Reducing/removing negative gearing disincentivizes owning rental properties. This will apply a downward pressure on property prices as people who cannot afford to own investment properties at a loss will sell them/not buy them as much. In turn, this will make owning a property more affordable, which will increasing demand at the lower prices, converting renters to owners, decreasing the number of renters (and applying a downward pressure on rent). However, this will not decrease build cost of new properties, which leads markets upwards over time with inflation. The cost of owning units in this current market are closer to the costs of rent (at which point anyone should logically buy instead of rent) than the cost of owning houses, therefore, we would see a market correction away from investment ownership to owner occupiers mostly in freehold houses. This would reduce the housing burden on the economy significantly for owner occupiers and renters while still offering ample investment opportunities in units (which also have higher depreciation ratios as a percentage of purchase cost). Remember that when cash rates are 4.35% and the bank charges a 2% margin, your $1000pm payment is $825 interest ($565 of which goes to RBA via the market, which takes its costs of running out and passes the rest onto the govt as income). Think of it as 56.5% of your mortgage being tax right now. Basically, it is better for everyone (even investors) if prices go down (making us all pay less tax directly or indirectly). The issue is that no one wants to be left holding the bag when the correction occurs.
Negative gearing was introduced to increase the number of rentable properties but that didn't happen because people bought inner city properties and negatively geared them. That does not increase the number of rentable properties. The reason why negative gearing was allowed on existing properties was because newly constructed properties require work and risk and the people making the rules did not want the extra work and risk involved in building a new property. The people making the rules were public servants. You have to understand that a business can negatively gear because there is work and risk and you often have to build new industry. Public servants don't want that. They preferred to rape young people's lives by taking the properties they would buy to start their lives and rent the properties to them. This is the main reason we see a very high level of apathy among young Australias and an incrediblely low birth rate. I will add that Australia public servants are now the highest paid as a percentage of GDP to any country in the world. This was done in the past 20 years during this period when our lives were dictated to buy them more so than any other period in history. To correct what has been done you have to drop negative gearing on existing properties younger than ten years and make it even more attractive to negatively gear newly built properties. I guess there would need to be a grandfather clues as well. Please I am not complaining. I am 65 and watched all this in my life time. I am highly educated and a self made multi millionaire. But the reality is the vast majority of Australians are not lucky like me. They are victims.
We always hear of the government finding new ways to tax and punish us. But never hear of ways to reduce costs. Where are the grand visions to tackle this supply problem, where are the city, town and infrastructure planning to accommodate everyone?
@srinivasdumpala637 of course it helped, when the cost of holding goes down, more ppl will likely to invest. If the cost goes up, it'll get passed to rent and less ppl r incentivised to invest
@@g.c955 this is all wrong, why these stupid people altering markets? Should let it run natural, Negative gearing, cgt discount and lowering interest rates were all wrong steps, created artificial demand and raised prices, Yeah it helped rich people to grab housing Market from common people
If look at what happened in 1985 when it was removed by the Hawke gov there were immediate negative impacts on supply and this has been repeated more recently in New Zealand.
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Reducing/removing negative gearing disincentivizes owning rental properties. This will apply a downward pressure on property prices as people who cannot afford to own investment properties at a loss will sell them/not buy them as much. In turn, this will make owning a property more affordable, which will increasing demand at the lower prices, converting renters to owners, decreasing the number of renters (and applying a downward pressure on rent). However, this will not decrease build cost of new properties, which leads markets upwards over time with inflation. The cost of owning units in this current market are closer to the costs of rent (at which point anyone should logically buy instead of rent) than the cost of owning houses, therefore, we would see a market correction away from investment ownership to owner occupiers mostly in freehold houses. This would reduce the housing burden on the economy significantly for owner occupiers and renters while still offering ample investment opportunities in units (which also have higher depreciation ratios as a percentage of purchase cost). Remember that when cash rates are 4.35% and the bank charges a 2% margin, your $1000pm payment is $825 interest ($565 of which goes to RBA via the market, which takes its costs of running out and passes the rest onto the govt as income). Think of it as 56.5% of your mortgage being tax right now. Basically, it is better for everyone (even investors) if prices go down (making us all pay less tax directly or indirectly). The issue is that no one wants to be left holding the bag when the correction occurs.
Thanks for your thoughts
Negative gearing was introduced to increase the number of rentable properties but that didn't happen because people bought inner city properties and negatively geared them. That does not increase the number of rentable properties.
The reason why negative gearing was allowed on existing properties was because newly constructed properties require work and risk and the people making the rules did not want the extra work and risk involved in building a new property. The people making the rules were public servants.
You have to understand that a business can negatively gear because there is work and risk and you often have to build new industry. Public servants don't want that. They preferred to rape young people's lives by taking the properties they would buy to start their lives and rent the properties to them.
This is the main reason we see a very high level of apathy among young Australias and an incrediblely low birth rate.
I will add that Australia public servants are now the highest paid as a percentage of GDP to any country in the world. This was done in the past 20 years during this period when our lives were dictated to buy them more so than any other period in history.
To correct what has been done you have to drop negative gearing on existing properties younger than ten years and make it even more attractive to negatively gear newly built properties.
I guess there would need to be a grandfather clues as well.
Please I am not complaining. I am 65 and watched all this in my life time. I am highly educated and a self made multi millionaire. But the reality is the vast majority of Australians are not lucky like me. They are victims.
Thank you for taking the time to comment here.
We always hear of the government finding new ways to tax and punish us. But never hear of ways to reduce costs. Where are the grand visions to tackle this supply problem, where are the city, town and infrastructure planning to accommodate everyone?
If the government was a company - all the directors would be in jail years ago.
Of course they won't go after multi national companies for company tax.
You think they should?
The 5.7 Billion a year (current level) that the govt are losing is certainly incentive for them to seriously contemplate the idea.
Its a decent chunk of cash!
Good 👍
Thank you! Cheers!
Negative gearing reforms will drive up rent by 20% !!! Leave Negative gearing alone Labour Government, it’s not a win win situation
Delusional twit. Labour is the UK government dummy.
It’s an absolute tax rort and you know it.
You think them renters would rather rent than own a house??
They can try. Pretty sure the banks would seize their assets before they can find tenants.
Yeah but $5,700,000,000 more tax revenue.
demand goes up, supply needs to go up as well. It'll be crazy for them to make moves to reduce supply even further
But giving negative gearing and cgt discount didn't up supply right? How would it reduce?
@srinivasdumpala637 of course it helped, when the cost of holding goes down, more ppl will likely to invest. If the cost goes up, it'll get passed to rent and less ppl r incentivised to invest
@@g.c955 this is all wrong, why these stupid people altering markets? Should let it run natural,
Negative gearing, cgt discount and lowering interest rates were all wrong steps, created artificial demand and raised prices,
Yeah it helped rich people to grab housing Market from common people
It would seem that way
If look at what happened in 1985 when it was removed by the Hawke gov there were immediate negative impacts on supply and this has been repeated more recently in New Zealand.
Old news, its not gona happen and thank god common sence prevailed
Im sure it will be new news again before the next election is done