Bill shorten poised to take negative gearing.

removal of NG=figures not stack up=lower property price=less investment motivation=less new build=rents skyrocket=people live on street=high crime

 

Changes to the GST have been dropped. Looks like whoever is in power is going to do something with NG.

Last week, ScoMo said they would be examining ' areas where the system is being abused or areas where they are excessive".

Whats excessive?

Cap on negative gearing and work-related deductions being considered by Treasury | smh.com.au

 

Because it's a carrot to dangle in front of investors to buy new = construction = jobs.

Flipping established houses to one another at higher and higher prices isn't as productive.

 

If it was up to me, I'd remove all tax concessions on interest payments. So no more negative gearing on shares or property, along with businesses being able to write off borrowing costs as an expense.

Why? Because it encourages a buildup of debt, and that makes the economy and financial system more fragile. So discouraging it strikes me as good policy.

As for negative gearing, its cost is a big number that keeps on getting bigger. So it'll either go or be capped and constrained.

 

Negative gearing is what keeps rental housing affordable.
Take it away and supply will reduce / price will go up.
As a society we will make sure everyone can have a roof over their heads as a basic human right, this is what makes Australia great.
Without any fancy economic model long I'd suggest the "savings" by eliminating neg gearing will be offset by increased welfare.
As a landlord, I wouldn't be unhappy for my yields to go up, even at the expense of suppressed capital gains as the market would inevitably reset in response.
As an aside - my strategy is to gear neutrally anyway, so would not lose out on not being able to claim losses.

 

The government relies heavily on private investors to supply the bulk of the rental housing to the market. If the government implements a change that makes it non-attractive to be an investor in residential real estate, they'd need to determine how on earth the government can own and offer rental housing for our enormous tenant population.

 

Possibly, they may be negative geared but still be able to service the loans without it.

I think that would depend on the urgency and the amount of investors that "may" flood the market.

I don't think it's all doom and gloom though.

 

Blaming Peter Costello? Odd. Should Malcolm bring up everything Labour has brought in every time he speaks?
I think it's disingenuous to think of it as a discount. I see it more as "normal" for people owning a property 12+ months, and more of a penalty to people selling under 12 months.
No words on the mental capacity of these people.

 

Because it encourages investment in new housing which actually helps the economy. Investing in existing housing does nothing at all apart from increasing the cost of housing.

This is great news.

 

It effectively has bipartisan support in one form or another anyway

 

I can understand the logic to limit negative gearing to new properties .

I think making it retrospective to existing owners , while obviously raising more money , has the potential to cause a short term distortion of the market , eg people dumping properties and causing a correction which could adversely affect the economy in general .

An option would be to grandfather existing owners , but either put a cap on what they can claim ( have seen that suggested in the media in recent months ) , or change to the UK system , so they claim current losses against future profits .

CGT discount would be a pain personally . It may well encourage people to hold on to properties , rather than trading , which could decrease stock on market and increase prices .

Cliff

 

Yes, and it would reduce their stamp duty revenue..............

 

It's suggested the proposal will be to continue allowing it for new builds, which is the only source of NEW supply.

It's very likely existing investors would be unaffected (grandfathered) or have a large grace period.

There would not be any additional need for government to own rental housing. Over time prices and rents would change to an equilibrium where buying for yield made sense. And it's not like the properties that existing investors hold will go anywhere, they will be sold to other investors or sold to home owners, reducing the size of the rental pool.

 

Which is exactly why a broad-based land tax will eventually replace it.

Australia's Future Tax System: Final Report - Table of Contents

I personally can't believe that the same old, tired arguments from property lobbyists are still getting air time to be honest. It's 2016 not 1987 and I'd hope that we're generally more educated.

Times they are changing, we can either educate ourselves and enable our investments to work sustainably or keep fighting the current.

 

Shorten unveils Labor election policy: No more negative gearing for existing homes

 

Yes read up on the grandfathered option which may occur for current property investors.

Do you not see a problem with this though, could this be an issue? Example.

Newer suburb, newer homes, currently an investor buys a 2-10 year old home at slightly less than a new build home. Let's go with Victoria, truganina suburb as this was mentioned recently on pc. Outer skirts. First home owners suburb and investors. I new home may cost an additional 20-30k over a slightly older build property in the same format. Negative gearing is a bonus, and can turn property into positive cash flow whilst you pay down debt/or rents rises and increase the yield over time.
New policy in place, the next investor that's comes along has a choice to buy either an older home with attracts slightly less rent and no bonus of negative gearing, or buy a newer home with negative gearing bonus and better depreciation on new stock.
Perhaps that will eliminate an automatic 50% of your buyers when it's time to sell.

 

I see a real problem with restricting NG to new property. As usual the pollies havent considered what the lenders might do. There is no NG without a loan!!

It is clear to me that the banks will not play along and will either veto all new property (valuation issues with distorted market) or reduce LVR's to 60%. Initially at least they would likely close lending all together.

 

Just quoting this, will revisit shortly but do you really think our banks can afford to veto new property lending?

 

Pffft. One's a federal tax the other is state. Why would the feds care about the impact on the states?

 

Pffft, I am well aware of that.

Maybe because the states will be right up their azz chasing funds to replace their lost revenue from the stamp duty................