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Budget Night: What's going to happen to negative gearing?

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Australian Broker | 13 May 2014, 08:30 AM Agree 0
Real estate associations and economists sit on different sides of the fence on the rumours the government will reform Australia’s negative gearing rules in the 2014 Budget
  • Common Cents (not an Economist) | 13 May 2014, 10:05 AM Agree 0
    Leith van Onselen thinks that removing Negative Gearing will allow Renters to become Buyers. Great Theory, shame about the practice.

    Sorry Leith, but whilst your theory sounds like a fair assumption, you're missing one vital part of the equation - the finance to purchase a property!

    Unfortunately, the reason most renters remain renters is that they do not have the capacity to pay rent and save a deposit. So regardless of the availability of property (cheap or otherwise), unless the current Lenders Mortgage Insurance Credit Policy is substantially revised to remove the genuine savings requirement and/or to increase the current maximum Loan to Value Ratio, the renters will still remain renters.

    I also forgot to mention, that one of the major barriers to entry for First Home Buyers is Stamp Duty. Unless a First Home Buyer purchases a new home, they miss out on the current First Home Owner incentives. Therefore, unless the State Governments totally abolish Stamp Duty - which is the single biggest deterrent to purchasing established property, then once again, the majority of renters will remain exactly that, renters! (In my experience, most First Home Buyers do not want to live out on the fringes of suburbia where the affordable housing supply tends to be.)

    So Leith, if the Investors sell their Rental Property as you assume they will, what is going to happen to all the renters unable to finance the purchase of a home once the Investors have sold up and they have no place to live?

    Hmmm, the Government would have to step in I guess! Oh and of course all levels of Government are well equipped to cope with the demand aren't they? Oh, and it wouldn't cost the Government's anything to provide all that housing would it?
  • Coast Broker | 13 May 2014, 10:49 AM Agree 0
    If the number claiming a tax deduction is less than 80% of tax payers earning less than $80K pa, then what is the figure? !!!!

    True - any change would treat property investment as different to other asset classes because absolutely, it is different. It's where people live.

    Let the market decide the outcome without the tax distortion.




  • Common Cents (not an Economist) | 13 May 2014, 04:24 PM Agree 0
    Leith van Onselen thinks that removing Negative Gearing will allow Renters to become Buyers. Great Theory, shame about the practice.

    Sorry Leith, but whilst your theory sounds like a fair assumption, you're missing one vital part of the equation - the finance to purchase a property!

    Unfortunately, the reason most renters remain renters is that they do not have the capacity to pay rent and save a deposit. So regardless of the availability of property (cheap or otherwise), unless the current Lenders Mortgage Insurance Credit Policy is substantially revised to remove the genuine savings requirement and/or to increase the current maximum Loan to Value Ratio, the renters will still remain renters.

    I also forgot to mention, that one of the major barriers to entry for First Home Buyers is Stamp Duty. Unless a First Home Buyer purchases a new home, they miss out on the current First Home Owner incentives. Therefore, unless the State Governments totally abolish Stamp Duty - which is the single biggest deterrent to purchasing established property, then once again, the majority of renters will remain exactly that, renters! (In my experience, most First Home Buyers do not want to live out on the fringes of suburbia where the affordable housing supply tends to be.)

    So Leith, if the Investors sell their Rental Property as you assume they will, what is going to happen to all the renters unable to finance the purchase of a home once the Investors have sold up and they have no place to live?

    Hmmm, the Government would have to step in I guess! Oh and of course all levels of Government are well equipped to cope with the demand aren't they? Oh, and it wouldn't cost the Government's anything to provide all that housing would it?
  • Bris West | 13 May 2014, 04:26 PM Agree 0
    I agree with Coast Broker avoid tax distortion on the property market and leave the system as is. How can you tax any business on Revenue, without considering the expenses in achieving the revenue. If expenses can't be claimed, then the user will have to pay. I.e. the renters.
  • Bottom Line | 15 May 2014, 11:50 AM Agree 0
    I remember the old days where 'experts' were people that operated hands on in their industry over many years.
    Now an 'expert' can be defined as someone sitting in an office interstate/overseas, looking through a data report, and making broad assumptions to other peoples industries.....oh and because they have a piece of paper from a university.
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