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Is it time to scrap negative gearing?

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Australian Broker | 17 Jul 2014, 09:06 AM Agree 0
The Financial System Inquiry has raised the question whether negative gearing is doing more harm than good
  • Alex SA | 17 Jul 2014, 10:03 AM Agree 0
    What will happen to the construction industry if negative gearing was scrapped & how many borrowers would end up with negative equity in their homes? One small issue forgotten in this argument is the Banks still pay taxes on the income from their investment loans. Getting totally sick of one sided arguments being bashed by every Tom, Dick & Harry without taking a balanced view. What's more frightening is there appears to be a whole raft of advisors? with limited knowledge of the issues they discuss. Perhaps some of these experts should get off their cushy rear ends & find a proper job, i.e. go into business.
  • QEDRisk | 17 Jul 2014, 10:06 AM Agree 0
    Commentators treat "negative gearing" like it's some kind of magical gift to wealthy investors. It is merely the act of weighing up your costs vs your income! Scrapping negative gearing is tantamount to saying all businesses should not be able to claim expenses and must pay tax on revenue alone. Uneducated piffle.
  • John from Geelong | 17 Jul 2014, 10:14 AM Agree 0
    Negative gearing has been with us for a generation now and has served to compress 60 years' price growth into 30 years. It has to be unwound over the next generation but Government has to have the cojones to ride the adverse pressure that will occur at the outset.

    Many of us have our wealth tied up in property and the suggestion that we will not see our investment decisions perform so well in the future is difficult, but less so than creating a generation who can't compete in the market.

    I would like to see a more level playing field where owner occupiers and investors can compete evenly. This would include indexation of stamp duty that costs a ridiculous proportion of the cost of acquisition compared with 50 years ago when the scales were introduced (here in Victoria).

    It is hard to see any government having the courage because they rely so heavily for funds on the trade of property.

    I don't have an easy answer.
  • Rosemary Johnston (PIAA) | 17 Jul 2014, 10:22 AM Agree 0
    Isn’t it other Government policies that are driving housing prices? The Reserve Bank recently published a document showing that employment was increasingly concentrated in the capital city CBDs and that this trend was expected to continue. As a result demand for housing close to these key employment centres has strengthening significantly driving out affordable options.

    Wouldn’t a new policy that supported the relocation of Government Departments to key regional centres provide decentralised employment, increasing confidence in these communities, and affordable housing in one coordinated effort?
  • QEDRisk | 17 Jul 2014, 10:27 AM Agree 0
    Commentators treat "negative gearing" like it's some kind of magical gift to wealthy investors. It is merely the act of weighing up your costs vs your income! Scrapping negative gearing is tantamount to saying all businesses should not be able to claim expenses and must pay tax on revenue alone. Uneducated piffle.
  • Old Broker | 17 Jul 2014, 10:33 AM Agree 0
    What and we are going to wait for the government to build new housing. Have a look at the houses they built where they last attempted it. What about Positive Gearing will they abolish that or will they have their claw out for that one only. Its all rubbish and what we need is purpose built infrastructure with housing nearby to be expanded out from the Cities and larger towns.
  • Wozza | 17 Jul 2014, 11:33 AM Agree 0
    Or we could think totally outside the square in an effort to re-distribute wealth AND help first home owners. Lets eradicate negative gearing on all investment purchases after today's date so that existing arrangements aren't affected. Then make the interest on FHO loans tax deductible for the first five or ten years. That's incentive and rationalising the whole process
  • Chris | 17 Jul 2014, 11:41 AM Agree 0
    It's not negative gearing forcing up prices and making it impossible for FHB's - its more the cost of land, stamp duty and excessive LMI costs.
    Get a new topic of discussion without wheeling this one out every 3 months...its as exciting as a regurgitated story on A Current Affair.

    Try this topic...Why can't someone investigate how land developers can force buyers to get Finance Approval within 14 days of Contract signing when land doesn't even title for 9 months, leaving them exposed if they can't get finance closer to settlement?
  • Dave | 17 Jul 2014, 11:41 AM Agree 0
    If they scrap negative gearing I'd have to put up the rent to keep my investment returns the same...properly not the effect the Govt would be looking for!
  • realist broker QLD | 17 Jul 2014, 11:46 AM Agree 0
    I think the scrapping of negative gearing or at least halving the tax deductability could make sense if it provides the funding for the government to offer tax breaks / deductions etc to first home buyers - the % of new approvals which are for first home buyers is far too low. So if we incentivise first home buyers and more return to the market via tax incentives at the expense of neagtive gearing tax breaks afforded to existing investors I think it certainly needs to be considered as part of a sensible review of housing policy.
    I think there also needs to be an introduction of significant taxes / stamp duties applicable to foreign purchases - the whole issue is complex but worthy of serious debate
  • SituationNormal | 17 Jul 2014, 11:49 AM Agree 0
    Adding up all types of immigrants plus New Zealanders, Aust has upwards of 500,000 people added every year to our small population. These people move close to Melbourne, Sydney or Brisbane. Our youth unemployment is at approx 17%, and in areas, much higher because it is much cheaper and easier to take on a very keen migrant or 457 visa holder. With such massive pressures for accommodation, plus the huge range of Govt taxes and fees on new blocks of land, GST on construction, local council fees, utility connection fees, infrastructure levies, bushfire levies etc etc, of course housing is getting more expensive. That said, the growth is in line with LONG TERM averages for the past 130 years. Some years there is no growth, other years are catch-up years. Whats the problem really? I'm surprised housing is still relatively affordable. Remove -ve gearing and tent cities will pop up everywhere.
  • SIDBROKER | 17 Jul 2014, 11:52 AM Agree 0
    With out negative gearing there will be a disaster. Investors will need to sell their investment property flooding the market. Prices will plummet. Down the track there will be huge shortage for homes to rent. Need I say more.
  • Alex SA | 17 Jul 2014, 12:02 PM Agree 0
    The FHOG schemes are already being abused by a majority of purchasers. Offering further tax incentives will only drive up prices as more supposed FHB owner occupiers get into the market. Ever notice that the moment governments offer incentives, developers increase their prices?
  • Patrick | 17 Jul 2014, 12:34 PM Agree 0
    The RBA recently published a view indicating that renters may be better off than homeowners over the long run. Has it occurred to anyone that this might be what most young, never owned a property, people might think. Maybe they just see it as a bad investment and are happy to rent from all the negatively geared speculators.
  • David | 17 Jul 2014, 01:14 PM Agree 0
    One of the reasons for less FHB is that people now are choosing to rent a lifestyle rather than settle for buying a new property in an outlying suburb.They don't want to spend hours travelling to work
  • Wozza | 17 Jul 2014, 01:30 PM Agree 0
    Dave. With my suggestion nothing would change for you so no need to increase rents.
    Alex - if there are FHB rorters, report them! I see little evidence of this occurring
    SIDBROKER.No change to current arrangement! No market flooding
  • Alex SA | 17 Jul 2014, 01:51 PM Agree 0
    Wozza. FHB investors are using the system i.e. only need to reside in the property for 6 of the first 12 months & you also qualify if you presently own an investment property but never occupied it. In SA that was $23,500K including the construction grant for all purchasers of a new property. Also, I'm not sure how much more incentive FHB want.
  • SteveL | 17 Jul 2014, 04:25 PM Agree 0
    First "Home Buying" is low yes. But "First Property Investing" is well on the rise. Younger people have woken up and are looking to invest first and live in the location they want to. Makes economic sense and will deliver a much better result than going o/occ would if done properly. As for stopping Negative Gearing....not a chance. Rents would skyrocket because houses would still have to be built and someone has to pay! At least this way a decent honest hardworking citizen can get back some of their hard earned taxed before the Government of the day wastes it on crap!
  • Spud | 17 Jul 2014, 04:56 PM Agree 0
    The stupidity....
  • Jeff Mazzini | 17 Jul 2014, 05:58 PM Agree 0
    Collapse the negative gearing system in place now and watch the house of cards collapse. The economy is now being driven by high building starts and potential outcomes could lead us into recession. This discussion keeps popping up time after time, year after year but most western nations rely on property to provide income for governments and employment for their people. Yes it will overheat in time, interest rates will rise, bad debts will reappear but thats all part of the 100 year plus investment clock cycle.
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