Labor confirms 1 January start date for negative gearing and CGT proposal

Labor has announced that it will implement its plan to restrict negative gearing to new investment properties and halve the capital gains tax discount from 1 January 2020.

 

Focus has been on property ... but wondering if this could fireup the ASX in the period before 1 January 2020.

 

Looking forward to the increasing of yields - if housing values drop, there'll be plenty of choice for FHB. They'll suck up a % of the stock on the market and take them out of the rental market (as they will also vacate the rental market) - a neutral effect. Not all renters will be FHB (so only a small subset).

To offset the loss of NG, landlords will need to increase rents - do I foreshadow rent control or new leasing arrangements?

 

The article on the ABC last night also mentioned that they were going to drop the tax rate ???? from 30% to 15% for business that build to rent.

 

for institutional investors

 

Landlords can try to increase rents to reflect their costs and cashflows. The question is whether renters will accept that proposal. Oversupply means its less likely rents will rise because of the old supply-demand effect.

Two properties side by side. Each different owners. One is newly acquired in Feb 2020 and the other acquired in 2016. Both presently rented at $550pw. Why would the newly acquired one have a rent increase ?

Under the ALP proposals if the same owner owned both its possible that the neg gearing on the new purchase CAN offset the positive gearing on the original acquisition.

 

With potential changes in NG and CGT,

Post jan 2020,
What would drive investors interest in existing dwelling market especially in Syd/mel which even after the recent falls have very poor rental yield?

Are we looking at a total desertion of investors from this segment of market especially in Syd/Melb for many years to come at least till rental yield becomes attractive enough either due to increase in rent or fall in prices?

Does it mean all existing properties which are not .net positively geared and some, will become untouchable by investors?

 

It looks like I may have a good excuse to increase my rents. My properties are in a superfund and I have no plans to sell them so increased rents are a good thing. Not that I will ever vote labor.

 

Not necessarily. Cashflow hasnt limited people in the past and tax is part of the cashflow equation.

The proposed changes appear to make it more complicated but doesnt stop negative gearing as such.

 

Ummm the NG changes wont impact your SMSF property. The precise issue with 1-1-2020 is that is the line in the sand for future acquisitions. Past acquisitions remain as they are today.

Anyway rents wont rise due to NG changes. Demand - supply issues are the determining factor to rent markets. Oversupply or under supply. The NG changes may create a under supply of rentals in the longer term as investors pull back and dont saturate the demand for property but that wont be a factor for a long time as there is plenty of over supply. This may push up yield if prices fall for lack of demand with rents at a stable level. And NG will be available for new builds still. So you may in time find a two tier demand - supply. Oversupply of new builds for rent and so this pushes rents down or limits any upside. Its more likely a suburb by suburb issue.

 

with grandfathering of negative gearing for existing investors and the 50% CGT discount could well mean people who currently have these investments dont sell.

Stock dries up. Prices rise.

 

Agreed

Surely the opposite? The chances of a currently rented NG property still being available for rent in five years will be higher than at present thus stabilising the rental pool. And if house prices drop further, at the margin tenants who previously didn't think of buying will now do so.

 

if demand stays constant with supply then yes that will assist.

My concern is more for Melbourne where population growth is increasing at a rapid rate.

 

See what what will happen, is yes, rental prices will stay pretty flat for a while (as they are already doing)..come 2020 or 2021, Labor will crow that they "fixed the affordability crisis"..

Meanwhile many who can afford to do so will snap up property as prices continue to fall or flatline, more investors will quit anyhow... Around 2023 or so onward all that will have absorbed, and then there will be a massive lack of supply, and rental prices will soar. So this is a 4-5 year play at least. Most will only look at the short term and jump to quick conclusions.

I imagine also those with freestanding houses as investments will be laughing all th way to the bank.

New builds will be in outer suburbs or high density in inner burbs... Leaving older houses in good locations a high rental premium.

 

Fantastic. Good luck to the renters who rent from an institution.

 

Does anyone know if you currently own a property that is positively geared only because of money parked in an offset account and you withdrawal the offset balance after 1st Jan so that the property becomes negatively geared - will this still be eligible for negative gearing under Labor’s policy?

 

who can say, but probably

 

Nail in the coffin for property markets.... already started of course, but this wont help

 

Don't buy property in 2019.... banging on this for obvious reasons.

 

Fingers crossed. I will be looking to buy again in 2020/21 so hoping for some great deals