How to Stop Wealth Gap Growth (Real Estate)?

donkeydoc on 22/07/2022 - 12:30

With impending collapse of property markets, maybe 40% in 5 years time, how can we stop investors from buying up homes of the least fortunate defaulting home 'owners'? Would be a terrible outcome if wealthy investors expand their property portfolio, say from 15 homes to 25. What policies can help those that lose their homes to re enter at a fairer price?

There is a housing crisis and markets haven't behaved freely for the last 30 years. There needs to be a ban on residential property purchasing for anyone with $2M assets in real estate for the next 10 years. Capital gains and negative gearing are a joke.

Financial

Comments

      • Oneguyinmelb on 25/07/2022 - 11:31

        Agree, but I think part of the reason Labor failed was that they tried an 'all or nothing' approach.

        Start by introducing a cap that can be used for negative gearing (i.e. 10K) then when people realise it's improving affordability or helping the budget, gradually reduce it to zero over time.

        A lot of the time government fails to see the benefit in incremental changes….even though this was how they increased the pension age years ago, by making it occur far in the future as opposed to immediately.

    • netjock on 24/07/2022 - 22:07

      Pensioners with a PPOR of $1.5M+ should have their pension cut

      If I lived in a house and all the clowns decide the area of was up and coming and bid up the prices. Fools and their money going to make me pay? (I am not a pensioner) Then these clowns might have to sell out and I get in under the cut off and can live again?

      Or you want said pensioners to take their chances on the private rental market?

      • Oneguyinmelb on 25/07/2022 - 11:28

        You cut their pension and put a reverse mortgage in place…even it it was for 50% equity it would likely last for 10-20 years of expenses.

        They wouldn't have to move out, but it stops them living off the tax payer and passing all their wealth on to their family

        • netjock on 25/07/2022 - 11:59
          +1

          Hold on a second. So a bunch of clowns decide to push my suburb price up and indirectly pushes me into a reverse mortgage. Where as someone on $1.4m gets to keep their full pension and their home. So they die with $1.4m and I die with less. Think you might need to go back to the drawing board.

          (I don't have a $1.5m property or a $1m property for that matter, I think you need to have a plan and well thought out one at that point otherwise depending on great headlines is going to lose you an election)

          • Oneguyinmelb on 25/07/2022 - 12:07
            -1

            @netjock: $1.5M is just a an example of a threshold it could be $2M it could be $1M.

            Maybe it could be a 50% reduction on the pension at $1.5M and then completely removed at $2M.

            Though for fun, using your 'clown logic' -> "If a clown that owns a 1.5M property doesn't plan for retirement, why should the taxpayer need to fund their lifestyle with a pension cheque every two weeks"?

            • netjock on 25/07/2022 - 12:56
              +1

              @Oneguyinmelb:

              Though for fun, using your 'clown logic' -> "If a clown that owns a 1.5M property doesn't plan for retirement, why should the taxpayer need to fund their lifestyle with a pension cheque every two weeks"?

              Who said they didn't? The problem isn't with their plan. The problem is when someone decides to drawn a line. I am also sure pensioners in SE Queensland / Northern NSW didn't have in their retirement plan getting flooded 3 times in 3 months. You just think everyone can be blamed for not having a plan. Tell those about to retire people in 2009/10 that lost 40% of their retirement (if they are in the share market) and took 10 years to recover. I guess you are going to tell me someone else lending out money to sub prime mortgage borrowers is their fault too?

              $1.5M is just a an example of a threshold it could be $2M it could be $1M.

              Or could be $250k and just catch everyone except for renters. You guys are just pitching an idea thinking you'd get some up votes on an internet forum because you'll always find someone with a $1.4m property who don't mind hitting someone with $1.5m until next year when it gets revalued and they lose their pension.

              I would say be careful what you wish for. If someone decides $1.5m is the top 10% of property owners and you just make the cut because you got lucky (bought 20 years ago and it became prime property) and not much other savings than the standard 10% employer super guarantee for the last 30 years and on $60k a year.

      • [Deactivated] on 26/07/2022 - 13:23

        LOL. Notice the people who suggest this are never pensioners.

        • Person buys a house 50 years ago when they are worth same a second hand car today.
        • Everyone around them live in crazyland so pays higher and higher prices (the ONLY reason "the market" increases in price).
        • More McDonalds generation crazies again, pay nearly the same price for 1 bedroom in unit blocks as torrens titles.
        • 50 years later is forced to sell by law changes, driven by nasty, selfish little p___s of the "McDonalds generation" (who chuck a hissy fit if their McHeartattack isn't ready in under 90 seconds) because they can't repay their home loan in <10 years working 3 days a week coding from their spa.
        • So they're forced to sell, can't afford to rebuy in the area, have to move to Broken Hill NSW/Norseman WA, leave all their friends and family behind, and with no pension now spend all their house money on living expenses, winding up on the pension anyway…
        • Meanwhile, thanks to the McG crazies, property keeps going up and up and up.

        So the pensioner dies in poverty, if they have no relatives government doesn't get to sell their property off upon death and so LOSES ALL THAT INCOME and needs to charge the rest of us MORE TAX, or, if they do have relatives, those can never afford to buy a home because they received no inheritance toward a deposit. So now we're all paying 75% tax and the only people who can afford to buy property are filthy-rich scumbags in government thanks to their insider trading, and we're all paying 20% of our wages on rent. We all own nothing but are happy (supposedly).

        Well done comrades - great solution. ;-D

        • [Deactivated] on 26/07/2022 - 13:36

          Oh - and I forgot to say above… these changes would be "grandfathered" in. i.e. They can't change rules midstream and apply them retroactively to everyone. So guess who they'd affect, folks? Only the generation suggesting we force pensioners to sell their home and eat that money. So many of these greedy grubs who think stealing from pensioners will help them, will reach old age themselves, never receive an inheritance, have some unexpected health event in their lives resulting in them never buying a property, or if they did, they had to sell it to pay their health costs. So now THEY'RE reliant on a pension, collecting aluminium cans to pay to heat their rental in winter, and eating 1x meal a day of 2 minute noodles.

          • netjock on 26/07/2022 - 14:49

            @[Deactivated]: Correct. I'm 20 years+ (but not 30 years hopefully) from retirement age (current legislation) and I can bet the government is going to screw me over. Some people have been screwed over the the increase in pension age.

            On 1 July 2021, Age Pension age increased to 66 years and 6 months for people born from 1 July 1955 to 31 December 1956, inclusive.

            1992. The Superannuation Guarantee (SG) is introduced with a mandatory 3 per cent contribution rate (or 4 per cent for employers with an annual payroll above $1 million)

            The information above we can see that pension ages will keep on getting pushed back by 18 months for every 18 months, therefore in say 18 years the pension age will be well over 84yo.

            Smart cookies on here need to explain how people in 1957 and started work at 18 = 1975 who reach pension age at 2023 with only 31 years of below average super guarantee contributions is going to survive given the increase cost of living.

            Some people just think for themselves, and don't realise that fixing it based on right now will have 30 years+ impact on people retiring.

            I hope people who are in their 20s and 30s with their bright ideas about eating your own homes are going to enjoy reverse mortgages until they are 80+ years old to get their government pension.

            (full disclosure, I don't have a property that is close to $1.5m, neither do I make the $250k average OzB salary, I am not near pension age, I full expect to have very little government cash hand outs in retirement)

    • tomfool on 25/07/2022 - 15:58

      At what point would negative gearing be removed for new builds? At what point would the capital gain be removed for new builds? New builds become older stock after a few years. A rental property can be positively geared for years then due to maintenance/repairs may be negative for a year, how would this be handled for old vs new builds.

      Why $1.5M where does that figure come from? Who is going to value all the properties, or are yo talking land value only? If I have a humble house on high value land I have to move, but if I have a expensive up market house on low value land that is good? Or does the government hire valuers to value a pensioners PPOR every year?

      • Oneguyinmelb on 26/07/2022 - 06:15

        The 1.5M figure is just a guess, currently the asset test for a home owner to get the pension is 500K which excludes the PPOR. A 1.5M home probably probably still in the top 25% percentile, increasing it to 2M would probably make it in the top 10%, though there would obviously be differences between NSW and other states.

        The calculation could be based it off the council valuations that are updated every two years (and typically lower than market value) which is mostly automated these days so no need to hire valuers, though there could be a mechanism to challenge the valuation if it seemed incorrect.

        The pensioner wouldn't need to move, they would just have their pension stopped. They then have a choice whether or not they wish to access their equity (25-50%) through a government backed reverse mortgage, which replaces their pension though probably at a higher rate.

        • tomfool on 26/07/2022 - 20:18

          Council valuation is based on pure land value not house and land. There in lies the flaw, in that I can have a house that could sell for 1.8M on a land value block of 800K and still get the pension but if I have a 1.8M house on land valued at 1M then I cant get he pension. Its a flawed concept.

          • Oneguyinmelb on 27/07/2022 - 06:20

            @tomfool: maybe it's different in other states, VIC councils valuations include both land (SV) and Capital Improved Value (such as buildings) in their rates evaluations.

  • dust on 22/07/2022 - 19:25
    +1

    Where's the crypto guy? (That might have been the answer 6 months ago.)

  • Vote for Pedro on 22/07/2022 - 20:52
    +5

    Your premise is faulty. The rest then becomes irrelevant.

  • donga100 on 22/07/2022 - 22:53
    +8

    So in the middle of a rental crisis you want to greatly reduce the number of investment properties available for rent? Let me guess, your solution for those people struggling to find a rental property is "just buy a house"?

    • netjock on 24/07/2022 - 22:09
      +1

      Lot of landlords getting out of the Victorian market given government changes to rental requirements and contracts. A lot of people buying up and putting those properties on airbnb.

      I assume hotels are going to go out of business and get converted to apartments. Meanwhile people can live on the streets until the great rotation happens.

      Lot of people have great ideas in their head, just not well thought out.

  • 2esc on 23/07/2022 - 08:56
    +1

    Something needs to happen asap in regional areas with the large number of city investors buying houses it's pushing house prices up in smaller centres. These house are being used as holiday homes (potential covid escape house) and as airbnbs.

    No longer offered as long term rentals pickers and other workers are finding it very difficult to live and work in the same area further adding to worker shortages in regional areas. When a rental does come on the market it snapped up immediately at a much higher rent.

  • Grunntt on 23/07/2022 - 12:00
    +4

    I have posted this a few times before and will do so yet again for those who react to clickbait articles about those nasty investors with so many properties..

    The claims of so many investors with huge numbers of properties does not seem to have resemblance to the reality.

    Direct quote from an ATO report -

    Here’s how many properties investors hold
    1 investment property – 71% (1.57million)
    2 investment property – 19% (418,000)
    3 investment property – 6% (129,784)
    4 investment property – 2% (47,469)
    5 investment property – 1% (19,861)
    6 or more investment property – less than 1% (20,756)

    They are percentages of investors, not percentage of the population.

    • reactor-au on 23/07/2022 - 12:59
      +4

      So assuming ATO is not nesting those numbers:

      2,205,870 investors

      3,209,069 investment properties (no knowing how many properties per 6+ group)

      That's a considerable amount of properties considering our population is 25,000,000 including infants, children, adults, elderly.

      • netjock on 24/07/2022 - 22:12
        +1

        25,000,000 including infants, children, adults, elderly.

        I thought infants are children. Elderly are adults. I have no idea how you work out numbers. Even if you assume it is families of 4 and only 1 person works you'd still have 6.25m working adults. Elderly people probably have most of the investment properties as they have been working longer and accumulated assets longer.

      • cadwalader on 25/07/2022 - 10:07

        I mean about 1/3 of the population own out right 1/3 of the population own with a mortgage and another 1/3 rent.

        There are about 9-10 million residential properties so ~3+ million investment properties would be congruent. A vast majority own only 1 or 2 which most people reckon are okay.

    • donkeydoc on 23/07/2022 - 13:10
      -4

      Wow that's much worse than I thought.

      • Grunntt on 23/07/2022 - 14:43
        +4

        You seem to be a little inconsistent with your alarmism.
        First you go with

        if wealthy investors expand their property portfolio, say from 15 homes to 25

        Then follow it it up with

        I take no issue in seeing a highly leveraged investor reduce his 30 home portfolio to 15

        How do you see the ATO figures of less than 4% of investors have more than 3 properties to somehow suport your argument?

        Your plucked from the air owners of 15 or 30 properties would be a miniscule number.

        I don't disagree that housing affordability is a problem but trying to blame those old boomers preventing people owning a home totally ignores the issue of wages going backwards whilst record corporate profits/astronomical CEO remuneration/ever increasing dividends continue.
        You clearly accept/support the paradigm of "hard working, 2 income families" without questioning why there is the need for a 2 income family.

        • Ozbargainlyf on 24/07/2022 - 05:17
          +1

          Apparently logic doesn’t sound alarmist enough.
          “I take no issue in seeing a highly leveraged investor reduce their 1 home portfolio to 0” doesn’t have the same ring/upvote potential

        • cadwalader on 25/07/2022 - 10:18

          There is actually no need for a 2 income family. Its just a moloch situation. At first a few families thought having 2 incomes would provide them advantages over other similar families with only 1 income, and they would be right. Other families saw this and thought the same thing. Eventually many more families would need to do this just to keep up and the cost-of-living moved up to match the new household income levels.

          The only solution is to make it impossible to voluntarily have a 2nd income as long as the option is there, and it provides an advantage, people will take it. And the market will equilibrate to accommodate it.

          • Grunntt on 25/07/2022 - 21:22

            @cadwalader:

            There is actually no need for a 2 income family. Its just a moloch situation.

            Not sure that I understand that reference unless you mean that child sacrifice results in no need for a second income.
            Harsh, but sounds effective.

            At first a few families thought having 2 incomes would provide them advantages over other similar families with only 1 income, and they would be right. Other families saw this and thought the same thing.

            Is this your own original interpretation of why dual income families exist or is there some real data to support it?

            The only solution is to make it impossible to voluntarily have a 2nd income

            If you believe this is the only way then you really do have limited imagination/education/experience.

            • cadwalader on 27/07/2022 - 11:05

              @Grunntt: Moloch situation is an analogy where a few people make a sacrifice to get some advantage over others leading to everyone making the sacrifice, getting the same advantage which results in nobody having any relative advantage but everyone has made the sacrifice.

              Is this your own original interpretation of why dual income families exist or is there some real data to support it?

              https://journals.sagepub.com/doi/full/10.1177/08863687199000…

              There are a few reviews on this but I don't have time to find the underlying data. Examples in this one is related to childcare and housing. Both of which are driven by more demand and ability to pay. It also mentions an "improved lifestyle" over single earners but then its up to you whether you think that level lifestyle is "needed" or not - if it is, then 2 incomes are "needed". Not all families are like this of course, some are able to have their material desires met by an income from one earner and the second one does it out of choice but your comment was about "the need for a 2 income family" so I did not address the choice factor.

              If you believe this is the only way then you really do have limited imagination/education/experience.

              Of course its not the only way. I can imagine all sorts of scenarios where this would be possible. You could have the government/charity/religion pay the family or provide them the same socioeconomic advantage for their equivalent full second income to remain a single income family for example. People are always looking to improve their lives so as long as you keep providing them that material improvement in exchange for not becoming a dual income family, you won't have dual income families.

              Not that I'm against dual income families anyway. I don't really care how many people in a family wants to work.

              • Grunntt on 27/07/2022 - 13:10

                @cadwalader:

                https://journals.sagepub.com/doi/full/10.1177/08863687199000…
                There are a few reviews on this but I don't have time to find the underlying data. Examples in this one is related to childcare and housing. Both of which are driven by more demand and ability to pay. It also mentions an "improved lifestyle" over single earners but then its up to you whether you think that level lifestyle is "needed" or not - if it is, then 2 incomes are "needed".

                My interpretation of that abstract you link is slightly different -

                From the link -

                This study supports the hypothesis that given a household’s desire to remain above a minimum threshold standard of living, the rise in the number of dual-earner households is inevitable mostly due to inflationary pressures in product markets including rising housing prices and child care costs coupled with relatively flat wage trends.

                I do not see how that is many people's choice if they are trying to stay above what they decide is a minimum threshold standard of living. (unless it is defining a minimum standard as one with many wants being fulfilled and therefore becomes a choice).
                Dual income families came about historically due to increasing costs and low wage growth primarily. I agree people then found they could get more 'stuff' with dual incomes but that's not how it started.

                • cadwalader on 27/07/2022 - 15:16

                  @Grunntt:

                  I do not see how that is many people's choice if they are trying to stay above what they decide is a minimum threshold standard of living. (unless it is defining a minimum standard as one with many wants being fulfilled and therefore becomes a choice).

                  Seems to be a choice (or at least it started off so) if you read the entire paper and not just the abstract.

                  Despite rising living costs faced by dual-income households, research shows that today’s dual-income households are still able to afford a lifestyle that the majority of single-earner households are not able to access. This observation was documented in a seminal 1979 report, which references a group of dual-earner households the author labeled “America’s New Economic Elite.” Much of the casual spending for this group was on recreational items such as travel and entertainment. Even during this historical period, the dual-earner couples admitted that rising inflation impeded their ability to feel wealthy.

                  and

                  Dual-earner households tend to be less frugal than their single-earner counterparts and hardly subscribe to the concept of delayed gratification in order to secure financial independence in retirement. Much of this increased spending and consumption is fueled by intense pressure to “keep up with the Joneses,” where everyone’s next big purchase is strategically featured in neighborhood chatter and on social media platforms. Driving alongside the Joneses on the highway of financial freedom is not necessarily harmful in and of itself. On the contrary, it can be quite exhilarating as long as wise spending decisions are part of the experience. However, within dual-income households, “rainy-day” savings funds are not prioritized due to the complacency and overreliance on contingency income secured by a second earner.

                  "minimum standards of living" is subjective and pretty much the same as "improved lifestyle" because these households have a clear advantage in spending power over an equivalent household with only one income. The article also describes how dual income households costs are driven by the act of pursuing dual incomes (Housing, Childcare) and inflation is more likely to be driven by households with more spending power than less.

                  I agree that its a very chicken and egg thing but households inflation was way older than dual income households becoming common and households would have been in the same situation if the proportion of single income households had not decreased. Inflation was high before the 1950s and that didn't encourage more and more dual income households.

                  My point isn't that dual income households caused the major background factors. My point was as this avenue of gaining advantage became acceptable, some households adopted it which made more households want to adopt it as well (or need to adopt it to keep up) but once and truly widespread enough, all advantage from dual incomes were lost and the cost-of-living background factors became worse to match the new household income levels which means its impossible to go back on an individual level if all else stays the same.

                  • Grunntt on 27/07/2022 - 16:40

                    @cadwalader: Ok - I think I finally understand the point being made.
                    I think Covid has had more of an impact on me than I realised. (well, that's my current excuse anyway.)

  • Brianqpr on 23/07/2022 - 14:12
    +2

    Difficult one. Labor tried to bring quite sensible changes to negative gearing to the 2019 election and a big LNP and media scare campaign around it contributed hugely to us getting 3 more years of the idiot Morrisson as PM. The changes were not drastic and were designed to remove some, but not all, property investor tax breaks while encourgaing building of new properties and increase of supply. So Labor distanced themselves from it this time and were able to win. Doubt they will go there again anytime soon.

    The problem you have is that if the market has already fallen significantly (which may or may not happen), then making it harder for investors will cause it to depress further. Part of the issue Labor faced in 2019 was that the property market had fallen a fair bit leading up to that election. The Australian economy, like it or not, hugely depends on the so called "wealth effect" of high house prices and their impact on consumer confidence and spending. Significantly falling house prices are therefore bad news for any government, espeically if changes to government policy have contributed to the situation. Hence affordable housing policies have taken the form of grants etc that do not risk crashing prices (and in fact fuel them further).

  • ribze1 on 23/07/2022 - 14:14
    +3

    Given how the MSM and LNP weaponised the sensible changes the the ALP proposed at the 2019 election it's going to be along time before any changes are made, Labor might need to revisit it before a third term in office, depending on how they sit at the time.

  • Malik Nasser on 23/07/2022 - 14:17
    +2

    Clearly there is no quick and easy solution for this, even if others suggest otherwise.
    By making any changes to the current system there will always be unintended consequences, even contrary to the expected outcomes.

    Why do people invest in residential housing to begin with?
    A house that is in a developed neighbourhood doesn't increase in value over time (in general). It is the same house weather purchased 10 years ago or today. Its value hasn't increased. Its price however has increased. Why is that?
    Is the core of the problem actually the devaluation of the fiat currency? People are looking for ways to ensure their future wealth is not corroded away by the constantly expanding money supply.
    The current system also offers people the ability to increase their wealth by borrowing money today, and paying it back in the future with depreciated money that has greatly reduced in value.
    If the interest rate charged by banks is below the depreciating rate of the fiat currency then borrowing money to purchase property is financially rewarding, and hence why people do it.
    Clearly there are also numerous other reasons for the price to go up, including but not limited to; negative gearing, population growth, subsidies, and more as noted by others here.
    At its core it is supply and demand. But the factors which drive demand are the most divisive.

    • Brianqpr on 23/07/2022 - 14:21

      Good old supply and demand is what drives housing and demand is of course increased by a high presence of investors.

    • OBEY YOUR MASTERS on 23/07/2022 - 16:59

      Nice post. I believe you have summarised the problem(s) adequately.

  • OBEY YOUR MASTERS on 23/07/2022 - 16:54
    +2

    Such ass backwards thinking.

    If you are going to lose your home because you over-extended on your loan relative to your income then you will need somebody to buy that home from you. The other option is the bank forecloses on you and takes the home.

    There will always be investors in every market. You can compete with them if you do your homework. Those who are lazy and less sophisticated will have to put up with second best. That's how life works.

    If housing prices are collapsing as you claim then wouldn't you save your money in order to buy when the time is right?

  • Kangal on 23/07/2022 - 17:06
    +1

    We get all the bad people rich investors, and we put them all on an island somewhere.
    Oh, yeah, that's right…!

  • jaimex2 on 23/07/2022 - 17:52
    -1

    Go back in time and vote for Labour in the last two elections. Nothing else is changing things.

    • Ozbargainlyf on 24/07/2022 - 05:23

      Strongly believe they had a number of policies that would have benefitted but just went way to hard, and too many in one go.

      Reckon trying to touch franking credits was the tipping point because it hit so many retiree voters.

      • jaimex2 on 24/07/2022 - 08:14

        Yep. Too many ideals made them lose to doing nothing.

        They also seem to end up with uncharismatic leaders a lot.

        • Harold Halfprice on 24/07/2022 - 16:43

          Hard to be charismatic when the media portrays you as something else.

          • jaimex2 on 24/07/2022 - 18:55

            @Harold Halfprice: Honestly if people are that stupid they deserve what they get.

            Same goes for climate change.

            • Harold Halfprice on 24/07/2022 - 20:47

              @jaimex2: Right… too bad we're not all as smart as you

              • jaimex2 on 24/07/2022 - 21:17

                @Harold Halfprice: I don't think voting based on reading policies requires intellect.

                Voting based on greed, apathy or media spin well… Here we are.

                The second Turnbull got into government all those years back I went all in on buying investment properties and again when Scomo got re-elected. I'm sure anyone with means did too.

                If that's the rules the country wants to play by then so be it.

  • orangetrain on 23/07/2022 - 18:08
    +2

    I would rather put a vacancy tax on empty properties, not just houses. One person can own all the properties in Australia but if they do not rent out the properties, then they are going to pay a hefty vacancy tax which can be used to build more houses.

    Pros: Rent is extremely cheap

    Cons: You can't own more than 1 (or 2 with spouse) empty properties

    I would like this to apply to commercial properties too. Coffee is $8 in city because of MASSIVE RENT. Not wages. It's funny picking up a coffee and noticing that shops nearby are closed for decades for some reason!

    • Tleyx on 24/07/2022 - 19:28
      -1

      Empty bedrooms too. If you have a spare bedroom you should rent it out

      • MrFunSocks on 25/07/2022 - 09:49
        -1

        Lol this is one of the dumbest ideas I've ever read (if it's serious). I have 3 spare bedrooms in my house that my wife and I live in. I don't want 3 random people living with us.

        • Tleyx on 25/07/2022 - 13:59
          -1

          It doesn't need to be randoms, anyway randoms are just friends you haven't met yet

  • leiiv on 23/07/2022 - 18:28
    +1

    The question is "how to stop wealth gap growth". That is impossible unless there is total overhaul of our economic system. I would even argue further that no systems can fully stop it, as it is something to do with human nature. There will always be royals and royalties (pun intended).

    But these can somehow help with housing affordability:
    1. Make building cost cheaper with any way necessary.
    2. Abolish stamp duty and replace it with yearly progressive tax, based on total area of owned properties normalised by population density.
    3. More aggressive policy aiming for much higher density habitation, eg: higher buildings, relaxing heritage rules, etc.

    • [Deactivated] on 23/07/2022 - 20:47

      Like you said, it's inevitable and in ways, created by us. I.e when you invest in Tesla at $800 a share, YOU'RE increasing the wealth of Elon Musk. But I'm fine with that, he's creating something for society. It's the ones that leach of basic human needs like housing, creating a class of renter's, are ones that need to be stopped. This is why I refuse to buy a house as an investment.

  • Blargman2001 on 23/07/2022 - 18:40

    Negative gearing does need to be looked at as I believe it skews the market in favour of one particular type of buyer. Preventing those who can afford it from buying more property however is just skewing the market in the other direction. The government should just let the market work out the price of houses naturally. Buyers will just have to live where they can afford. Even someone on minimum wage can get a $250k home loan, they just have to adjust the expectations of where and the type of dwelling they can afford.

  • RefusdClassification on 23/07/2022 - 18:47

    I disagree that housing values will significantly decrease since Australia is back to its old open borders immigration policy. Australia is large but Everyone wants to live in the sliver of land running from Melbourne to Cairns, between the coastline and the Great Dividing Range. This is probably only 2% of Australia's landmass.

    However, it would be great if house values tanked. Poor people would get a chance to own instead of have to rent or wait 10 years on a public housing roll.

  • cfuse on 23/07/2022 - 18:51

    Someone is always going to have to take the hit for correction of an unsustainable market. You shouldn't need to be told it won't be the wealthy in the firing line. The real question is where the line for wealthy is in any rug pull.

  • pipe on 23/07/2022 - 19:36

    Wow so easy. Wait for crash and buy everything. Why didn't I think of that.

    Seriously though if prices do crash property will be a crappy investment for decades to come and govt policies will ensure it.

  • Top G on 23/07/2022 - 19:47
    -1

    Buy in Perth, property for 600k and average salary ~ 100k

  • MrTruffle on 23/07/2022 - 19:55

    All the rules you can think up to stop the 1% of investors with many properties = easy to get around with companies and trusts.

    Look at how companies are avoiding paying corporate tax. :(

    The biggest factor is how many places are for sale. I've seen nothing from the gov on how many government housing is being built. I saw the greens policy was for 1M homes over 10 years? Seems way too low and haven't seen any follow up.

    Why aren't there big unit developments being run by the government?

  • Exec-Matrix on 23/07/2022 - 22:13
    +1

    I don't understand why they arent fast tracking housing development.

  • Dack Smith on 23/07/2022 - 22:39
    -2

    All forms of investments should be subject to an extra 50% tax, no one should be allowed to accumulate drastic loads of money while others suffer and rot.

    Exempt stamp duty for those earning below 60K buying a house, while those earning above $200K should have to pay triple stamp duty + investment tax to buy houses.

    …..

    People that neg this are probably going to be the ones who deserve the big taxes with their fat salaries being selfish.

  • Guerilla89 on 24/07/2022 - 01:04

    They could take a few steps:
    1. Split property ownership into two types and limit/tax it based on type of sale, i.e. if a resident/citizen is buying it as a home then less tax, if a company or management fund is buying it then they only get to "lease" it off the government for 99 years and pay higher taxes.
    2. Additional taxes on properties that could be homes for anyone other than owner/occupier.
    3. Ban foreigners from owning property until they get permanent residency or become citizens.

    Most likely though the following would lower prices more:
    1. change zoning to be more european than US in style, i.e. residential and small business mixed in a single zone with two storey being the norm at somewhat medium density instead of putting massive suburb zones out in the sticks requiring everyone to own a car and being far from shops with homes often lacking public transport.
    2. building and selling properties as quickly as possible to provide more supply to market with prices as low as possible without running a loss.

  • xavster on 24/07/2022 - 07:50
    +5

    I'm going to play devils advocate here and say, if property investors are so evil and are making tons of money and accumulating wealth, why haven't you invested in property yourself and made a ton of money?

    https://www.news.com.au/finance/real-estate/buying/western-s…

    this is a property investor, McDonalds worker making 500$/wk, worked his butt off, saved like crazy and did the hard work to now own 40 homes worth $20m.

    I'm seeing a lot of people presenting wealth re-distribution ideas above, but the truth is, they just don't want to put in the work.

    So the question is, if a Macca's worker can do it, why haven't you?

    Get out there, start a business, study and up-skill yourself, buy property even, do something, instead of whinging about it on the internet.

    • donkeydoc on 24/07/2022 - 08:20

      He's done extremely well, and invested outside of Sydney in a positively geared area, that might be the go as the future looks bleak with high repayments. With close to no rental costs living in public housing, I couldn't make that decision with a young family. But I'd argue that unaffordability remains high and the current generation, although more skilled and higher income are taking on exuberantly more debt, making them worse off.

    • TimboAus1234 on 24/07/2022 - 08:33
      +1

      "so the question is, if a Macca's worker can do it, why haven't you?"

      He saved the deposit from living at home with his mum. Which is great if you can do that, but people cant always stay with family or have immigrated to the country and have no family to fall on.which due to the intergenerational wealth in Australia and and high deposit amounts being required for a home puts you at a disadvantage.

      That story does show however that financial education is incredibly important. I was never told alot of these things growing up or in the school system. Good on him for getting out!.

  • Mr Krinkle on 24/07/2022 - 10:30

    This housing crisis is fuelled by more than investors.

    • Interest rates were lowered increasing purchasers buying capacity
    • Supply chains have been hit with material shortages slowing new builds
    • Materials used in new builds being redirected to renovations/additions
    • Worker shortages have impacted the supply chain shortage across the globe affecting manufacturers, transportation, distributors and construction
    • The costs of finished goods have increased due to the increased cost of labour, transport and raw materials
    • Lockdowns and travel restrictions have impacted the labour shortage
    • Natural disasters that have wiped out entire regions through flooding requiring significant materials and labour

    So we ended up with

    • Lower supply of new properties entering the market
    • New builds that do make it to market have higher costs
    • People paying more than the historical market rate

    Negative gearing and investors aren't the root cause of this issue.

    • donkeydoc on 24/07/2022 - 10:48
      +1

      The costs of building have definitely increased (3x for timber framing alone) but it's lagged behind increases in house prices. There's been several large building companies that have collapsed of late, most likely to do with increased building costs and cannot fulfill project home contracts, but I do think a contributing factor are international investors.

      A first home buyer cannot compete with an investor, and I've see this first hand with a large townhouse development having worked there for 2 years, and this is commonplace across all projects.

    • xavster on 24/07/2022 - 10:54
      -1

      This is correct, the housing crisis is due to NOT enough investors in the market leading to reduced rental availability.

      For there to be a property for lease there has to be an investor behind it taking on the risk.

  • cloud68 on 24/07/2022 - 10:41

    ELIF5,

    Why is negative gearing bad? You can do it with Stocks and any other investments loss. Why exclude property?

    • donkeydoc on 24/07/2022 - 10:49
      -2

      Because of housing affordability to Australia's citizens.

      • redfox1200 on 24/07/2022 - 18:55
        +1

        What about stock affordability for investors?

        • donkeydoc on 24/07/2022 - 19:20

          If other markets become more attractive to investors, that'd be great!

    • TimboAus1234 on 24/07/2022 - 11:13
      +1

      Why exclude property?

      Housing is a necessity for people, it offers much more to both society and the people living in them

      Negative gearing to me is like the first home buyer schemes just a tax payer handout that increases demand.

      I would rather they target increasing the motivation to invest in businesses, which export goods/services. Which in turn injects value into the economy. Rather than residential housing which produces nothing. Keep tax breaks there as we would want some sort of incentive to growing the economy

      • Grunntt on 24/07/2022 - 13:39

        I would rather they target increasing the motivation to invest in businesses, which export goods/services.

        When I buy shares(from the pool of shares available to buy - ie not directly from the company) how is that seen as an investment in a business?
        The business doesn't receive anything from me (just the person that sold their shares to me) so how am I directly putting anything into this worthy business?
        I am basically just gambling on the price increasing so that I can receive my winnings.
        I fail to understand how buying and selling stocks is not classed as gambling but is somehow seen as investing in a business and helping the economy.
        It seems to align with many gamblers who refer to their habit as 'investing money' in their choice of vice.

    • TooSerious2 on 24/07/2022 - 11:20
      -1

      1. Negative gearing allows investment losses to be taken off your job or other income.

      2. Property investment allows the building and fittings to be depreciated (they are worth less this year than last year) and you pretend that's an expense.

        This gives you a loss on paper, so you pay less tax on your other income.

      Some investors make a real loss (rent<interest, rates, etc) but all property investors get the pretend loss as well.

      Replace "pretend loss" with "legitimate tax deduction" when discussing this the-law-says-it's-not-a-scam with your accountant

      • xavster on 24/07/2022 - 13:12

        I want to make an amendment to @tooSerious2's statement item 2.

        Any depreciation schedule claimed during ownership must be added back if you sell the property and make a capital gain.

        Viz.The depreciation losses you claimed during ownership will be clawed back if you sell at a profit.

        However it is still tax advantageous to claim depreciation for most new apartments investments because it gives you better cashflow during the period of ownership.

      • cloud68 on 25/07/2022 - 08:04

        Pretend loss?

        Genuine question: Is this seriously your main explanation of why property neg gearing is bad?

        • TooSerious2 on 25/07/2022 - 22:46

          I think it's the two steps combined. Deductions come off income while profit enjoys the 50% capital gains discount.

          Not only do we tax wages more than unearned capital gain, negative gearing exploits it further.

          That's what I think anyway. Not an expert 😃

          • tomfool on 26/07/2022 - 20:30

            @TooSerious2: Capital gains tax has the discount to offset inflation. If there was no discount it would be a huge disincentive for longer term investment. As an example you invest 100K and after 10 years that investment has grown to 150K. You sell and have a capital gain of 50k. Lets say you pay 37% tax on that so you clear 31.5K. Based on the CPI over the last 10 years compounded 2011 - 2021 that 100K should be $120,297. Your profit for the risk is 11K over 10 years that's is less then a 1% return per year on your investment. You either need the discount or return to the indexed calculation. Indexing benefits longer term investors, discount benefits shorter to medium term investors.

            Removing negative gearing will also just defer the losses being claimed in future years, a negative return will be carried forward until it can be claimed in future years and or deducted from the capital gain.

  • xavster on 24/07/2022 - 11:04
    +1

    Now the question was how to stop the wealth gap.

    To truely reduce the wealth gap, we have to teach financial literacy in schools, as well as financial discipline.

    But we could never 'stop' it. People have different priorities in life, some choose to spend all their earnings on holidays and dining out, while others choose to save and invest. It comes down to personal responsibility and choice.

    Why haven't you gotten a PhD and moved to America and start an online payment company (PayPal) and then buy a tiny startup car company called Tesla and turn it into the largest car company in the world like Elon Musk?

    True wealth is built, re-distributing it to people who will just waste it is… well a waste.

    • donkeydoc on 24/07/2022 - 11:12
      +1

      We should stop it growing though, there will always be varying levels of wealth, but a growing gap is indicative of underlying, complex issues and cannot be explained away by personal responsibility when housing affordability and costs of living have grown beyond real wage growth.

      On Elon Musk, he's done very well with his parents emerald mines wealth, but not everyone has the backing of exuberant family wealth to support their investments.

      • xavster on 24/07/2022 - 12:57

        That's exactly my point, he could have chosen to just have an easy life on the back of his parent's wealth, but he didn't, and chose to build something.

      • redfox1200 on 24/07/2022 - 18:48
        +2

        We should just tear down others that have wealth, instead of taking financial responsibility for ourselves, this is the easiest and laziest way.

        • pogichinoy on 24/07/2022 - 18:54
          +3

          Agree. There’s many that are home owners and/or own multiple properties that sacrificed hard but you have people who yolo’ed most of their life and suddenly when they want to buy a home they complain.

          Sorry but life doesn’t work like that.

  • ely on 24/07/2022 - 15:22
    +1

    Tax more and build more.

  • jason101 on 24/07/2022 - 15:29
    +1

    The only way to fix the housing problem in Australia is to open up the supply of land for new housing and permit appropriate zoning for higher density in our capitals. For anyone who’s tried to get a residential subdivision or multi dwelling property approved you’d know it takes time, persistence and very deep pockets (leading to the necessity for high returns to cover the risk and expenditure required to gain planning approvals). Fat cats keep getting fatter by virtue of the system we have in place, yet like the OP the average man on the street doesn’t blame constrained supply. Until the public realise what’s going on and apply the necessary pressure to government policy makers the system will not change. At the moment getting on the “bandwagon” is the only way forward, and every time someone does this, it pushes those on the sidelines further and further back.

  • pogichinoy on 24/07/2022 - 15:54

    You cannot shorten the wealth gap in property unless you impose exorbitant taxes on those who have multiple properties.

    This will lose votes.

    In addition to this, to make housing cheaper, reduce the costs of building infrastructure to housing developments, which is reducing their labour costs (i.e. their wage), and minimising the development applications that compound the costs of construction (i.e. local councils). To improve the quality of work, remove the self regulating industry and start a real third party for quality control.

  • ttt888 on 24/07/2022 - 20:32
    +3

    This post is just dumb.

    40% in next 5 years.

    If it really did. I bet u won't even want to buy any property at that time.

    Either Oz is at war wiht china or something catastrophic for that to
    happen.

    Inflation accumulating in next 5 years together with good wages.

    A drop of 40% would be like a drop of 60%.

    Dream on.

    • kl2999 on 24/07/2022 - 21:22
      +2

      Into the property market since 1997. Being through the bubbles, GFC, what ever crisis they name it. Property price is only shooting up in a long run. People can't afford a 2mil home, they still wont afford it when it drop 30-40%. Not to mention that 30-40% is not realistic at all.

  • Wasabi Ninja on 24/07/2022 - 21:22

    Does anyone actually believe the gap between the wealthy and poor will ever tighten again in the next 100 years? I don’t. 🤷🏼‍♂️

    • cloud68 on 25/07/2022 - 08:10

      It never will

  • Cluster on 24/07/2022 - 22:06
    +2

    Changing capital gains tax or negative gearing is fiddling around the edges. It cannot even help solve the problem.

    The problem is we have a few highly desirable geographic locations to live in Australia, and almost everyone wants to pile into them. The people with the most money win, and get the nicest chunks of land, and want to keep buying more. Changing tax laws won't fix that.

    We have two major problems: Buying real estate is the go-to investment for many Australians. We're not as bad as China, where property is pretty much the only investment vehicle available to all, but there's no denying Australians see property as a 'can't fail' investment. That means we keep piling ever higher amounts of cash into it, and when we run out of money we go even further into debt. Why not, right? Property only ever goes up.

    The second is most of the desirable places to live are taken. Good jobs, good school, low crime, nice scenery. We could help solve the housing problem by making more desirable areas to live, and improving areas that are currently classified as being sh~tholes. The latter is a problem however, as that 'gentrifies' an area and just drives up property prices. Rinse, repeat.

  • osh89g on 24/07/2022 - 23:16
    +1

    Real solution to solve housing affordability is high speed train network to regional towns (bendigo, ballarat, shepparton, morwell, etc in VIC)
    If we had trains from CBD to regional towns in under an hour, that would drastically increase the affordability for first time buyers to enter the market. Also solves issues of overpopulation in large cities.

    • gromit on 25/07/2022 - 07:57
      +1

      High Speed train has been financially analysed to death. We don't have the population to make it financially viable. Maybe one day, but right now all it would be is like the simpsons monorail episode.

      • kl2999 on 25/07/2022 - 09:30

        Expansion of satellite city.

      • Cluster on 26/07/2022 - 10:49

        High speed rail works in some countries. It could work here too, as we have highly concentrated population centers.

        But even if we made a decision today for high speed rail, it would be a decade or more until all the court challenges, protests from NIMBYists, changes in government radically changing the design, etc before the first bit of rail is laid.

        • gromit on 26/07/2022 - 10:55

          It requires large populations to make it viable. estimated costs to build are around 200m a kilometre (probably a lot more now as those estimates were from a few years ago). The issue is to support that cost you need large populations coming from each stop so you can run many services to make it viable and you can't charge large prices for tickets if you want it to be more than just an alternative to flights. It works in other countries due to the population density at each of the stops, something we can't realistically achieve for many many decades. so we are looking at a cost of hundreds of billions to build when the government is already heavily in debt.

        • Oneguyinmelb on 26/07/2022 - 11:33

          Also the different track gauges between VIC, NSW and QLD

      • osh89g on 01/08/2022 - 01:10

        Let me elaborate.
        Bendigo to Melbourne is ~150km, currently train takes 2hrs. If we had a direct train travelling 150-200km/h that could be reduced to under an hour.
        Ballarat to Melbourne is ~120km, currently train takes 1.5hrs. If we had a direct train that could be 45mins.
        The cost of a train at this speed is much lower than the high speed trains of europe and asia that travel in excess of 300km/h, Vlines tracks already have trains travelling up to 160km/h so not much infrastructure changes needed.
        With WFH arrangement now post covid, many people would be happier to move a 45min/1hr trip because they can still access the CBD and Melbourne area for work, family, entertainment, dining etc.

  • DarkOz on 25/07/2022 - 09:55
    -1

    LOL 40% in 5 years. Wake me up when that happens, PLEASE!

  • wannagrababargain on 25/07/2022 - 15:35
    +1

    "Impending collapse" is not guaranteed. If the Australian housing ponzi still hasn't collapsed after a global financial crisis, a decade of no wage growth, a banking royal commission, a 1 in 100 yr pandemic, 2+ years of zero immigration and the collapse of the construction sector, then I don't know what will collapse it.

    No point trying to pick the bottom or top of any market and yes it's unfortunate that everything is financialised, re-financialised, baked and re-fried and repackaged, especially real estate and hooked up to a global system where someone sneezes in France and our mortgage goes up. No point in worrying about any of that because it's not like you can game that system. Just think of housing as a long term investment/cost and don't worry about the immediate cost - it will kind of average out over the long term anyway, even if you overpay a bit now. Forget the 'market', buy when you need to buy and buy within your means.

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