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Rent could surge 50% without negative gearing

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Julia Corderoy | 02 Dec 2014, 08:34 AM Agree 0
Abolishing negative gearing could see the cost of renting increase by 50% or more, according to a national accounting and wealth advisory group
  • Incognito | 02 Dec 2014, 09:05 AM Agree 0
    On cue the fear campaign.

    This is why they must grandfather existing arrangements when they abolish negative gearing on established property.

    People would rather own than rent anyway. The tax man shouldn't stand in their way.
  • John from Geelong | 02 Dec 2014, 09:17 AM Agree 0
    Pathetic scare mongering designed to be self serving and not intended for general consumption.

    Negative gearing is Government meddling in the market and there has be a way to unwind it to allow the market to return to a normal level, we simply pay too much for property.
  • Brado | 02 Dec 2014, 09:29 AM Agree 0
    What is the big deal with negative gearing? What sane person buys an investment specifically to lose money? There is never a benefit in losing money. Negative gearing helps lower the loss on a property in the first 3-5 years, until rent increases and the property begins to go positive (pay for itself). Its a very good point to consider investing in property just like investing in a business. In which case losses are deductible against income.
  • David | 02 Dec 2014, 09:35 AM Agree 0
    John & Incognito I think you need to think a bit more broadly about the implications of scrapping negative gearing and the distortion of asset classes that it will create. If I had a choice to invest in two different asset classes with one allowing me to claim tax deductions and the other not, I'd generally choose to invest in the first option due to the favourable tax treatment. If the deductions are scrapped, people will stop building new homes for investment. Apart from the disastrous impact on the building industry, it will quickly create a shortage of supply which will drive rent up, as it did in 1985 when Paul Keating abolished it and Sydney rents jumped around 45% before he bought it back in less than 2 years later.
  • Vic Regional Broker | 02 Dec 2014, 09:53 AM Agree 0
    Negative has been part of the taxation structure for a long time, it is a legimate taxation deduction and should not be changed, BUT ids must only be available to permanent residents or citizens who are PAYG or have a business, or Australian Superannuation fund and not a company formed by an overseas resident just for the purposes of buying investment housing in Australia. The two comments already put up are ill informed, especially incognito's comment. Yes most people want to buy rather than rent, but many cannot do it!

    Also time for strict enforcement of FIRB rules, prosecutions must commence, especially of the promoters of schemes that are designed to allow foreign nationals to buy resi property when they cannot normally do it.
  • Bottom Line | 02 Dec 2014, 10:55 AM Agree 0
    A good article. Abolishing negative gearing is the most naïve suggestion discussed in finance in the past 3 years.
  • Haydn Cooper | 02 Dec 2014, 11:05 AM Agree 0
    Given what's occurred in the lending industry, I'd say investors should be more concerned about the Government looking to cap the cost of rental housing.
  • Awesome - Albert | 02 Dec 2014, 11:08 AM Agree 0
    The last 50 loans we have written have been for clients with positive or neutrally geared residential property. Have a look at the rental yields on properties with granny flats in Sydney, Brisbane and regional areas and with fixed interest rates under 5%, negative gearing make no difference.
    What we need is more help for first home buyers....
  • Colin Rice | 02 Dec 2014, 11:11 AM Agree 0
    Its more jawboning to "spook" investors from the market ala Glen Stevens from the RBA on macroprodential policy. It wont happen, move on nothing to see :)
  • Sheringa | 02 Dec 2014, 12:51 PM Agree 0
    If they abolish negative gearing then the rental income (when it becomes positive) should be tax free & they should abolish the capital gains tax. They need to start having incentives for people to invest & get ahead so they rely less on government handouts....not taxing them to the death.
  • What if. | 02 Dec 2014, 01:40 PM Agree 0
    Saul Eslake / SMH 11 April 2014:

    Australia is one of only a few developed nations that allows negative gearing, which economist Saul Eslake says is wasted money that inflates house prices.

    This is made worse, he says, by a raft of other policies including the Howard government's 1999 decision to tax capital gains at half the rate applicable to other income and the decision by successive federal and state governments to boost first home buyer grants.

    -------------------------
    Houses sure seem overpriced here in Sydney.

    My high income high wealth investors love the negative gearing part though.

    My young hard working couples on the other hand just want a family and a home. They keep getting outbid at auction.

    hmmm.. could be a distortion

    Then there's that federal budget thingy.
  • Damo | 02 Dec 2014, 02:41 PM Agree 0
    I am by no means an economist, but I very much doubt that rent would increase by 50%.

    If anything, investors will leave the sector, dump their property portfolio's and realise any profits made in those property.

    That would bring more properties, increasing supply on the market and allow new home buyers to enter the market as properties will fall in value and take the heat out of the rental market due to less demand.

    Or am I just wrong on this?
  • Ray Weir - | 02 Dec 2014, 03:00 PM Agree 0
    They can grandfather existing negative gearing and avoid rent increases. Then allow negative gearing only on new builds which will increase housing supply.
  • Logic happens | 02 Dec 2014, 03:31 PM Agree 0
    Yes yes..

    Grandfathering makes sure nobody loses what they've got.

    And NG ONLY FOR NEW BUILDINGS drives the investment into new housing.

    Logic happens.
  • Awesome - Albert | 02 Dec 2014, 03:51 PM Agree 0
    Incognito - have you just come back from Holland? This is exactly what they have done. The negative gearing is equal to the original purchase price less the depreciated value. Rent v the depreciated value means the whole loan on an older building is not able to be claimed, so it encourages new building and increases the government tax return on older buildings. The net result is a steady stream of newer building.
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