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Thread: Home ownership - the new class divide

  1. #21
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    Quote Originally Posted by nomeat View Post
    ...does the census show how much each individual is holding?

    You forget the 1% holding 99% syndrom.
    Irrelevant...I accept that but you will never change it. It's almost impossible as our politicians will just sell out to the donor EVERY time. We can go down the banning of negative gearing road if the majority want. It helped no one last time and it won't this time either.

    The best start for me is to severely limit the foreign ownership of land and property, but again, political donations would probably stifle that too.
    The fact that there's a highway to hell and a stairway to heaven says a lot about the anticipated traffic flow.



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    Permitting neg gearing and maybe other tax incentives only on new constructions will of couse make a major difference.
    Investors will focus on new constructions and supply will slowly grow.
    They will knock down the old houses and build new multi story and sell perhaps 6 new appartments where there was one.
    The individual appartment cost will be lower for first home buyers but the constructive invester can now sell 6 of them. Win - win, also for the construction industry.
    Enf, why would you not support that?
    Last edited by Uncle Fester; 18-04-17 at 02:04 PM.
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    Quote Originally Posted by nomeat View Post
    Only 50% CGT needs to be accounted for. That is plenty of cream for the investors.
    Assuming no other income for the year a property was sold then on $500,000 capital gain Capital Gains Tax of $108,630 would have to be paid.

    Quote Originally Posted by PZ. View Post
    It doesn't matter who's doing the negative gearing. It still plays a role in the housing shortage and price blowouts. Capital Gains Tax actually makes it worse, because it's a disincentive to sell.
    Eh!
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    Negative gearing also keeps rents lower than what they would be without negative gearing. Any changes to NG resulting in additional costs to landlords will 100% be passed on to the tenants.
    then where are people going to go ?- cant afford to buy , cant afford to rent , not enough public housing ? live on the streets?

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    Quote Originally Posted by VroomVroom View Post
    Negative gearing also keeps rents lower than what they would be without negative gearing. Any changes to NG resulting in additional costs to landlords will 100% be passed on to the tenants.
    then where are people going to go ?- cant afford to buy , cant afford to rent , not enough public housing ? live on the streets?
    I think that will happen anyway regardless of any changes. No matter what happens with NG or CGT sooner or later interest rates will go up which will put some homeowners in negative equity and foreclosure. It'll be a disaster but unavoidable IMO.

    The Vic Govt is removing stamp duty for first home buyers, there's been talk of dipping into super, more talk about buyers grants etc. All these things will make the problem worse.

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    In the late 80's I thought I would never own a house. But the stock market crash happened, interest rates started to drop from 18%, property prices dropped..... and in the late 90's I'd got some money together to buy a house. I'm sure things will change at some stage. Interest rates can't stay low forever. When they do go up, housing financial stress will set in and people will be forced to sell because they won't be able to afford to keep their house. There will be a long period of no growth in the property market and this will allow wages to catch up. Things will balance out but it won't happen over night.

    Leroy

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    Quote Originally Posted by VroomVroom View Post
    Negative gearing also keeps rents lower than what they would be without negative gearing. Any changes to NG resulting in additional costs to landlords will 100% be passed on to the tenants.
    then where are people going to go ?- cant afford to buy , cant afford to rent , not enough public housing ? live on the streets?
    That is what Scott Morrison is telling you but I disagree.
    They can't raise rents that much because they know that tennants will move out if they can't afford it.
    If they can't gear on old property any more they build/purchase new ones. Mad bidding on existing properties will stop if there is no motivation without NG.
    Also keep in mind that existing NG arrangements stay in place.
    This would only effect purchases after a such a rule is passed and investors are likely to hold onto their properties longer which could also stabilise the market.
    I see no effect on rents whatsoever.

    However rents will continue rise as they are doing right now to cover the exploding realestate prices if nothing is done.
    Last edited by Uncle Fester; 18-04-17 at 11:34 PM.
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    your points are very valid Nomeat , but if NG is stopped on old properties i dont think investing on new properties will be all that attractive either. when it is resold that "new" property will suddenly be an "old" property and could be too overpriced . Prices may actually fall and no potential investor will buy something that he knows will be worth less upon resale.

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    Quote Originally Posted by VroomVroom View Post
    Negative gearing also keeps rents lower than what they would be without negative gearing.
    Wrong.

    Have a look at this graph which shows what happened to rent (in red) during the period Keating abolished NG:



    Then Read this:

    Pollies tell fibs about negative gearing
    By Ross Gittins
    August 25, 2003

    We all know that when Paul Keating got rid of negative gearing in 1985 this proved disastrous for the rental market and he was forced to restore it.

    We all know this because the politicians - from John Howard to Simon Crean - keep reminding us of it.

    There's just one small problem: it's not true. It's remarkable how bad we are at remembering events - and how easily history can be rewritten by people with an axe to grind.

    A negatively geared property investment is one where you borrow such a high proportion of the cost of the property that your interest payments and other expenses exceed the rent you earn. You then deduct this operating loss against taxable income from other sources.

    In July 1985 - and as part of a much bigger tax reform package - Treasurer Keating moved to "quarantine" losses from negative gearing by stopping them from being deducted against other income. The US Congress had already done something similar.

    But, so we're asked to believe, this caused investment in rental accommodation to dry up. Vacancy rates fell very low and rents shot up. By September 1987 - just over two years later - Mr Keating was forced to admit his error and restore the old rules.

    However, Saul Eslake, ANZ's chief economist, has gone back to check this story and can't find it.

    His examination of the Real Estate Institute of Australia (REIA) figures for the capital cities shows that rents rose sharply only in Sydney and Perth (and the Bureau of Statistics' figures for dwelling rent don't show a marked increase for any capital).

    If the tax change was causing trouble, you'd expect it to be showing up in all cities, not just one or two.

    Mr Eslake's conclusion is that rents in Sydney and Perth surged because their rental markets were unusually tight for reasons that had little to do with the tax change.

    And this conclusion is supported by an earlier study by Blair Badcock and Marian Browett, geographers at the University of Adelaide.

    They say Sydney was the only case that provides support for the claim that the tax change caused problems. "And even here the flow-on effects of the tax changes have to be weighed against the contribution of the general turndown in housing activity in Sydney to the deterioration of the vacancy rate and a real rise in rents," they say.

    But the academics remind us of a factor the pollies gloss over: the central role that politics played in the whole affair.


    Quote Originally Posted by VroomVroom View Post
    Any changes to NG resulting in additional costs to landlords will 100% be passed on to the tenants.
    Wrong.

    Increases in house prices are supported by increases in borrowing capacity (now at all-time highs thanks to low interest rates).........increases in rents can only be supported by increases in wages....now running at an all-time low.

    You can't get a bank loan to pay the rent.

    Wage levels, and hence disposable income, put a very firm lid on rent increases.

    What do you think landlords will do when faced with two alternatives:

    1. Increase the rent above an affordable level and have the property unoccupied, or

    2. Leave the rent at an affordable level and keep the property occupied?

    Investment is supposed to be about generating a positive cash flow and making a profit.

    What is happening in real estate in this country at the moment is not "investment".....if it was, there would be no need for negative gearing, as that is based on making a loss.

    What is happening in Australian real estate is pure speculation......totally disregarding the notion of positive cash flow, and based solely on the notion of collecting windfall capital gains.

    There is no more destructive mechanism in any market than the anticipation of never-ending capital gains.......and the ever-increasing amount of capital tied up in non-productive real estate represents a massive cost in productivity to the entire Australian economy.

    Quote Originally Posted by VroomVroom View Post
    then where are people going to go ?- cant afford to buy , cant afford to rent
    A ridiculous proposition....but in the completely unlikely event that it occurred.....guess what would happen to house prices....real fast.

    Negative Gearing and Capital Gains Tax Discount are only two pieces of the puzzle......development roadblocks, land-banking, excessive immigration, inefficient taxes like Stamp Duty, are just some of the other issues that must be addressed.........NG and CGT alone will not fix the problem.

    But make no mistake......NG and CGT are definitely part of the problem, and must be addressed....very soon.

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    Home Ownership, pfffft, Try Farm Ownership!
    Where do kids find $5Million + to get into a typical 1000 acre farm?
    If u want to go on an expedition get a Land Rover, if u want to come home from an expedition get a Landcruiser!

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    Quote Originally Posted by oceanboy View Post
    ......................
    Where do kids find $5Million + to get into a typical 1000 acre farm?
    China.
    The fact that there's a highway to hell and a stairway to heaven says a lot about the anticipated traffic flow.

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    Quote Originally Posted by enf View Post
    China.
    Touche
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    Quote Originally Posted by VroomVroom View Post
    your points are very valid Nomeat , but if NG is stopped on old properties i dont think investing on new properties will be all that attractive either. when it is resold that "new" property will suddenly be an "old" property and could be too overpriced . Prices may actually fall and no potential investor will buy something that he knows will be worth less upon resale.
    Yes, precisely and that is what needs to happen.
    Prices will fall, madhatters will stop buying or have burnt their fingers but the strong hands will either hold onto their properties or sell and buy back cheaper.
    Nothing can go up for ever, look at shares. Investors don't stop trading when the prices fall, they wait for a bargain and buy back in.
    In the mean time young mums and dads can afford the 'bargains' too.

    Nothing goes down forever either, but in the mean time wages might be able to catch up, maybe in 10 years when we see properties at these heights again.

    But first we will have to sit through a recession to clear out the excesses, which will happen with or without intervention. We have survived that in the past too.
    How deep the recession will be depends on how well our governments could intervene, but the current 'hiding their heads in the sand' strategy will likely create a major uncontrolled implosion, rather than a softer crash landing. After a soft landing there could be a lot of construction going on around the cities and we should be out of the recession almost as quick as we fell in.
    Last edited by Uncle Fester; 19-04-17 at 12:22 PM.
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    Quote Originally Posted by nomeat View Post
    Nothing can go up for ever,
    Incorrect.

    You seen the house prices in 1912?
    Have you seen the house prices of the 1960's?
    House prices of the 1980?
    House prices in 2017?

    You tell me when they went down?



    We wouldn't have Banks if house prices came down.
    Last edited by ol' boy; 19-04-17 at 12:50 PM.
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    Quote Originally Posted by oceanboy View Post
    Incorrect.

    You seen the house prices in 1912?
    Have you seen the house prices of the 1960's?
    House prices of the 1980?
    House prices in 2017?

    You tell me when they went down?



    We wouldn't have Banks if house prices came down.




    You tell me when they went down?
    According to the graph, between 1880 and the mid-1940's.

    If you have a look at the trend lines I've added to the graph, I think you'll see that what Nomeat really means is that nothing can go up forever at the current rate being experienced by Australian real estate.

    And, again, if you look at the graph you will see that the the current rate of increase is a very recent phenomenon.

    This accelerated rate of increase coincides with the movement of large sums of international hot money (in our case, particularly from China), historically low interest rates after the GFC, and the resultant tsunami of cheap money worldwide looking for somewhere to park, resulting in the conversion of housing from a social amenity to a financial asset class.

    These are all factors that are well within the ability of Governments to control.

    The Chinese government is already taking significant steps to stem the outflow of money from the country, much of which ends up in houses in Sydney and Melbourne.

    And interest rates can just as easily go up as they went down.

    So I wouldn't be taking the recent past performance of Australian real estate as an indicator of future results.

    And as for:

    We wouldn't have Banks if house prices came down.
    ,

    Oh, yes we would.........aside from the good old tried and proven bailout (see 2008-09) Australia is now a signatory to an international agreement detailing the mechanism for bank bail-ins.

    If you're a bank depositor......feel very, very nervous.
    Last edited by Thala Dan; 19-04-17 at 01:35 PM.

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    Some more food for thought.


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    Having read the opinions of everyone here, and having read the extensive plethora of opinions from financial "experts" in all of the major news publications this morning, one thing seems abundantly clear....

    No one knows....

    I'm good with that....we can give it a go and see who's right.

    Easy for me to say of course, I won't be effected.
    The fact that there's a highway to hell and a stairway to heaven says a lot about the anticipated traffic flow.

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    Quote Originally Posted by Thala Dan View Post

    Oh, yes we would.........aside from the good old tried and proven bailout (see 2008-09) Australia is now a signatory to an international agreement detailing the mechanism for .

    If you're a bank depositor......feel very, very nervous.
    I cant see this ever happening here in AU, at least for the foreseeable future....................................but who knows what will happen when the whole ponzie scheme of endless expansion collapses

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    Quote Originally Posted by enf View Post

    No one knows....

    I'm good with that....we can give it a go and see who's right.
    It will be like it always is and always has been.
    Occasionally the market gets over heated and has a small correction, which might be just standing still for a few years or correcting 15% in 1 year.
    In some case a higher correction, like units in a Multi story complex
    But over all it will increase while there is people with money to buy them and there is HEAPS of people with money and i don't mean Bank money.

    Although some people seem to think houses in Sydney will be $200,000 in the near future.

    This is a general condition.
    Unlike like the WA Mining Housing market.
    Then again, most miners have 3 or more rentals which may go on the market.

    What happens with Interest Rates in the next 5 years will be a telling story.

    I do agree, there will be an increase in Mortgagee Auctions.
    I just went to one where 10 x 1 Bedroom Units (12 years old, Modern, Pacific Hwy frontage) just for $800k for the lot.
    $80k a unit
    Last edited by ol' boy; 19-04-17 at 06:25 PM.
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    Why negative gearing rules wont change


    What is not mentioned here is the number of houses etc hidden in other family members names which is what i would do if i was a sleazy parlimanterian
    Last edited by allover; 20-04-17 at 08:20 AM.
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