economy?
The taxpayer who have already subsidised the who ponzi scheme. Huge private debt will become a public liability, again. If we are to end up like Greece this is where we are most at risk, when private debt becomes public. The answer to that is simple: DO NOT bail the banks out with public finance. Let them fail, protect ordinary people at the same time, then prosecute for corporate malfeasance.
Iceland did it, and we can do it. Yes, there would be short-term pain, but long-term Australia would be better off. Alpo Where does it say in the constitution that everybody has a "right" to own a home? But if you are going to do this in one area of investment, you should in fairness do it in all. And it should be possible to claim losses against future income from the same investment. Interesting point you raise old fella. Obviously there is no "right" for anyone to own a home, nor even to have a roof overhead.
Those who wish to own a home have the task ahead of them. Prices now days would make this task very difficult indeed, but some country towns still have relatively inexpensive land. He pointed out that people had lived quite happily without housing in this country for many thousands of years.
If housing had been a right, someone would surely have offered one to my Dad not that he would have accepted. That said, there's no doubt that governments are under considerable pressure to ensure that housing is available to all, in one form or another. Of course governments won't succeed in this, because they also have a policy of rapid, perpetual population growth. The 2 policies don't match. I have no issue with people acquiring many homes, nor that they borrow large sums to finance the purchases.
I do, however, have a problem with the fact that other Australians are paying for the privilege. One of the drivers of this phenomenon is the fact that tax breaks for big and small business are legend.