Negative gearing changes could 'tip Australia into recession' (Part 3) | 7.30
HTML-код
- Опубликовано: 11 дек 2018
- The Labor party has promised to remove negative gearing tax breaks for new investors who want to buy existing properties. But with property prices already falling in Melbourne and Sydney, there is heated debate over what those changes might have on the property market.
For Part 1, click here: • What is the future of ...
For Part 2, click here: • Credit crackdown putti...
Read more here: www.abc.net.au/news/2018-12-1...
For more from ABC News, click here: www.abc.net.au/news/
Subscribe to us on RUclips: ab.co/1svxLVE
You can also like us on Facebook: / abcnews.au
Or follow us on Instagram: / abcnews_au
Or even on Twitter: / abcnews
Property is a commodity to live in... Not a speculative investment! Piss off negative gearing...
No truer words were said across this 39 mins three-parter
The lower the better when it comes to housing prices. High housing prices are a sign of a sick, greedy and inequitable society.
Did you learn that at your gender studies class? High housing prices are indicative of demand. Those prices wouldn't be what they are if people weren't willing to pay that price. Duh!
@@Re3iRtH Yeah...the demand of greed before need.
@@Re3iRtH hurr durr if someone is against the fact that everyday australian's have been priced out of the housing market due to investors and foreign buyers they must just be some SJW. What are you going to support next to own the lefty's maybe campaign against worker's rights and min wages too? Did you also fight against the royal comission into the banks like the liberals to trigger some lefties?
@@Somone_final_final_v2 Minimum wage is the worst policy decision in the history of the United States and Australia. It does more damage to the minimum wage workers themselves than the workers earning significantly more. Listen to a good amount of Peter Schiff as he describes this eloquently why this is so, if you can't figure this out for yourself.
@@Re3iRtH k...whatever you say.
Houses are for living in. Instead of investing in our economy were land banking and crypto-mining dirt.
Successful property developers don't give away secrets and most definately don't do bus tours
That's right. It's a sales tour. It's marketed as "Education Field Trip" when in fact they will just attempt to offload their inventory. If you charge for information it's called education. If you don't, it's called sales. It's an old trick but still works.
The ladies from Brisbane against negative gearing (even though it benefits her) is a beautiful lady. She is the Sort of Aussie we want in this country representing us.
Even though 'negative gearing" at first glance seems to "help" everyone , it in itself (the NG) crates the property price bubble grow and makes the poor poorer and the rich richer - and all at taxpayers expense .
A few generations ago Australians used to work for an honest living doing something useful, now most of the them are gambling in the property market that should be used for living in, not for investment.
It's very sad, my home country, returning to a British aristocratic class system. Australia has the most land per person out of any developed country on the planet, yet a lot of people have nowhere to go.
Its crazy aye ❤
Stop calling these people Investors, they're not..
They're gamblers, they put little money & effort and hoping to double or even triple their money without doing anything.
Not feeling sorry for them when they lost their bet since their behaviours are one of the causes of overly inflated property prices in Australia.
You do realise that the nature of investing is not effort right? 😆🤪 If it's effort, it's work, not investing.
@@xpusostomos yeah he is an idiot, clearly hating on investors probably a renter by the sounds of it. lm trying to sell my place, people coming in offering what l paid for it 3yrs ago. All this media is brain washing these brain dead buyers.
@@Hunter-yy4es your the brain dead person trying to sell in a falling market hahaha
my deposit grows daily
No, wihtout them, there wont be this many uints and houses being built. And the rent would be higher.
@@Hunter-yy4es Better you sell now, because at the end of this year you will be $200k down.... then who will be "brain dead"?
No, Australia is heading for a recession in part because of negative gearing and people borrowing more than they can afford-the reason Sydney property has become unaffordable is because, well, it is unaffordable, for many who bought, not just those who couldn’t. We have amongst the highest household debt to GDP in the world and the RBA thinks the solution is more debt? For banks to expose themselves to even higher risk when the global economy faces serious threats? There is an oversupply of property and rents across Sydney are falling, all contrary to the arguments for negative gearing. To say Labour will cause a recession by removing negative gearing is a deliberate political lie. Investors have already fled-high transaction costs, poor return on investment, no prospect of capital gains for a long time. This is in fact the best time to get rid of this failed policy.
So, negative gearing is just another subsidy.
exactly.
but only for the rich
Negative gearing, low interest rates, easy finance and consistent growth of property values, there was literally no downside to becoming a boomer property tycoon. Besides forsaking the livability and quality of life for the succeeding generations.
Zetunez I hope they loose absolutely everything , their greed has robbed two generations
Killing off this stupid tax subsidy that has hamstrung a generation with the benign euphemism of negative gearing is a vital element of restoring sanity to the housing market. In the short term of course it will lower GDP but in the long run it will improve housing affordability and now that the bubble is already bursting, this is the perfect time to do it. Labor should be applauded and encouraged to go through with this for the good of the middle class of the country.
We shutdown our factories and manufacturing in order to maintain the housing bubble.
The main driver of runaway inflated house prices was artificial low interest rates kept there by the the reserve bank and the access to cheap credit by the banks lax and predatory lending practices .when money is created through debt the expansion of the money supply causes inflation it went into the stock markets and property .
Yea it has nothing to do with baby boomers filling up their portfolios... smh
@@DV-zv4ox Yes but if the easy cheap credit was not available to them they wouldn't be able to borrow the money to do it , don't get me wrong I don't believe the government should give favourable tax incentives to any asset class other than putting money into a savings account as this gives the bank actual real money to then lend to entrepreneurs and not fractal banking (when a dollar is lent then the bank is allowed to count that as an asset , it can create the money out of thin air to it's own determined ratio ie 33 to1 ect). that exponentially expands the currency supply which then causes inflation and raises asset prices to bubble like conditions. The greater the pool of available money that is chasing a finite number of assets the greater the price rise.
Through history and in many different countries a proven way to get to where we are now is low interest rates and easy credit. That's it. Negative gearing is component of the easy access to credit i guess but a small part and not the main problem. Don't blame baby boomers, if you were one of them you'd do the same. So sick of judging people as a group.
we have a bunch of property investors instead of entrepreneur this country will fall behind if we keep this up.
All of those speculators on the bus at the start... Hilarious. The 'mentors' giving them advice for a falling property market even though they made 100% of their wealth during a once in a lifetime housing boom and know nothing about recessions. Sounds about right.
Once in Life Time??
Yes, they are total con artists.
if you find yourself in a Bus full of people eager to invest in properties, the only question you have to ask yourself is: is this a bubble or what?
If a property investor can't afford to service loans & costs without negative gearing, they should not be investing in property. An investment that does not generate an income to cover costs and also provide some long term growth is a 'liability'. Middle income Australians have been hoodwinked by property spruikers wearing gold watches and driving BMW's into thinking that property investment utilising negative gearing is the magic chalice that will make them wealthy. A world of pain is awaiting those who thought leveraging beyond any sensible levels was their way to the end of the rainbow.
Just for the record, finding a well built home to rent is not easy in Sydney... Then, trying to stay at that one place is not easy as well (dependent on home owners sell/buy impact on your stay). Owning a home brings you a lot closer to securing a place to stay for as long as you can. Renting, is not practical as a long stay option. On paper, renting seems better but people never speak about the cost of relocating every 2nd year or so and the burden that brings along with it. For a couple or individuals, it can work out well but what about when you have children?
Look at 11:27 Jo Masters a Economist for the ANZ, she is so full of shit.... she claims that renting is a different psyche we see from offshore, what she means is Europe where fiefdoms still exist people rent so get used to the new fiefdoms in australia... she is hot, but she is a slippery gypsy old Jo... i suppose renting is the new black.. and very cosmopolitan.. what, you dont rent? whaaaaatt.... cmon Jo, pick up your sense of decency.
That’s laughable. They earn $150,000 a year and they think they are ‘ordinary Australians’. That is obscene. These are the kind of people that drove up house prices, effectively shutting out the true ordinary Australians from buying a simple home to live in.
Australians arent shut out, the market is in a downturn, now is the opportunity to buy at reduced prices and be rewarded with future capital growth. It's funny because people are still complaining while missing opportunities to get into the market gold mine.
How is that laughable? They earn $150,000 combined, $75,000 each. According the the ABS, the average wage of those living in Victoria for Q2 2018 is $80,610.
@@micmag2375 lol gold mine not right now
Politicians make my stomach turn. This is not capitalism. Any policy that manipulates reality like decreasing interest rates or providing tax incentives to speculate in real estate or anything asset class is ultimately bad as it distorts the actual price of goods and services. Unfortunately, it is very difficult to gear up the politically will to reverse these policies once they have gone mainstream. The real solutions are harsh, but like some good bitter medicine, it is the only way to cure a disease of debt asset speculation. Increase interest rates and end all manipulation of the tax code that favors artificial growth. Who wants to go make this announcement to the people..... no one? Exactly, you will be booed and heckled. The big crisis will do the announcement. It is just a matter of time.
House prices should go down...
RENTS should go down
DFA/AdamsEconomics watchers already know...
Yes I do mate good to see you on this channel.
480p? is this 1998?
@Glenn Abadilla I think this video was uploaded with 480p~
I wish it was 1998, I'd be buying property like crazy.
1983. Missile Command on my Atari has higher res than this. Bwahahahahah
Land Tax: With the exception of the property you currently live in, all property should be subject to a % tax on generated income, and a flat limit placed on any deductions (negative gearing) both per property and in total.
Off the top of my head, 37% tax on profits (top marginal tax rate for labor based income), 10k per property and 25k total would be where I would start.
The inflation of house prices to the point where property is divorced from its primary purpose as shelter has a negative effect on Australia as whole, and needs to be addressed.
Income or profit? Income is negative when negative gearing, so that's zero. If you meant on actual income, that's crazy to pay 37% when you're not making money. That's communism pure and simple.
We have the same non sense happening here in the US. The property market is hurting the regular economy because these overpriced homes are literally making it harder to borrow for businesses and job creating companies.
These people have been brain washed into thinking there is a such as thing as easy money.
Borrow… borrow… borrow… household is not a business and should not be run on D.E.B.T.S.... Governmens in the US are essentially corporations running up massive debt to support an inflated economy… much like the banks…
Kirralee Thompson well that is true. I can’t disagree with you.
Im early 30's working professional and I am also not saving for a home deposit, id rather rent til the ratio between avg income and avg home get back to 1:4 than the current 1:9. The prices are absolute garbage and have been for a long time. All the negative gearing should be scrapped and that extra 11 Billion dollars of tax should be pumped into our economy to fix proper issues rather than lining the pockets of greedy boomers
ill buy when property market halves on avg and when rates are back above 7% pa. That'll be the point where we bottom and there is growth in the property market again to take the risk of owing the bank a large sum of money for a place to live.
A N : I agree with your summation here, in relation to housing it becomes a sick economy when you get investors still attempting to search far & wide for a so called property with potential. Our economy is sick when you see a house that is run down & the real estate agent hypes it with the comment that a great investment potential & all it needs is renovating. So buy that bomb for $1 million, is not good for our society.
I live at home, It takes a toll on my mental health at times. I am 32 single, hard working bloke who has saved 6 figures but I dont want to jump into huge debt. Its rediculous isnt it!? Houses are not worth what they are still selling for.... I dont expect it easy but i agree with your statement. And nothing shits me up the wall more than ignorant clown baby boomers sighing at us and saying: Work harder we had to... Fucking bullshit.
AN you can wait but you should still save
@jim pratchen Hahahaha
"Performing well", this means bank are making money - at the expense of normal people needing somewhere to live. Ban negative gearing now
Perfectly said. They screwed you.
Now they trapped you, with raising rates and raising costs. Both nails in the coffin.
Ung Grabb Banks make the profits they do thanks to government regulations such as deposit guarantees, legal tender laws, fractional reserve laws etc, plus the RBA (ie the government’s best buddy) policy of low interest rates. Why do you blame “negative gearing” for bank profits? In any case, what concern is it if yours how much profit someone else makes? Nobody cares how much money you make every year. Why do you need to stick your nose into how much anyone else earns?
@@johnobeid67 When our tax money is being used to subsidise investors (in the form of tax rebates) to outbid people who want an actual home at an auction, and make ALL of our living costs go through the roof - it becomes of immense interest and personal importance to ALL of us. NG and the CGT tax rebate makes property investing (at least for the people who join at the beginning of the ponzi schme) a guaranteed win, an absolute no brainer, with the banks only too happy to throw cash at it for profits. So OF COURSE it is these tax incentives that created the debt bomb and indirectly the banks profits. But it is the the suckers who get in last (the majority of investors) at the bottom of the pyramid who can lose everything, and maybe end up taking a bank or two down with all of their customers savings. How is this kind of catastrophe NOT EVERYONE's business?
MonkeyHerder3 It’s not a “tax incentive”. It’s the cost of making an income. Just like your costs are legitimate tax deductions.
Anyway, this whole NG problem (if it is a problem) can be overcome by lowering personal tax rates. If you drop tax rates it makes NG less attractive. Cut personal tax rates across the board and NG will vanish. Keep trying to squeeze the life out of people who actually work and earn an income and they will try to find ways to stop big government stealing their money. Simple.
Millennial here, and yess I know a lot of 25 yr olds here in Perth now putting capital into businesses and start ups rather than buying houses. I would rather start a business before buying a house so I guess it’s good for the economy if there is a down turn. Young people will start to become entrepreneurs and innovators to create wealth.
maybe, it not easy thou, most are not capable of doing this, and business can be a tough game too.
About time we all started actually working for a living...
Earning $50K a year from a Investment Property
Earning over $100K in wages
Who are these people?
Good question actually I would love to know what they do for a living. Maybe selling drugs
Why not shift to the US system where the interest deduction is allowed on the interest paid on your own home, not on investment properties
That system the US has is stupid and helped contribute to their housing crash. There is no incentive to pay off your home and I big incentive to use your home as an ATM machine and borrow money against it.
Well researched and well made series. Refreshing compared to all the biased articles in The Age over the past few years focusing on what real estate agents think and calling it objective - (just turning into a propped up echo chamber)
Housing should be for people and families , not speculators and investors . They have driven prices up to the point of un-affordability for the workers . My parents bought their first home 35 years ago on a a single factory workers salary . We even went on holidays 2 or 3 times a year , nothing fancy, lots of bush walking, camping, staying at caravan parks, fishing etc
If your a factory worker these days it takes 2 wages just to pay for necessities and rent. Good luck with taking that holiday . As for having kids or owning a house , yeah good luck with that .
I work in a call centre and I’m a single parent and I’ve just bought my own place. It’s doable if you get out of Sydney and Melbourne
Lauren Lucas Like where, Dubbo? Alice springs?
Renaissance Man Ipswich, 40 mins west of Brisbane
My parents bought there house in 1981 for 36,000 dollars. They had a 10,000 deposit and they were earning between them both working 400 dollars a week combined. One wage on the mortgage the other wage they lived off they paid there house off in 4 years. Now I couldn't even imagine how the hell people would do it. The houses are overvalued and overpriced. NOW the crash is starting fall baby fall.
@@yusuf.alajnabi your right, the houses were overvalued. It was a bubble, now it's burst which is a good thing. If people bought at the top of the market they were silly and greedy and probably thought prices would keep going up crazily forever.
All of these people engage in these economic games without ever questioning the ethics or morality of "the game". I don't understand why so many people fall into this trap.
It's not a free market with negative gearing, the more the government intervenes the more distorted and unhealthy the economy becomes.
how so? sweden seems to be okay, china has brought over 200million people out of poverty. However America has gone from being the worlds powerhouse to a pretender cause of capitalism! companies who focus on profits dont care about workers, they make 10% year on year and we never get a pay rise. Karl Marx predicts our situation
@@dbestclassicz All perfect examples of crony capitalism. A capatilist free market does not intervene with qauntitive easing, bail in, and tax incentives to artificially prop up and inflate bubbles.
@@wildman529so its the CEO's and politicians? you could just call em Trump haha
debt slaves
The problem is not with Negative Gearing or Capital Gains tax. It is allowing investors to bet on the market with cheap Low interest loans and 20% deposits that is a problem. Property investing should have the same rules for lending as with any other investments. (Share Market, Business loans etc.). Take away the cheap loans and leverage you will then have houses being valued based on their actual value closer to their rental income multiples. You can then negatively gear as long as you like if you pay the same interest rates as for a Margin Loan. Additionally individuals should be able to declare insolvency and walk away from a home loan just as any businesses would. That would make the banks wary of lending to every Bob on the street.
You make alot of sense, i feel the recent decline in lending for interest only loans is a directive of the reserve bank to the banks in lieu of a interest rate rise to reduce the inflation in the property market. lower interest would only be inflationary at this point and higher will put the mortgage belt to the wall on repayments... making for a massive failure.
Im still in principle opposed to negative gearing, but your ideas make sense.. treat the loans like business loans, not house loans, and see them scatter.
Funny that they claim (like other nations in the same situation regarding housing bubbles) that young people don´t want to own a home, it´s simply that they see no possibility of gathering the money to buy one, as the lady in the beginning paid off her house in 5 years, i hear in Australia it takes 35 years ca. on current wages/house prices. The sooner this bubble bursts and people realize houses are to live in, not to gamble with (and calling them selves investors at the same time), the better. We are watching this mania in the latter stages. Problem with this is it produces NO economic activity (wealth for some, yes..) but no true economic benefit, if you have plaid the Monopoly board game, you know how this will end, people run out of money while few at the top gather more and more properties, it´s almost game over.
you heard wrong
Estate agents trying to convince people that negative gearing g is a good idea is like cigarette comanies trying to tell us smoking is good for us
Cigarette companies haven't done than since the 1970s. Stop fear-mongering (and lying) ;)
They only stopped because of regulation, if it was up to them they still would be saying it. I smell an estate agent 😁
@@MrPslol No, absolutely not an real estate agent. Some other Aussie dude on another video guessed wrong saying the same thing. What is it with you Australians calling strangers on the internet real estate agents. I'm a practicing M.D. and successful real estate investor - not in Australia thankfully ;)
Re3iRtH if you dealt with an average Australian estate agent you’d get it. Trust me.
Or car salesman trying to convince you that the 2004 Corolla with 250k km worth it's price tag of 50k.
i hate the world
Hang on... "investment property". Property isn't an investment, it's a a consumer good 🤔
The term 'investment property' is complete contradiction.
"Not just for rich people, also ordinary people like us" - Says the couple earning $150/year. You don't need negative gearing, have your family live off 50k like actual ordinary people, and in 10 years you could buy a $1M property outright....
well the're not wrong, its just they see themselves as the ordinary people of the Rich People.
@@player1111fulSeems they are holding their house (investment) in an LLC and paying rent to themselves to save the 6k. If it's legal that makes sense but there's no way this should be able to happen.
mark my words - no recession will happen - only cheaper properties.
Based on what?
arthur desilva is that you Scott Morrison?
Negative gearing is a seriously insane form of regressive tax that needs to go but unfortunately neither Labour or the Libs are likely to force that.
you obviously haven't been paying attention. Labour have stated multiple times that they will negative capital gearing if they are elected next year. Unfortunately anyone already using negative gearing will continue to be allowed to do so for any existing properties they own
@@sharnistevens1428 I take your point but if anyone already using it is allowed to continue it is not really ending it, just reducing a bit. Also I just don't really trust either party to actually do anything about it given what they have done (or perhaps should say haven't done) in the past.
If you couldn't afford to have an investment property without negative gearing - DON'T DO IT. I've lived in so many ramshackle, under-maintained rental properties and it's simply not okay. If you cannot afford to fix that property when necessary, put in appropriate climate control, etc. Then you are an absolute fraud and you should not be an investor.
Oh please the negative gearing changes have nothing to do with any recession coming along. It was the NG that caused the unsustainable bubble in the first place, which made Australian living costs so high and made businesses internationally uncompetitive. It must GO.
Sure bring on the recession if it means regular people can afford houses again.
It will probably mean regular people become unemployed long before they can afford any houses but the recession is definitely coming anyway.
@@dekzzx It's the recession we need to have unfortunately
@@muzzmac160 unavoidable at this point, damage has long since been done.
Mark my words. The recession is going to be blamed on the Labor party despite the fact that it was John Howard and Peter Costello who created the negative gearing legislation that has seen the housing bubble grow so massively. Though Abbott certainly contributed to the problem.
How to make a small fortune in property in Melbourne ? Start with a large one.
The bus property seminar at the start was such a scam. "Investing" in property is a good way to grow broke while making property developers rich.
What no one really tells you is that the interest only loans on these 1.3million + homes negatively geared are creating a inflationary bubble in the system due to the reserve bank allowing bank notes out to the commercial banks based on the loans given. This is extremely inflationary behaviour.,
That said, i believe the reserve bank as they dont want to lower interest and higher interest would hurt many, they have asked the banks not to lend interest only loans, these are the type used in negatively geared investments. The real problem is the intermediaries lending interest only on negatively geared investments.
(houses are not investments, they are inert building people live and sleep in, they dont make money unless they go up in value from demand, negative gearing adds demand and its inflationary as it requires a loan and interest which prints more money .="inflation" and it takes away homes that would otherwise have been sold.)
Also.. the tax revenue is heavily reduced, it needs to be re-couped.
Inflation is the enemy of all economys, it erodes savings. when things inflate, dont save, spend big... better than letting your money die in the bank.
these are not investors, they are speculators
Boom!
Truth bomb. 🎯🎯🎯
Greed greed greed then blame blame blame.
11bn that isn't going towards building a society, rather welfare for the rich.
I’ve abandoned all hope of ever owning a house, why? What’s the point when rent takes over 50 percent of income...
In Australia only I hope. It's by design.
Who the hell needs to attend a class for investment property. Just teach yourself these things online and is all FREE
Exactly. It's all been written or online. It's a sales field trip is what it is.
man with tens of millions in RE tells you negative gearing in not responsible for you not being able to afford a house. and we should have a fair debate about removing negative nearing.
Decebal825 who you going to blame now that Australia is in recession
Negative gearing would be an option to self funding pension but any thing after two properties would should be taxed . This I say is because negative gearing hasnt created more available properties but quite the opposite . I grew up saving and have made some good investments but it hasnt made me want to sell what I have collected simply because I dont need to . I'm seventy and I have to much return so I have to buy another property to reduce my taxes .
House and land prices should go down and rents should go down
People need to understand that the shortfall to the govs coffers from NG is additional tax to the people who cannot claim any deductions and who in most cases are also burdened with all the existing levies.
In my opinion Australia economy it's based on the every Australian complaining about immigrants, believe it or not.. The only reason of economy growth are all the immigrants, most of the investment properties (which benefit big time Australians wealth) are rented by temporary and freshly permanent immigrants which are millions of people atm.. Now something scary is going to happen, the easy money making property dream (either construction and investment) it's slowing down.. Credit tight new rules, less foreigners investments, oversupply, ecc ecc. have started a house price fall.. If that house price fall is going to keep going and impact the economy (recession) all those immigrants that come to Australia (only and exclusively because of the good salary and jobs) will stop coming because there'll be no jobs or opportunities available anymore.. Once the voice spreads out it's going to be the end of it.. Just think what's your economy based on.. Mostly Real Estate and Construction (all the rest is pretty much correlated to it, the few manufacturers left in Australia are construction correlated and even finance sector is mostly glued to real estate) you don't have any real manufacturing, no technology, no research and development, just a bit of mining and cattle that's all. Who's it going to rent all those investment properties and who is going to buy all those hundreds of thousands of new homes (really bad quality units) that are being builded while I'm writing.. Remember that price of a commodity is given by offer and demand.. Houses Demand has been through the roof in the past decade mostly because of the massive population growth good part of which are immigrants... Stopping them wil stop the economy growth.. Real Estate and universities (which make billions from foreigners students) not counting all the secondary income like for example students visas (massive business for schools and agencies each student pay between 6000 and 10000 dollars every year of visa in exchange of those 20 working hours per week that everyone overdue just using either abn or cash in hands deals) that foreigners go through it just because they can hunt for a sponsorship then pr... If all that stops Australia will see the worst recession and house price fall ever seen in human history (Australians have the second biggest amount of household debt on the whole planet 122% to GDP).. I can articulate way better the argument and I'll take sometime to do it.. Excuse me if there're any mistakes but English it's not my language. I'm one of those immigrants and I can clearly see the tsunami off the coast but most Australians are not panicking yet (they're used to the everything goes well forever mentality) just because they see it as a small wave like the others (price corrections) but the stone (easy debt) that has been builded in the past ten years it's massive (RBA doesn't have much rope left to keep the stone out of the water with the interest so low at 1.5%) and when the rope can't be hold anymore the stone will hit the sea and considered how big is the stone (liar loans, interest only loans, loans based on bubble equity, ecc ecc) the wave will be massive this time.. I feel blessed because I don't have any debt and I have good savings (already invested abroad).. So that tsunami won't wipe nothing off my pockets... The greed will suffer the most but that's what they really deserve, another innocent category will feel the pain and that is the FOMO people that bough a property in the past 3 years often going a bit over capability (because of skyrocketed prices) thinking that price rise will help them in the future.. I see what's coming as a really good thing and a good lesson of life to everyone especially will make all Australians open their eyes and come back to the real world where money doesn't grow on trees (properties), most of them seriously think that houses price is going to grow fast forever, it's coming the wave to wake you up from the dream..
Once the economies focus is off the myopic construction industry and its interaction with population growth, investment may finally go back into innovation through manufacturing and technology, things that actually produce tangible value. - very optimistic I know, also what are paragraphs?
@@Zetunez who's is going to employ all the construction workers? Manufacturing isn't viable in Australia because of the high salaries.. Like a car should cost twice if produced in Australia, same rule applies to everything you want to produce with manpower.. I don't see any possible painless solution.. One would have been to create a new city 10/20 years ago let's say in between Sydney and Melbourne and then focus most of the population growth in there.. Creating all the universities for foreigners in there and developing the city gradually and smartly around it.. Not overcrowding the two best cities in the world just to benefit the greediness of Australians, price to pay it's a much lower quality of life.. You'll see Melbourne and Sydney coming off soon from the best cities where to live.. In my opinion Australian life stile is purely based on work work work, fine Australians are rich but they are far off from living best life on planet like those charts want to picture it, life is something else other than work and traffic.. Not counting Australia is at the top of the charts followed by NZ for cancer rates, at the top well far from the rest of the world.. Money isn't everything in life, the quicker you realise it the better it'll be your life..
Housing has been the single easiest way for banks to create debt serfs for life. Housing is for living in, not speculating.
nixnix99 I couldn’t agree with you more.
Amen......these banks will say the only purpose for a women is not to have family life but to be a whore.....she can earn more money to pay the mortgage....
Yep should be illegal to own more than one.
Lords and serfs.
Welfare for Capitalists!
Negative gearing assumes housing prices go up.
It does because negative gearing creates investors who continually buy.
The big problem is when there are too many houses, which is pretty much now, then prices don't go up.
Much like the stock market. There are big overpricing problems there. Once interest rates go up those in negative gearing are in big trouble.
Exactly right. As in the example given, it cost $10000 to get $4000 back, giving a total loss of $6000. The price has to go up by $6000 a year to break even. This also assumes no inflation.
Not necessarily. There are non cash deductions like depreciation.
The inverse of house prices going down - means interest prices going up as banks look to protect margins for shareholders. If interest goes up, negative gearing (losses) on current houses increase > which means general tax payers pay more to subsidise the loss. Rent might slightly increase to cover between the loss. All APRA has done is allow the banks to price up legitimately to "investors" for them to pass on the negative gearing loss.
@@ck7846 I object to rhetoric that "taxpayers subsidise the loss". That's like saying if Coles Myer has to pay more interest on their loans such that their profit is reduced, then "taxpayers subsidise that loss". Well no, it means they couldn't make as much money, and thus didn't pay as much tax. There is no subsidy going on there.
xpusostomos I object as well. I’m not an investor. Just stating what happens. I don’t want to pay anymore to subsidise this. However, if it remains for current agreements and losses are further negative(interest rates increasing) . Guess who pays? Taxpayer. With any change you need to understand the impact of that change. It’s sort of like Newton’s 3rd law in action ( even though it’s motion) Every action has a equal or opposite reaction.
great series... hope there is more
I'm a property investor (I have 1) in the UK. They have gone further in the last 2-3 years in reforming tax for private property investors, If you earn more than £35,000/yr with your job+rents, you pay 40% income tax, but can now only reclaim 20% rate on interest costs. Effectively you pay 20% income tax on the cost of interest! The UK has feared a bubble and has clamped right down on private people being investors. They are forcing people to sell or become limited companies to be tax efficient. But raising capital as a limited company is considered riskier by banks so requires more deposit and costs more interest.
Perhaps it is not right to treat where people live as a commodity to profit from. If prices double every 10 years, did I really create wealth and value to the economy to deserve that wealth as an investor.... I do think governments really need investment money instead to go to small/medium companies + R&D to creating something more real to grow the economy.
So I think governments the world over will move away from tax brakes for real estate (if not adding penalty taxes like the UK), but leave negative gearing for more real wealth creation.
sounds as if negative gearing was introduced to help increase renting / housing stock. Now it seems we realistically have enough, but the investor portion of it needs to keep making them economic gainz.
Negative gearing applies to any bona fide investment, not just real estate.
1988, that Brisbane home was probably less than 100k. Maybe 3x her income. Now property is 5x, 8x, 10x someone's income.
MrBrentles 12x in Sydney and 11x in Melbourne and that’s not counting after tax . After tax is around 16x in Sydney
Excise taxes and regulations was much less .... Capitalism didn't push up costs to live socialism policy did 37 yrs
What about the additional demand that immigration creates? I'm not talking about refugees, I'm talking about the 160,000-200,000 economic immigrants our government invites in each year. Isn't our whole economy based on a population ponzi scheme? Our population has risen by 6 million since the year 2000, largely fueled by immigration. The demand for housing isn't phantom demand, it is caused by excessive population growth.
Exactly right mate.
Here in nz is the same we have 800k more in last 10 years mainly Chinese and Indian buying up large.
Was mostly Auckland Wellington etc but has now spread every where.
Here in palmerston nth 10 years ago you could buy a doer upper for 150k now the same kind of house is 300k minimum
Like all Ponzi Schemes, they work.....for some, and only for so long. Housing inflation benefits few, as a rising tide raises all ships, so unless you have multiple properties, it doesn't benefit you, as your principle residence is being used, by you. Sorry to hear NZ has gone the same way as Australia, kick the can down the road economics, with immigration used as a band-aid, for short term economic gain, but long term pain for existing residents.
Immigration is a big factor but so is overseas investors.
The government is hungry for money from anywhere.
Thats the problem,More people are flooding in than houses are getting built so the prices are still going up but more people means the need for new hospitals,schools,infastucture to keep up,but the governments have not spent f-all on this as they need more money which means more tax to pay for it.
Labor will blame 'negative gearing' even though we all know it's Indian and Chinese coming here buying up properties on interest only loans. Even the ABC story the other day had the 'Guptas' with their 18 investment properties.
I had to look up the term negative gearing as I had never heard of that before but it seems like a stupid idea. People who buy investment homes and think - well I make this much rent per month and my taxes are this much and insurance is this much and interest is this much and I'll make XX dollars per month have to be very careful not to overextend themselves. All it takes is for a month of missed rent, or a bad tenant that causes damage, or even normal repairs and the owner could be in a lot of trouble.
There's no such thing as a free lunch. All this massive borrowing will have to be repaid one day. People who think housing prices can only go up need to study history more. And yes I'm a home owner but my house is paid for.
100% agreed!!💯💯💯
You don’t get it then, people scam the system
You had the people in the segment saying themselves that they LIVE in the property they negatively gear
That means they deduct payments and maintenance (which most exadurate) from their income, on the house that they live in
Great for them, but not for people who can’t afford to buy a home because of the incentive and who still have to pay the full amount on their income tax
I caught that simpsons refernce in your username
It goes both ways. Rent is highly competitive due to the fact that so many people rent because they can't afford to buy a house. Investors can take out insurance for damage to their properties and probably insurance for missed rent income too if they wish. These are all expenses related to earning a rental income and thus can be "negatively geared". Then you also have to consider that people invest not just for rental income but for their retirement thinking that in 10 or 20 years the value of their house will have doubled. It's a great way for under skilled low income earners to make a decent living and even get rich and save for their retirement.
Never mind the missed month in rent, if a months rent is a worry you should NOT be property investing. I don't know what the law is in Australia on eviction for non payment, but in the UK the tenant has the upper hand. It takes a minimum of three months from beginning the legal process, but consider before you take that step you have probably someone who has owed for over two months. If the tenant knows the system, I would bet that most are evicted owing a minimum of the best part of a year when the give some sob story to a judge and get an extension to their stay. Then consider the state your property will be in when they leave.
This is not an investment for the faint hearted or some easy ride to riches.
Obviously most have demonstrated poor financial judgement taking on too much debt, and are not capable of managing their finances.
Negative gearing not looking so great now is it hahaha investments carry risk now it's time to find out how levered these people are
give them a flogging!
Australia was in recession for more than twenty years.......look at the Aussie debt clock.....U will be shocked............. people are burried in debt..........
People don't even know about the debt clock.. it's very sad how in debt the country is..
Blame socialism for it , taxes increase all the time
I cannot buy investment property with $60k per year income . If you think you can then take my payslips .
To much of the economy seems to be based on real estate. Australian homeowners are getting crushed by major drop in real estate value. Sad that money owed us greater than value of the homes.
Its a shame you didn’t talk to Martin North
True 👌👍
If your investment doesn’t stack up without tax breaks - it’s not an investment!
That's a pretty ignorant perspective. If it leads to a positive increase in wealth, it's an investment. Period.
@@fauxtography1018 I guess his point is there is no real wealth creation. Investment should be driving growth and if all it does is shift money from tax revenue to the "investor's" wallet, then it isn't adding to the economy
Young people will eventually realise that to have a decent life they need to leave Australia and move to another country with affordable housing. Let the baby boomers look after themselves.
haha
@Alexander Jenkins
True but you are still better off retiring early to a number of non western countries due to the difference in buying power. Why retire like a pauper in Australia when you can live like a prince a decade earlier in Poland or Estonia. Australia's big advantage is its relatively flat income distribution but that isn't going to help you once you stop working.
i hope they enjoy their old age in the nursing homes we see in A Current Affair
Yes I've done that. It makes zero sense for me to live in Australia. When I talk to people overseas about Aussie houses they literally can't believe it. They also think people bidding on houses at auctions is insane.
@@BrendanRaymondKoroKoro That's where I live mate. It's cheap, awesome and safe.
Remove negative gearing an increase the tax threshold to $26K. That will counter it.
how so? due to the median house price that 1,000 will have an X effect?
we should just invest in the yen lol, they down value there currency and we overvalue haha
@@dbestclassicz - How so?
The first $26K of earnings isn't taxed. That is how so.
@@JJSPARROW1978 that would cause a property crash yeah? the reduced tax income thats supports the average battling family would only cause a default?
51% of bank loan are interest only (westpac) i heard through the royal commission
that means banks are affected also i presume
no avergae person will be much worse off w/o neg gear....
BEING FROM CANADA I FIND THIS INSANE, AND NOW UNDERSTAND HOW THE MARKET HAS BECOME SO HEATED IN AUSTRALIA. ONLY JAPAN ALLOWS THIS, OTHER OECD COUNTRIES HAVE BANNED THIS. OBVIOUSLY A TAX SCAM FOR THE WEALTHY, ITS RIDICULOUS.
Just avoid Sydney & Melbourne for time being. Invest in other city and lease it out to cover repayment. At the same time renting and working in Sydney or Melbourne. That way you are still investing an Australian home and get pay higher from work. Don't you forget you only live once. Do at least two or three things at the same time. (in this case - Invest lower & work pays higher hopefully). At the end of your employment, you should be paid off your mortgage and the property value should be appreciated accordingly. Let Sydney & Melbourne be your benchmark. You never know how much your property will be appreciated by that time but it certainly more than what you have invested. Then you may choose whether you want to retire there or sell it off to buy in Sydney or Melbourne with better options. You have limited options while you are young however you have time. Make sure your money works harder for you. Two bedrooms are good for decades to come. Start small and affordable, most importantly start early. Don't invest something beyond what you could pay off. You may change to a larger one when you can afford. This is a global issue. Isn't just Australia.
Canberra is still rising, and you can get 7% yield, which covers your mortgage. Oh, and vacancy rate is like 1% so no issues there.
All cities are slowing. All lending is tightening.
neg gearing should not exist in a hot market... what a sham
Rich people don’t use negative gearing because they run investments at a profit. They don’t hold as much debt because they have investment capital.
Poor people trying to break out of the “poor” category use negative gearing because they run their investment at a loss, due to not having enough capital.
Cash flow is king and rich people know that.
Problem is we are entitled sulks who have become used to handouts with no compromise - I am under 27 years of age earn below average income and have almost paid my home off in the Melbourne suburbs, I only eat at home, don’t go out too much and live within my means, which allows me to pay it off quicker. Ofcourse Id never own a home if I wanted to eat out subway, McDonald’s every second day, go out drink etc. once my house is paid off and I have surplus income that’s no longer going to the bank then I can improve my living standard. Brick by brick you’ll succeed but if you want it all and now, no amount of government handout will ever get you ahead because as soon as you have more income you’ll just improve your lifestyle accordingly again to have no surplus cash once again
You'd be a fool to assume rich people don't use debt to its fullest. They understand that it's a tool to use, not a crutch. This segment even points out that more than half of the tax benefits of negative gearing go to the top 20% if you actually watched it.
Granted my house is in a cheaper area but yeah totally agree, according to the official numbers my income is way, way below both the national average and the median but i have a family and am still managing to pay off a house. At this rate it'll be paid off in a third of the original loan time frame. Its all about living within your means and not expecting to have things without sacrifice. This business about unnafordability is just the modern mindset of people wanting everything all at once and blaming others when you dont get it now. I don't see this attitude as a young persons attitude but rather a modern one. There are plenty of older people who carry on much the same as our youth.
Jim lastname if that helps you sleep at night.. . I earned on average $650 per week and saved $500 per week for the last 10 years on average as I got a job full time even whilst I was studying that’s $26,000 a year - bought a house for $400,000 approx. 35km from CBD and have less than $180,000 debt - the lower my debt goes the faster I pay off as it’s a scaling effect ...
Nick Sandford top 20% classified as earning $80k per year or more - I don’t define that as rich ... rich are millionaires and billionaires, the people who will buy all the housing stock cheap in cash when they crash the market using entitled fools as a scapegoat, they will raise interest rates and because you still need to borrow to buy your cost of borrowing will go up and as house prices go down, it will still be the relative same cost to acquire a house to you as it is today and those poor buggers who already have debt will have their eyes gouging out..whilst the capital rich individuals are only ones who win because they aren’t as reliant on borrowing as we are... the monetary base increased 3x in 2008 to bail nations out which decreased the value of the dollar by 3... house prices in that time tripled - it means the real cause for house prices rising is deterioration in the value of the dollar not an actual house price increase... it means banking cartels are detoriaritating our standard of living by dividing our real disposable income by 3 whilst they acquire capital not backed by paper promises/paper money($$$)
@Jim lastname I am married with child, my wife and I are both 31 and we OWN our home outright. We 0 mortgage and live in Melbourne.
It can be done, just cos it ain't common doesnt mean it doesnt exist.
Negative gearing is IMO for those that have money to burn buying properties (ie the rich) and who pays for that? The taxpayer. What a joke.
I'm not rich and I negative gear my property.. I pay $45,000 + in tax annually and use negative gearing to get some of my hard earned cash back.
@@stevie180788 you pay more taxes gst & excise taxes is theft that socialism
12:50 typical latte hipsters want to live in gentrified areas rent, have squashed avocado toast and organic soy lattes
Negative gearing = tax-payer funded sort for property gamblers! A non-productive asset class! Its time is over! About time!
James Postle So, let me guess, you think the ABC and welfare spending are “productive asset classes”? How about you let people work out for themselves what is productive or non-productive? Interest is the cost of doing business or producing the income socialists are so fond of taxing (or, more accurately termed, stealing).
@@johnobeid67 Oh I think people are finding out right about now how productive property investment is.... What kind of value does investment in existing property add? None. Nada. Zilch.
MonkeyHerder3 The free market will sort that out. If they have made malinvestments, those investments will lose and value will be lost. You don’t need to concern yourself with that. Bad investments will lose money/value and good investments will go up in value. That’s the beauty of capitalism.
Australians should search "Bizness Crew" on RUclips to listen to a series of podcasts about a potential economic crisis coming up in Australia. Very good series by someone who knows what they are talking about.
Come on abc do 1080p
Negative gearing is detrimental for the government as well as for future generation!
part 4?
@@aperfecte lmfao
I love when rich old people speak who owe everything to the system and have the most vested interest in keeping things the same, speak for younger people. “Young people don’t like big commitments” one said. YOUNG PEOPLE CANT AFFORD CBIG COMMITMENTS IN AN INCREASINGLY UNCERTAIN/UNSTABLE WORLD (even if the uncertainty is only a feeling). It’s not that hard and I find it both funny and aggravating to see old people across nations repeat the stupidity. Perhaps trying to convince themselves.
10:56? did i hear that right, low-cost loans for... "lifestyle purchases?" like what, a new rolex?
Those poor young aussies, they may not afford a home but they can buy a designer bag on credit.
Yeah, what the hell is a "lifestyle purchase"? Isn't that hire purchase?
I don't understand the identity politics around negative gearing. its beside the point. Negative gearing on property only seems to be detrimental for society and our economy. That's why it should be removed. If they gave a tax deduction for smoking, we'd all just agree that was a bad idea, no matter who benefited from it.. But yeah, they should be careful about removing it during a downturn.
mattr8750 they tried it years ago in 80s it dosent work if look at picture negative gearing is good as when people retire with say couple property's they can't get age pension saying thousands an reviving money instead from.property's note it will get harder for next generation to get bank loan as they want bigger deposits an proof you can service that loan
During a downturn it's better - it is falling anyway, its already priced into the market, it won't cause the market to turn (as opposed to if it was on an upturn). There is no better time.
All unecassary......this is what happens when housing is commodified
So owners and renters....two levels.....a race to serfdom....
Property investment is similar to running a business and if labor remove the deductions from property investment then this should be applied to all businesses!
To be fair to all citizens, the Australian government should get rid of the use of negative gearing to be set against one's tax because this only helps the rich and not the poor. That is if one wants a fair society.
Are you saying that an enterprise or business should be taxed on revenue as opposed to profit??? Do you think that is “fair”??? I’m going to go out on a limb here and guess that you’ve never run a business or employed a person in your life. Am I right?
@@johnobeid67 Of course you are wrong.
Zhang Ruyi in that case you have a lot to learn about business. The only thing that counts in the end is profit, not revenue. Just like owning an investment property.
@@johnobeid67 I live in the UK and we have stamp duty and I just look up the rates and if one were to buy a property worth more than £575K, we have to pay 10 % of property price and if over £1.5M we have to pay 12 %.
In the 80s we have huge problems with negative equity but the government did not allow people to use this to set against any form of income.
I think in society we have to think of taxing system which does not benefit the rich and think about how we can help the poor.
It is very sad when property prices keep going up and young people cannot afford to buy property and set up families.
We also have huge inheritance tax and again to help the poor.
Why? Because only the rich pay for this high stamp duty and inheritance tax.
In addition, people can only have one property and if they have additional property, these additional properties are subjected to capital gains tax at 40 percent.
In the video, I remember hearing people having multiple properties, using their negative equality to help them in paying less tax. This is bad!
@@zhangruyi3153 The UK property market will crash soon too. The properties are overpriced and many can't put a deposit on a house without help from family.
So spend 10k to save 4K? I don’t understand how negative gearing helps anyone anyways. I would invest in a positively geared property any day!
People assume the value of the property will increase in value by $10k per annum or more in that scenario (good for a boom, but catastrophic for a bust). Honestly negative testing isn't the big bad wolf the media portrays it to be... I think they should focus more on international investment. Only citizens having the right to own land.
@@manarioomanarioo7331
Won't work because corporations need to be able to own land as well so the investors will (and already often do) just register a corporation with an aussie lawyer or accountant as the chair and buy property with it.
@@SurmaSampo in Indonesia, companies aren't allowed to own land. Persons are liable and bankruptcy goes back to the individual. Alternatively, you could just have a requirement that directors / trustees are required to be citizens. Idk I just think its wrong the Chinese are buying out the nicest suburbs in the cities... pretty sure the councils found that places like toorak and point piper use less water than poorer suburbs bc people don't actually live there full time (higher rate of Chinese investment)
But yeah agree the company and trust investment area is tricky... potentially put restrictions on presales only being local for developments is also another option
Crazy isn't it. You spend $1 to get 50 cents back. I'll just keep buying $100k houses in the US that rent for $1k a month. 1% rent to value or over. Neg. gearing only works in an up market and enslaves you to a job. Doesn't make sense to me. Cashflow is king, meaning I don't have to work.
from the AFR this year. "On March 17, the Australian Prudential Regulation Authority ordered the banks to limit the proportion of risky interest-only loans to 30 per cent of all new loans from the September quarter of 2017."
interest only loans should be banned