Negative gearing decision 'hard but fair'

tryagain on 13/02/2016 - 11:40

http://www.skynews.com.au/news/top-stories/2016/02/13/shorte…

I am not a "Labor Person" but I think this isn't really hard but more so common sense, the only downfall I can see is a spike due to people trying to get in before its implemented. I also think it would make sense for the Turnbull government to grab it and implement it this year while there would be bipartisan support, Hockey was once attributed as saying that the easiest savings to implement are the ones the opposition has proposed, doing it for the coming financial year would also limit the time to a point where the a spike would be unlikely. I am interested to hear what the arguments against it would be both from a policy and politics point of view and what people think about it in general.

Poll Options

  • 195
    I think this is a good policy.
  • 97
    I think this is bad policy.
Financial

Comments

      • Davros on 13/02/2016 - 18:11

        Stop telling porkies.
        There are whole cities and townships full of cheap housing and people are living in the houses.

      • rgr on 14/02/2016 - 02:35
        +10

        maybe because it's too far from where they work - i'd hazard a guess and say the average house buyer most likely has a white collar job in the city centre. cheap houses are slowly becoming 1hr away and further, towards the city.

        • DarwinBoy on 14/02/2016 - 09:42
          +3

          Pretty much. I chose to have a house over a unit but at the expense of a 60km drive to work( unit would of still been 25km)

        • captobvious on 14/02/2016 - 10:31
          +14

          @DarwinBoy: holy shit 60km out of darwin would be half way to indonesia

        • DarwinBoy on 15/02/2016 - 09:52
          +1

          @captobvious:
          Lol. Or half way round the harbour.

        • Frozensage on 15/02/2016 - 11:33
          -1

          Plenty of ppl at my work travel 1-2 hours to get to work on the V/Line. So either you can sit on your ass complaining till the "government" come help you. Or you can make it work for yourself. Begger can't be choosers.

        • rgr on 15/02/2016 - 13:40

          @Frozensage: the ultimate solution in this current climate is to make enough money to afford a place that is appropriate for your needs that is close to work, however not everyone is in a position to do so. i'm sure people would love to reduce commute time to near zero but it's much easier to complain for the time being because they're just too tired from putting up with commuter stress after an 8 hour day.

        • Frozensage on 15/02/2016 - 17:21

          @rogr: Buy a house further away, rent it out, use that money to rent somewhere closer, maybe even rent an apartment if you live near the cbd. Claim negative gearing, sell the house in 10 years and pay not CGT cause it's a PPR. Much better solution.

        • Providence on 15/02/2016 - 22:22
          +2

          @Frozensage:
          How would it be Priciple Place of Residence if you are not living in it and were renting it out for 10 years?

        • LurvinOZB on 15/02/2016 - 22:32

          @Frozensage:

          I couldn't make sense of this too, pls explain

        • serpserpserp on 16/02/2016 - 20:03
          +1

          @Frozensage:

          Plenty eh? 2 hours just to get to work? Every day? Yeah I am sure "plenty" of people are doing that (I actually bet it is less than 1 in 100 people)

        • konazz on 17/02/2016 - 14:12

          @Providence:
          Live in it for 6 months (or less if structured correctly) then rent out for 6 years. Rinse and repeat

        • brentsbits on 19/02/2016 - 00:12

          @Frozensage:

          That's true.

          However it's the negative gearing laws and the insistence of the government on propping up the housing bubble and preventing it's burst that has made us beggars. So, it's really up to the government to fix it.

          Also, what is the government for if not to help all of it's citizens, not just the privileged few.

      • brentsbits on 19/02/2016 - 00:11

        That's why it's cheap. Supply and demand.

        I wouldn't suggest that laws be made so that Toorak (or your capital city's equivalent) be made affordable to first home buyers.

        However, prices are usually dirt cheap for a reason.

        You could get a house for $10k in Detroit. If you were willing to live in a town with rampant crime and no employment. Sounds like a dream come true to me.

    • SeVeN11 on 14/02/2016 - 01:13
      +4

      You don't need 20% to get in. That's a myth.
      Moat bank will lend 90-95% for owner occupied properties.

      You just need to pay lenders mortgage insurance which will cost 2-3% of the loan amount.

      Some Banks will also lend to go you.

      If you plan to own a house some point in your life and also plan to own a house the day you die theb paging mortgage insurance is not that expensive because the cost is spread out over your life.

      Now… If you cant afford 5-10% deposit then you haven't saved enough or buying outside of what you most probably should.

      • captobvious on 14/02/2016 - 10:32

        It is definite possible Some brokers will get you to take out a personal unsecured loan to make the deposit.

      • ItsMeAgro on 15/02/2016 - 10:24
        +1

        You don't need 20% to get in.

        Of course, but you need 20% deposit to make buying a house not a foolish waste of money.

        It's not hard to figure out that you're better off renting and saving the rest until you have a decent deposit.

        • konazz on 15/02/2016 - 10:51
          +4

          Not always.

          We were struggling with high rents in Canberra. $350/week for a little shoe box unit where we had to heat it 24/day in winter so we didn't freeze.

          we bought OTP with no deposit on the canberra fringe (<20 mins from CBD), but we had to put $10k down. By the time we ended up at settlement (2 years later), we were at LVR90%. My parents guarantored the remaining 10%.

          Within 12 months, we had dipped below 80% LVR and the guantorship was removed. 24 months later, we're sitting on >$100k in equity. We haven't put a single dollar on top of our loan - we pay around $430/week in P&I. Next door is rented out at $450/week, for EXACTLY the same house (although our place now has a deck/pergola, buffalo grass, CAT6 in the walls, 8.1kw aircon vs 2.1 next door and many things).

          Buying somewhere cheap was the best thing, and because i'm on NBN, i work from home 2-3 days a week.

        • Zanadar on 15/02/2016 - 14:38
          +2

          Do the maths.

          You may find that you are still better off paying LMI/higher interest rate to get in now when you factor in modest appreciation when compared to renting.

        • Slo20 on 15/02/2016 - 18:12
          +3

          @Zanadar: assuming house prices don't drop in time it would take you to save the extra deposit.

        • Zanadar on 15/02/2016 - 23:07
          +1

          @Slo20: Yes assuming that, but generally house prices don't drop.

    • knk on 16/02/2016 - 11:32

      With mortgage insurance you can do a 5% lvr, at least you could a few years ago. Sure you lose a bit of money on the insurance, but if it gets you out of the rent game it may be advantageous.

  • moo on 13/02/2016 - 12:52
    +27

    I do hope they get rid of negative gearing and let the housing market reset itself. Sure there will be casualties and dire consequences, but it will reduce the barrier of entry especially for the younger generations. Bring it on!

    Probably will get negged by mum n dad investors who overcommitted đŸ˜„

      • moo on 13/02/2016 - 13:53
        +12

        Don't disagree that those are contributing factors too. But when the median house price to average income ratio is too high, seems like renting ya be the only viable option.

        • zealmax on 14/02/2016 - 10:38
          -1

          There are plenty of affordable houses in the outer west. People should get realistic and buy where they can afford rather than blaming the government and investors for thwir reason not being able to buy in Double Bay.

        • macrocephalic on 15/02/2016 - 11:57
          +1

          @zealmax: What do you consider outer west? Bathurst?

        • zealmax on 15/02/2016 - 12:00
          +1

          @macrocephalic: There are 2 bedroom units in the Blacktown area that are quite affordable, and have good public transport and amenities. Blacktown is the new Parramatta. There was a time where places like West Ryde and Epping were places where only the working class would live in. Look at it now, you need a household of income of 200k+ to live there.

      • r3dfusi0n on 14/02/2016 - 00:02

        You have no idea what you are talking about.

      • rgr on 14/02/2016 - 02:33

        we're actually not lazy, the older boomers need to hurry up and get killed/die off so you can stop leeching off the system with no return. i get real shitty when older people sit and point fingers and talk smack - bunch of out of touch, high-horse neurotypes.

        • hazzad on 14/02/2016 - 08:24
          -1

          Because clearly you will never get old and expect to take advantage of benefits that you are entitled to, will you?

        • rgr on 14/02/2016 - 11:05
          +4

          @hazzad: no one is entitled to anything in life.

        • JohnHowardsEyebrows on 15/02/2016 - 13:38
          +4

          @hazzad: The difference is, the younger generations will never have gotten this free kick in life (cheap property gone gangbusters because of tax system, planning etc). And we probably won't even get half your pension entitlements either!

      • DarwinBoy on 14/02/2016 - 09:47
        +6

        The children now love luxury; they have bad manners, contempt for authority; they show disrespect for elders and love chatter in place of exercise…

        Socrates over 2000 years ago. Sounds like the same issues or maybe people's viewpoint of the current generation is always the same.

      • Talonparty on 15/02/2016 - 17:34
        +4

        People like you are part of the problem not part of the solution. My wife and I should be very successful on paper. I have a bachelor of engineering and a bachelor of science and my wife has a bachelor of commerce. An engineer and accountant couple should be making more than enough on paper to save a deposit and move into a house.

        Except the job market is in shambles. People like you will call us job snobs except my wife takes what she can get - she is exploited and paid under the minimum wage by illegal cafe/restraunt/food service businesses. Fair work Australia does literally nothing to help. I work in a supermarket in a casual job as well as another job tutoring and I am interviewing for a third job tutoring with a different company.

        We are trying so hard, I barely make enough to pay my rent most of the time. I take the jobs I can get and people like you accuse us of being lazy and entitled, still having the nerve to call us job snobs when you have no idea how hard it is at the moment.

        I don't even know why I'm bothering to defend myself or appeal to your emotions, you seem like a real piece of work. I hope one day you are given the perspective to understand what it's like on the other side. I hope it happens to you very suddenly and very forcefully and I hope for a moment you are able to see just how terrible and truly toxic your attitude is.

    • nautic on 14/02/2016 - 03:42

      …

    • Frozensage on 15/02/2016 - 11:34
      +3

      Did you read the article? It says future purchases… Your mum and dad investors would already be loving life and not be affected. HOwever, if YOU ever decide to get on the gravy train in the future, guess what?

    • speedracer on 15/02/2016 - 16:45
      +5

      You will have a two tier system of the haves and have not's. Past investors who benefit and newbies who don't get to sponge off negative gearing. The government is rigging the system so the winners are the ones already on the gravy train.

      • trongy on 15/02/2016 - 23:11

        The number of negatively geared properties will decline over time as they either:
        * are sold
        * become positively geared when enough of the loan is paid off to a point where rent income exceeds losses.

        Affecting current investments would be much more disruptive and far less palatable to a large segment of voters.

        • speedracer on 16/02/2016 - 18:12

          Does not mean that it is fair though - the distortion remains. The system remains rigged. I would want to see a 10 year grace period for Existing purchases to remain under the current or amended system. That is ample time for such an adjustment. I own two positive geared properties. The first thing i'm going do is to borrow on them and turn them into negative geared properties and probably never sell to get the NG benefit indefinitely.

  • MITM on 13/02/2016 - 13:00
    +4

    1st time buyer vs investor @ auction
    Investor gets 30-50% back from the taxpayer
    Investor hold 2+ properties - but his kids can't afford 1 and will have to wait for inheritance to "own" 1

    • zealmax on 14/02/2016 - 17:23
      +1

      The investor needs to pay CGT. His kid will listen to the investor parent and buy cheaper area with long term growth potential. The kid will do this number of times and will reap the rewards. At this point in time the kid has enough buffer to invest in more volitile investments for short to medium term returns. The kid will ask his parents if he did a good job and also ask for his inheritence.

    • konazz on 15/02/2016 - 10:59
      +1

      Yep!

      Investor who bought property in 90's in Sydney now has $700k in 'usable' equity to fund multiple 'deposits' without a cent being 'saved'

      Kid has to rent somewhere, then save $$$ on top and hope that payrises keep up with inflation to keep up savings.

      Here's another one: in ACT and NT, as the land is not regarded as freehold, but 99 year leases, stamp duty is fully deductible to the purchaser if they put a tennant in. I've seen short 6-term contracts spanning the end of a financial year, then the owner/investor deciding to move into that property.

      I've seen more and more of my friends and clients purchase a property, NG it for 2-3 years, then move into it after, but still requires LOTS of cash + parents guarantoring the loan.

      At zealmax, CGT is payable AFTER the property is sold. I'm sure FHB's wouldn't mind paying CGT (at a greatly reduced 50%) if they could just get a foot in the market somehow.

      Also remember,that for SMSFs buying on LRBA's, CGT payable is only 10% (1/3 reduction of 15%). You can REALLY leverage your borrowing in an SMSF. Then withdraw it all tax free @ Preservation age!

    • Frozensage on 15/02/2016 - 11:36
      -1

      investors and first home owner are different buyer group. When you are investing you look out for different things than someone who will be living at the property. Don't let the media get in the way of selling a good story though.

  • Diji1 on 13/02/2016 - 13:13
    -1

    So uuuh … who is going to subsidise rental housing after the investor money moves into other tax sheltering investments?

    It seems very unlikely to me that it will occur due to the Australian economies reliance on residential property.

    It wouldn't surprise me if this policy was as ill-thought out as HNIC Turnbull****'s recent GST stupidity - zero thought at all went into the announcement. He is know trying desperately to avoid any talk of GST after the Treasury leaked a report showing that 15% GST would do nothing at all to the gummints tax income.

    • CheapandUsed on 13/02/2016 - 14:53
      +9

      Based on that logic, why don't we cut out the leeches in the middle and just have the government subsidise the renter?

      • elektron on 13/02/2016 - 19:38
        -1

        Because the current system benefits both the renter and the investor from the same subsidy. Most of the 'leeches' you speak of are mum and dad investors who have been saving up for years or even decades to buy an investment property.

        Class warfare much?

        • CheapandUsed on 13/02/2016 - 19:56
          +36

          Lol, yeah the "mum and dad's"

          The director of the Grattan Institute, John Daley, says negative gearing - the practice of using losses on property investments to reduce taxable income - and the associated capital gains tax discount disproportionately benefit Australians in high-paying occupations, not those of average incomes.

          He says anaesthetists, surgeons, finance managers, mining engineers, and lawyers, are far more likely to negatively gear their properties than so-called 'battlers'.

          http://www.smh.com.au/federal-politics/political-news/negati…

          This also shows that negative gearing is used mostly by those earning above average wages, they also gain the most benefit.

          http://www.domain.com.au/news/factcheck-are-average-earners-…
          beneficiaries-of-negative-gearing-20151124-gl66d3/

          In that article they are also using after tax figures, so $80k after all their deductions, well above what most 'mum and dad's' earn.

          But really, this whole debate is a sideshow: Australian housing markets are now some of the most expensive in the world (only being beaten out by Hong Kong, which actually has a land supply issue), Aussie housing is now worth $6 Trillion or about 4 times the GDP of the entire nation, and an average house is 11x the average income. But the real kicker is that anyone is welcome to come and launder their money through our houses because real estate agents can't be assed checking ID on a million dollar transaction, even though they will go as far as to give you a rectal examination if you dare apply for a rental…

          This country is great in so many ways, but its housing is an absolute clusterf*#k of greed and stupidity.

        • caramellokoala on 13/02/2016 - 23:30
          +7

          @CheapandUsed: hmm watch no one reply to this comment from the pro-neg-gearing crowd. It completely dispels their whole mum and dad investor mantra.

        • DavidFong on 14/02/2016 - 17:25
          +1

          @CheapandUsed:

          Agree that the largest (individual) beneficiaries of negative-gearing will be wealthier individuals with more wealth to invest, and larger incomes and higher marginal income tax-rates.

          However, from the political, and partly from the social, point-of-view, there is still a large number of average-wealth individuals who negatively-gear and whose income is not that dissimilar to the population who do not negatively-gear. Looking at one of the graph "Comparison of taxable income 2012-2013 ATO" in the Domain article, the median point ($80,000) for people who negatively-gear is well within the bulk of the bell-curve for people who do not negatively-gear.

          I am not saying that people who negatively-gear are, on average (median, mean, or otherwise) wealthier, and perhaps less deserving of a tax-deduction, than people who do negatively-gear. I am merely stating the political problem that when the government talks about 'battlers' who negatively-gear, you can perhaps substitute the words "a large number of swinging voters, many of whom are part of 'middle' Australia".

          As to whether foreign investors are contributing to over-inflated housing prices, much of their investment is directed to new housing (good for housing stock, and good for Australian jobs). If they purchase existing housing stock, none of it can be shipped overseas, and can only be rented out to or used by people living in Australia. And if you are thinking of Chinese investors who actually live in the property they purchase, their focus of interest is in a relatively small number of suburbs where there are decent Chinese restaurants and schools which already have a high-proportion of high-performing Asian students. My apologies if your dream of purchasing a dream home with harbour-views is just a little bit more distant…

        • Flet on 14/02/2016 - 21:11
          +4

          @DavidFong:

          The Property council has cited ATO figures to say that the median income for loss making negative gearers is $80000. This is deceptive. The ATO data only looked at the taxable incomes of people who lodged tax returns. Many negatively geared properties are owned by people with low taxable income but high actual income because they were drawing untaxable income from super, or reducing taxable income via negative gearing! See this article:
          http://www.macrobusiness.com.au/2016/02/morrison-once-and-fo…

        • DavidFong on 14/02/2016 - 21:51
          +1

          @Flet:

          Thanks Flet. That makes sense. I have no doubt that people with greater income and wealth would have a greater ability to purchase investment property (with, or without, a loan), and the data would support that people with higher income and wealth do invest in more property, and derive the greatest individual financial benefit from negative gearing.

          In the article you quote Morrison : Once and for all time a property parasite?, which in turn quotes a Guardian article, there is a graph of number of people in the ABS statistics who own investment property, categorized by income quintiles.

          • The higher the income quintile, the greater the number of property investors
          • The median income for property investors lies in middle of the second highest quintile
          • It is of note, to me, that the number of investment property owners in the highest income quintile (590136) is exceeded by the number of investment property owners in the three lowest quintiles (593154).

          I would still contend that the government is more likely to be worried about the 'aspirational' investors in the three lowest quintiles than the 'comfortable' investors in the highest income quintile.

        • JohnHowardsEyebrows on 15/02/2016 - 13:39
          +3

          @Flet: Asking the property council for comment on this policy is like asking Shane Warne what he thinks about feminism.

        • burningrage on 15/02/2016 - 16:42
          +1

          @CheapandUsed:

          I wouldnt use Grattan institute as a substitute economic policies. It would be like asking ACOSS to run Treasury.

    • tryagain on 13/02/2016 - 14:35
      +13

      I think that still allowing it on new purchases as proposed would if anything boost housing supply and therefore make renting if anything easier and cheaper. I think housing should be thought of first and foremost as habitation for people as opposed to a speculative investment.

    • MrEs on 13/02/2016 - 16:38
      +1

      They were able to remove it in many other countries with highly positive outcomes, but "it's different here" rollseyes

      • nautic on 14/02/2016 - 03:45
        +2

        and how many of theses countries have a population of 20 million.

    • serpserpserp on 13/02/2016 - 20:18
      +1

      You will try to pass on the costs to your renter, but then they'll move out and find something cheaper. Then you'll be down the hole a few grand immediately trying to get someone back in at a higher price. Even if you up the rent slowly you'll still be running at a loss.

      This will really only affect the people who have got into investment properties recently or a geared on a portfolio of investment properties. Otherwise all the baby boomers who already have a handful of place are already positively geared or close to it anyway.

  • CheapandUsed on 13/02/2016 - 14:52
    +4

    This should be interesting.

    Treasurer Scott Morrison was "National Policy and Research Manager for the Property Council of Australia." https://www.scottmorrison.com.au/biography

    I wonder if he is still playing on their team or on the side of what's best for the country?

    The graph in this article is interesting, rather than building new supply, the price of existing has been bid up.
    http://www.businessspectator.com.au/article/2014/7/9/austral…

    • tryagain on 13/02/2016 - 15:23

      Thanks C&U, whilst there is always differing views the figure's used seem to confirm the thoughts I have had on the issue.

  • gringo on 13/02/2016 - 16:19

    limiting it to new houses etc will just make people get around it in some other way.

    e.g. taking an existing property and modifying it just enough to make it a "new house". Tearing perfectly good older houses down and rebuilding for the tax benefit. etc etc.

    I'm sure there are a million loopholes here.

    The only way is to get rid of it for everyone overnight - no retrospectivity. People affected might be able to apply for compensation - but it shouldn't be guaranteed.

    The forestry scheme rorters got no compensation, excessive negative gearers shouldn't either.

    • serpserpserp on 13/02/2016 - 20:20
      +5

      It'll be a new dwelling mate. so buying a place and adding a new dunny and deck out the back won't cut it.

      • gringo on 13/02/2016 - 20:22

        Place up the road they did a reno by gutting and replacing almost the whole thing - remove a couple more beams and it'd be a completely new place.

        Wouldn't change the amount of work available in the slightest.

        It'll probably create a new industry "phoenixing" existing property to be negative gearing eligible - as it would be the best value-add possible.

        EDIT: here's another one - buy an existing property with large backyard, build a granny flat at the back and sell the whole thing as a new residence with NG available.

        • hazzad on 14/02/2016 - 08:35

          Why on earth would someone spend ten of thousands of dollars to just get minimal to little return? Ultimately I doubt that would result in the property being new. Id say they would have stringent definitions of what exactly is termed new and not a Reno job.

        • SeVeN11 on 14/02/2016 - 12:58
          +1

          Negative gearings works on the loss incurred from the rental income and property outgoings.

          If you sell it, you just pay the capital gains and there will be no more negative gearing.

  • dwhes on 13/02/2016 - 16:34
    +16

    Personally I don't see how it is that hard to get into the housing market if you save and start with a realistic purchase. Sure if you want to buy in Sydney or Melbourne or go after your dream home you are in for a shock. But if you really want to get in there are plenty of affordable options out there. I am young still and bought my first home 3 years ago at 24 with my wife. We didn't have 20% and copped some mortgage lenders but still managed to put down a solid deposit after paying for a wedding in full the previous year. After living in our house for a couple of years we are now renting it for a good return and will be looking to buy our next in the next couple of years. The only benefit we received was no stamp duty as it was our first home. I earn a good wage and she earns a fairly low wage, but I worked hard to get to where I am now and I was on a fair bit less when we bought the house. Also we have both lived out of home since 17 and paid rent since then. I don't see why it's hard for anyone else to do the same thing and why the housing market needs to be reset? All it takes is adjusting your priorities if you want to achieve it. And not having kids young..

    • dwhes on 13/02/2016 - 16:41
      +5

      Rather than just neg me, please actually comment on why you disagree. My partner and I had a goal and worked towards a house we could realistically afford. I really don't understand why others can't do the same thing. You might be able to afford a more expensive or less expensive house than I bought. But the options are out there and achievable if it's what you want to do.

      • tryagain on 13/02/2016 - 17:53
        +4

        Being DINK's with one of you on good money yes it is probably reasonably achievable if as you say you make it a priority, many dont fit into that catagory however. From some very quick calculations 2 people earning the average Australian wage buying a house at the median Australian house price repaying at historical average home loan rates would be considered to be in mortgage stress, with one of the highest house price to income ratios in the world I think although some like yourself might find it achievable but many don't and if there are policy's contributing to this they should be evaluated. It might mean you evaluating a second purchase but if that results in someone else being able to purchase a home to live in I would think that as a good outcome. As a matter of intrest are you currently renting? I didn't DV you btw

        • dwhes on 13/02/2016 - 18:31

          I'm not against the reforms really. Think labors proposal is actually quite reasonable. I'm just not of the opinion that any tinkering actually needs to be done if people really want to buy a home. I think people just need to reevaluate where they buy and what is achievable. So many people complain these days without evaluating their situations and what they could do to achieve their goal of owning a home. Is the average Australian wage currently considered to be ~$60K? If so when we bought the house between my wife's wage and mine we were on the equivalent of 2 people on average wage. Now we are in a better position but for actually buying the house and at least a year or so after we were what most would consider average and were under no stress. No we don't have kids yet but again it comes down to organising your priorities. And I'm not sure what to say in response to your question about me having a second home vs someone having a first. That's a whole other question. Getting into the socialism vs capitalism vs communism debate. Which I don't want to get into. And yep currently renting.

        • tryagain on 13/02/2016 - 19:01

          @dwhes: My comment about you buying a second place is more a general thought than something specifically targeted at you, if you are able to afford a second place already well done but in general id rather people thought of investing elsewhere first (I am guessing you have moved away from your original house so its a different scenario than most). We will always need landlords but it seems in general housing is seen as the primary speculative investment people think of and negative gearing seems to be a major reason for this. I would rather for the most part it was thought of as habitation for people. I based my figures on a wage of 75k/yr, 600k loan and 8% interest rate and mortgage stress is considered if you have to pay more than 30% of your income on the mortgage. Ideally I don't think people should have to make a choice between a house and kids.

        • dwhes on 14/02/2016 - 12:18
          +2

          @tryagain: Fair enough. I just honestly think that a lot of people trying to get into the housing market are focused on living exactly where they want to live and exactly the type of house they want. Without looking at themselves first and if they could maybe live further out, take a small apartment, reduce their spending to save more. This is a larger discussion but it comes back to the mindset of a lot of people now to immediately look to the government to solve or fix things. We knowingly bought our house that it was far from perfect but would be decent for us to start out in. With the intention of putting a dent in it early, building some equity and working towards what we want. Yes we moved not long after buying for my work. I don't think people should have to choose between a house or kids either, but I do think that you can't have everything at once. Unless you have the income to support it. For us it was about building a solid stable base for our future before we start with kids.

        • zealmax on 15/02/2016 - 01:27
          +1

          My first home was way below the median. Unless you can get financial assistance, majority of people on median wages will not be able to start with median priced property. Probably need to start lower and move up. Median salary does not mean you will be able to afford median priced property, car or middle class life style. However it will allow you to get there with couple of good decisions earlier on.

        • dwhes on 15/02/2016 - 11:02

          @zealmax: exactly.

        • zealmax on 15/02/2016 - 11:58
          +2

          @dwhes: I know it is frustrating not being able to afford the house that people want. I have first hand experience with that. All I could afford was a fibro shack out in the west with quite a stigma. Areas with bad and out dated stigma, with good public transport is like a gold mine. I don't think people that have worked hard and legally within the current system should be penalised for what seems to be leading to an affordability situation. They did nothing wrong, in fact they did the right thing. Also the term investor, is so broad. I have many first home buyers who are investors. They live with their parents and would like to knock down their mortgage before moving in. They end up renting the property out for few years, until they are ready to move in. Mum and dad investors have worked hard to pay for their house and have a little spare money left over that they invest in another house to with the hope of supporting their retirement. These people are smart enough and patriotic enough not to rely on the age pension. Why should they be penalised? Housing frustration should not be taken out on these people. Now developers are another breed of investors, and that opens another can of worms.

      • Frozensage on 15/02/2016 - 11:39
        +3

        It's easier to neg, just like it's easier to sit on your ass complaining you have been left out, rather than going out there and making it work and living within your means so you can save a deposit. And ultimately, maybe some ppl aren't meant to own a house. If my parents can come here with just 2 brief cases of cloth and still be able to send me to private school and pay off a mortgage, there's no excuses for anybody.

    • gringo on 13/02/2016 - 17:59
      +9

      I don't care about buying a house at all - it's just about fairness. Government should not be involved in protecting investments to the detriment of others.

      If we have built up a situation where people can't take a 10% loss on housing or a couple of % increase in interest rates without going bankrupt - then the incentives are just all wrong.

      • SeVeN11 on 14/02/2016 - 13:22

        I think people who choose to rent long term need to be careful… When negative gearing was abolished last time, investors sold out and resulted in the price of the property market dropping.

        More importantly, all these properties were previously rentals and the side effect was the number of available rentals on the market reduced and caused rents to increase.

        i.e. if you plan to rent for long term, the rental market may become more expensive as the number of available rentals shrink as they are sold.

        This time is a little different and I suspect it will shift the rental property on the market to largely new properties which generally rent at higher than older properties.

    • [Deactivated] on 14/02/2016 - 11:48
      +3

      Not everyone is as fortunate as you are and most of the time, it won't work out as planned for most of us IMHO.
      Accepting everything as it is now and just working "hard" for it will keep "fuelling" what might be wrong and unfair for most of the unfortunate ones. I'm not saying , working hard is wrong , but what I'm saying is we should somehow show our "disapproval" toward the "economy" which is biased for the fortunate ones, in my opinion.

      • dwhes on 14/02/2016 - 12:10
        +2

        Is as fortunate as I am? So working for something now equals fortunate? You have literally no idea about my personal situation. And what have these unfortunate ones as you say done to better their situation and ability to purchase a home first? If you are referring to people with disabilities or inability to work, I am all for low priced ways for certain people to be eligible to purchase.

        • [Deactivated] on 14/02/2016 - 20:16
          +5

          That wasn't my point. My point was economic laws should be fair for everyone. Shouldn't just try to "save" the rich few. And we should show our disapproval, instead of just taking part (and working hard for it) in the rat race that was created by those in the top of so called pyramid.

          You as well know how ridiculously overpriced the houses are. How the trap of all these bank giving away "loans" to everyone and any number of times without being controlled by the law and how it's going to effect the economy.

          The banks are never at loss. They own the "title" and they get their interests. They make more "money" out of your debt. They sell your houses if you are at default and get their money back anyway.
          We are trapped into investing in more and more houses, which creates a false demand. A guy never stops at buying a single house, you gotta create a "ladder" , bank will loan you anyway. The demand never comes down, it keeps going up even the "population" doesn't agree. So, what happens, is your house price are always increasing. The supply are almost the same where you want to invest because your "location, location, location" for investment has no room to create a new house. And whenever there is a transaction, government and the bank takes a "biggest chunk". The buyer always pays a big pile of "stamp duty" and the seller always pays a hefty "capital gain" in the highest tax bracket, the bank gets their steady "interest" plus "10 times" more "money" out of your debt.

          So, what all we do? we work "hard" for it. We work hard to make it to that next investment and we are saving our money for that next "downpayment" and "stamp duty". We gotta buy before that next guys buy it. We gotta go to the auction to beat "that" price because the "location" looks really good and "bank" is loaning us anyway because we "made" such a big "capital" gain last year , we gotta pay the "capital gain" to this other guy who is selling.

          So, my point is lets just show a bit of disapproval towards this scheme, otherwise, even if some of use "fortunate" enough to make it , our sons and daughter won't.

      • burningrage on 15/02/2016 - 16:46

        Economy growth is build on the success on the "fortunate" ones. Without them there is no money to pay to support the less fortunate ones.

    • ItsMeAgro on 15/02/2016 - 10:37
      +7

      You're not seeing the bigger picture.

      At other times in Australian history, and in other parts of the world right now, you don't need two people's income (one of the decent) for years and years just to get started on a massive mortgage for a crappy old cheap property an hour from the city. People didn't need to wait until their late 30's to start having kids for purely financial reasons. People only had intense mortgage stress if they'd been greedy, not as a standard thing.

      Yes, it's possible to buy a home with a lot of hard work and sacrifice over many years, and it'd be possible if house prices were triple what they are now.

      That doesn't change the cold hard fact that Aussie property prices are utterly ridiculous, and the poor policies artificially propping them up need to go.

    • FatBlanket on 16/02/2016 - 22:04
      +2

      Completely agree mate. People living in Sydney and Melbourne should leave their friends, family and job and ship out to Darwin and buy a nice little place in the middle of nowhere with minimum deposit and mortgage insurance. Just gotta put your sleeves up, and get to it (being effed over that is).

  • GOFYS on 13/02/2016 - 21:03
    +7

    The USA allows a tax deduction against the principal place of residence, not just investment properties like here.
    So ten years ago everyone could negative gear and participate in the GFC. And in the USA, the owner had some protection, in that the could just hand back the keys when they couldn't pay.
    In Australia, the greedy immoral banking bastards will lend you more than you can afford, then strip all your assets if you default.
    The simple fact is you can only negative gear if you are losing money.
    You then pray you will make a capital gain when you sell.
    And it works until the music stops. And the government would not dare to accept any sort of accountability for that..

    • JimB on 15/02/2016 - 10:16
      +3

      "In Australia, the greedy immoral banking bastards will lend you more than you can afford, then strip all your assets if you default."

      The banks force you to borrow more than you can afford?

      That's the problem with people, no accountability when things don't go their way.

      • GOFYS on 25/02/2016 - 22:33
        +1

        It's not the people. The world is full of workers, people who struggle to succeed in life, and take what they see as opportunities thrust at them, and financed by what were once respectable, honest banks.
        Now banks are just a bunch of falsely credentialled property spruikers.
        When the battalions of banking experts tell Joe Average that his house is worth the collateral they lend against, he is fully entitled to believe them. Or should he know better, and not buy because, because…..ummm.
        And when they take his house and everything else he owns, it is because they were either wrong or dishonest. So who the hell is not accountable when things don't go their way?

        They are playing their last hands now.

        The bubble isn't in the housing market, it's in the Debt market.

        • JohnHowardsEyebrows on 26/02/2016 - 07:38

          Exactly. These statements about people not taking accountability for themselves show a complete pack of insight into human behaviour. In the case of housing especially, people have zero choice. The prices are sky high, and renters are looked down on. Older generations like to hector and tell gen y and z to move out to whoop whoop, and lose 10-15 hours a week commuting (like the older generations never had to do).

          The property market is indeed a ponzi scheme, and the performance of bank shares has been directly related to this madness. For that reason I gladly skim FF points off them by churnin gc credit cards.

        • GOFYS on 26/02/2016 - 18:24
          +1

          @JohnHowardsEyebrows: Well, a few points.
          1. I love your moniker. But I'd like to see how little Johnny would operate now without a mining boom to ride in on.
          2. I am "older generation", but I have seen how these banking dogs dragged my children into their ponzi, even in the face of my endless advice.
          3. We never had to commute long distances, but we did work out arses off so our wives could stay home to raise our children. We went without, and without and without, to educate our kids, to give them more opportunities.

          I don't want to get into a sexist argument, but the banks have stolen family life for your generation and your children, for their advantage, not yours.
          Skin them alive.

  • CheapskateQueen on 13/02/2016 - 21:42
    +14

    People think "negative gearing" is this golden nugget for rich investors, but it's far from it. Yes, it provides a tax break but there is a reason for it.

    Firstly, I'm currently renting out my apartment. Which means it's an "investment property" and it's negative geared. I'm not a rich investor. I'm just living at home renting it out to help with the mortgage..because I need help. A lot of people who buy property do the same thing that I do and I think it would be a shame for all of us to miss out on a little bit of help.

    Secondly, the actual concept of "negative gearing" = your expenses are greater than your income so that you have a loss. You deduct the loss from your taxable income and get some tax back. But in order to get "tax back" you actually have to be in a loss position. All negative gearing does, is reduce your loss. e.g. Your loss is $10,000. You get 30% back i.e. $3000. Your net loss is $7000. So you're still actually in a loss position. Making a cash loss isn't a smart investment.

    There are only 2 ways around this:

    1- Your capital growth per year (or in total) at least equals your net loss after tax. i.e. you need growth of $7k in the example year to break even. This seems doable but sometimes it's not when you're looking at much larger losses around the $20-30K mark.

    2- The only time negative gearing really provides a big advantage is when your rental property is cash positive but have a tax loss. This is when your rent is greater than your expenses but because of depreciation on the building and other assets, you have a tax loss. e.g. Rent is $25K. Expenses are $20K. You're $5K positive. Your property is brand new and has $12k depreciation. so now you have a tax loss of $7k. From that you get 30% back, say $2k. So now you've actually made $7k (5k rent surplus + $2k tax refund.) Plus you get your capital growth. This scenario is win-win-win for the taxpayer.

    The funny thing is, is that most smart investors aim for this situation and this situation works BEST with brand new properties, which offer the biggest depreciation. So then by limiting negative gearing to "new properties" it's actually not going to do shit all to stop investors from getting tax benefits because they'll still be buying up new properties.

    Meanwhile Bob and Jame Smith who buy a 10 year old house in the suburbs and live with their parents for the first few years so they can rent it out and help pay the mortgage, miss out on getting a small tax break.

    Perhaps they should limit negative gearing to just one property per person and not available to companies/trusts. That'll mean your average aussies still get the benefit for at least their main home, and it really focuses on reducing tax breaks for investors with multiple properties.

    • gringo on 13/02/2016 - 21:53
      +10

      People who realize the greatest benefit of NG deduct income they would otherwise pay at the highest bracket - which is 45%.

      Positive cash flow is only gained by screwing (often poor) renters through rental creep.

      Capital growth is only achieved by screwing the next guy buying (FHB).

      There is no win here. It is more like a ponzi scheme than rational investor behaviour.

      • burningrage on 15/02/2016 - 16:48
        -3

        Nobody forces anybody to buy property. No one is being forcefully screwed.

        Also if u dont want to pay the rent then dont live in a rented house. No one is forcing you to pay the rent you are paying.

    • SteatoLegato on 14/02/2016 - 11:04
      +1

      You are not understanding the whole premise of speculative investment.. If the property value goes up by 10% every year (Sydney property gone up 20% in 2015) then negative gearing reduces your taxable income while positive capital grown more than compensates you for that. It is best done with investments of more value or over multiple investments. I.e. RICH people that can afford multiple properties, need that "on paper loss" for negative gearing while reaping the profits of increasing capital in their property

      By the way, buying a negatively geared investment property that you can only afford by living at home with your parents.. is the epitome of stupidity… Not only you're wasting money on the interest but ALSO losing money via negative gearing by renting it out. you'd be much better off saving for a couple more years or waiting for the new legislation to come through so that established housing can come down a little from their stratospheric hights

      • CheapskateQueen on 14/02/2016 - 11:28
        +2

        ugh. let me not waste my time with a response.

        also, im cash positive but with a tax loss. #Winning

        • JohnHowardsEyebrows on 15/02/2016 - 13:44

          In other words, you win from the arrangement, so you defend it vigorously. Most of the country is subsidising your investment. That's not how it should work - especially if you haven't contributed to investment.

  • GameChanger on 13/02/2016 - 22:37
    +6

    This is a non thread Labor will NOT win the election.

    Malcolm has got it in the bag as long as Shorten is in charge.

    • Peck on 13/02/2016 - 22:51

      I agree. And because Labor has made it their policy the Libs will now certainly not do it.

    • gringo on 13/02/2016 - 22:56
      +2

      This is an opportunity for Malcolm to pull the rug on shorten by proposing harder cuts on NG (now GST is off the table). This really is a "Liberal" policy in the economic rationalist sense anyway.

      It would tick boxes as being a prudent and good economic manager, while highlighting that labor stands for nothing.

      As both sides would be proposing changes - there would be no political fallout.

      • Peck on 14/02/2016 - 10:19

        Tip from ABC 'Insiders' Libs. could 'cap' NG so that the high income earners could not NG their income down to $18,400 and thus pay no tax! Malcolm did not have the electoral 'ticker' (ie not worth the votes that would be lost) for the GST reform even though they are comfortably ahead (as long as they don't lose any more ministers due to 'on the nose' actions)

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