To those people who wants to know how negative gearing works. this is a good explanation and example.
Fundamental Focus: Negative Gearing, Backwards Thinking
Mod — please do not copy and paste the entire article.
Negative Gearing
dragonrabit on 18/06/2010 - 22:04
Last edited 21/04/2011 - 17:38 by 1 other user
Last edited 21/04/2011 - 17:38 by 1 other user
Comments
so long i gave up reading half way thru, but thats mostly coz im financially literate anyway. it is interesting to see the tax figures thou, the amount of people investing money, losing net income, in the view of capital returns. from memory the definition of a bubble, from financial literature, is someone who buys something expecting because it expects the price to rise, not because there is a fundamental reason for it to rise.
In other words, if over 1 mill people are negative gearing because they expect to profit from the capital gains, and are not covering their cost capital (ie, take in less rent than they pay in interest and costs) they are speculating in a bubble.
Ofcourse one thing that never gets taught is how long a bubble lasts before it bursts, but that depends on how hard the governments want to sustain it with grants and land restrictions etc.
the material above is copy and pasted twice, and reads like a spiel arguing for positive gearing with shares.
My god, this post is so long. :o
Okay, yeah, OP double posted it. Mods or OP should fix it.
Fixed. Shouldn't even copy and paste the entire article in the first place.
An over-valued property sector and an unstable stock market with major waves of failures overseas yet to be "accounted" for and tax payers footing bills that they'll never pay off ever except with a printing press. Why would any one even consider such a capital gains strategy in such an environment…
… the mind boggles sometimes.
With that said, this is a good explanation of Negative Gearing if one is financially literate enough to interpret it. :)