Nathan Birch "dumping" properties according to Macrobusiness

I suppose farmers shouldn’t make money. They should feed people.

I suppose bus companies shouldn’t make money. They should transport people.

I suppose doctors shouldn’t make money. They should cure people.

I suppose teachers shouldn’t make money. They should educate people.

Yeah, that’s gonna work.

Totally disagree. Investors provide a great product/service.

Nope. Investors will still buy established properties because they are closer to the CBDs. That is where the growth is. If one's aim is to fund one's retirement, one must go for higher growth, NOT higher yield.

Nope. If a property cost more to buy/develop, sales prices will continue to rise over the long-term due to demand.

There are only two ways to make housing more affordable:

1. Force up wages/salaries. Risk is inflation will take off, making living more expensive for everyone.
   
2. Force down prices of housing. Risk is people will have negative equity in their PPOR, banks will foreclose, …

Totally wrong. I have bought established properties and build new. I have help keep many lawyers, accountants, financial planners, bank staff, real estate agents, property managers, tradies, insurance people, admin staff, … in a job. I have also paid a small fortune in tax and GST.

I have been bloody good for the economy. Thank God for property investors.

Wrong

What people can’t stomach is the cost of welfare, currently around $160B. The largest cost of this is Aged Pension, currently around $50B. This makes the cost of NG pale into insignificance.

When I started work 40 years ago (in 1977) the Government put out the message that they would make it harder and harder for people to qualify for the Aged Pension and that people should plan to fund their retirement out of the own funds.

My wife and I heeded that message and, over the last 40 years, we worked hard to build ourselves a property and share portfolio. So much so, we do not qualify for the Aged Pension, which was our aim 40 years ago. If all goes well and Government don’t screw us over, we aim to self-funded until the day we die.

The Aged Pension is currently just under $35,000 for a couple. We hope to live for at least another 30 years. So, the way we look at it is that we are saving the Government over $1,000,000 in today’s dollars by not having to EVER pay us the Aged Pension.

Imagine if Governments had encouraged people to follow in our footsteps and the number of people drawing the Aged Pension today was halved. That would give the Government another $25B to spend on schools and hospitals.

Yes, I have benefited from NG but the Government is going to save themselves a lot more that what it cost them.

In my case, NG was a wise investment for the Government

Even if Wee Willy gets in and removes NG, it will be back. I have no doubt. Seen it before.

 

Kinda all over the place there mate. When I said the property market isn't for investors to make a profit, I'm talking about its prime purpose. I'm not saying people can't make money or shouldn't.

But look at the APRA changes recently with I/O. That has smashed some people. Does APRA care? Nope. Because their mandate is to ensure stability of our financial system. It's not "make investors money".

That's what I mean. The Government doesn't care either, except as far as it changes votes. People get locked out of housing, they vote accordingly.

As for speculation... no, it's terrible and the fact that some lawyers and agents and etc got paid doesn't mean it was productive or good for our country.

So you say the Aged Pension is $35K for a couple, or roughly a million over the retirement period.

Okay, so speculators buy five properties, which stops five couples buying their own home. They're forced to rent their entire lives because speculators keep outbidding them. They hit retirement age still renting.

So we now have 1 speculator NOT collecting that $1 million... but we have five couples taking $1 million EACH.

Down FOUR MILLION overall and as a direct result of property speculation.

People who add to supply, great, go right ahead. But speculation is pure poison for our economy and society. It pushes potential owner occupiers out of ownership and into the insecure rental market. By the time they hit retirement age, the situation is dire... and costly.

 

You've displayed not a shred of evidence that you know how CGT was calculated prior to the Howard changes. Did you know a lot of investors would pay less tax under a pre-Howard calculation?

 

I need to prove to you what I know?

I'm very well aware of how CGT was introduced and then changed, thanks mate. You can believe me or not. What I do ask you is that you stop with insisting you have any idea what it is I know. It's just pointless.

I need to write an essay to convince you I understand how CGT was calculated prior to Howard's changes?

How about you waste your time doing that instead? I have no desire to.

Here is my position: I'm all for multiple changes to the property market. That means cutting NG. Changing CGT back. No exemption broad based land tax that increases per property held. End I/O entirely. Hard income to debt ratios (like 3-4x). Rental reform (longer leases, more the euro model, up to tenant if they own a pet, end of no-reason eviction).

I also think there needs to be major bank and broker reform. Broker shopping shouldn't even exist. Loan application fraud needs a Royal Commission.

I'd also go with introducing the next stage of the anti-money laundering act that has been sitting around for a decade.

I'm not going to write an essay to prove to you that I understand CGT tax calculations...

 

You've displayed not a shred of evidence that you know how CGT was calculated prior to the Howard changes. Did you know a lot of investors would pay less tax under a pre-Howard calculation?

 

I am waiting to discover where all the current renters will live if there aren't any investment homes for them to live in. By current renters I mean people who move around a lot for their jobs, who are newly arrived in the country and haven't got their residency, or temporary visitors like foreign students. What about recently divorced and separated people, those who don't yet know where they want to eventually buy, and those who are currently saving their deposit and stamp duty costs. What about those on pensions and those working in the service industry like my offspring who cannot get a real job, let alone buy a house. They are perfectly happy to rent.

As previously pointed out, there is a huge proportion of the population who actually choose to rent. They are not 'forced". Back when I was a young socialist zealot getting my head around the Whitlam era of Medibank and free university education and when housing was cheap, the ratio was approximately 70% OOs and 30% renters. The state government built a nice new public housing facility across the road from where I lived, which was trashed by its residents. Not long afterwards, the state government stopped providing public housing.

So if the government doesn't provide affordable rentals and it seems that our honoured friend doesn't want us to be providing safe cosy rentals either, then who is going to provide housing for the significant proportion of the population who want to live in modern housing? Real question.

As pointed out so many times previously, not everyone will go out to buy a house, no matter how far its value drops from Sydney's heady median. I don't see much chance of a Workers' Revolution similar to what happened in Russia a hundred years ago.

I'm all for having the freedom to choose from a vibrant array of accommodation styles, and being free to supply such a service to the public if I so choose. From time to time the European model is discussed here on PC but I am yet to understand how we would transition to such a model given it is so far removed from the structures of tenancy that we are familiar with here. I also question how we would transition to the typical style of housing supply from the days before banking deregulation, when a high proportion of housing was provided by the state, and entire blocks of units were built and owned by one family trust, held as income-producing assets rather than released for private sale.

 

It is a false comparison as all the above groups do not claim NG. Tax is paid either as a business or an individual and streams are not *******ized. Run property as a business, enjoy the profits, do not dip into public purse when intentionally running a loss making speculative venture.

• Pure builders and developers running property as business do. NGer's do not.
• Public handouts distort the property market, create a financial risk and creates an under class of perpetual renters, which can be avoided by removal of tax payer subsidies to investors.

• If the investors are willing and able to buy without public rorts, good luck to them.
  
• Read Euro's posts to understand how the financial landscape has changed since stone-henge and the emphasis on yield.

Point 2 is what removal of NG will achieve. Take the speculators off, asset prices will revert to normalcy. Labor could actually go a bit further and get rid of both the CGT exemption (completely) as well as grandfathering of existing NGed properties.

• Rest of the world (without NG) does fine with all the jobs described.
• Substituting a speculator with an owner, does not eliminate all the above.
  
• However the parasitic financial microcosm (BAs, accountants, PMs, MBs, trust advisors etc) sustained on NG will feel the most impact. IMHO that is a conscientious and well targeted price to pay for a much needed enema in the property market.

• Emza has adequately answered who has benefited at whose cost.
• Time will tell the future of NG...

 

Given nine out of ten investors buy established properties and only one in ten builds anything, it's a bit of a joke to suggest that "investors" as a class as responsible for increasing supply overall and any reduction will result in fewer homes to live in.

Labor's plan would have keep things rolling - NG on new builds only. We only need to move that needle from one-in-ten to two-in-ten to double the volume of new builds!

 

Interesting points @Angel. I have wondered about this too. In the past the state provided a lot of public housing but that function of the market has been privatised. Let's say that negative gearing is the cost to the government for proving housing. Is that more or less than the government providing the same number of houses as public housing? What I mean by this is was it a good idea from a financial perspective for the government to essentially privatise the provision of accommodation? I can't answer that because I have seen no analysis of the numbers but it's interesting to think about.

It's interesting to trace the history of this back to it's origins. I believe that one key document was the The World Bank report: Housing - Enabling Markets to Work from 1993. Here is a key point:

"Reforms in the housing sector will need to be coordinated with
macroeconomic reforms. Housing finance liberalization, for
example, will need to be coordinated with the overall liberalization
of the financial sector. Similarly, privatization of housing
production should go hand in hand with the overall privatization
of public sector enterprises. In this context, the Bank will promote
mechanisms for coordinating public agencies and private
interest groups with a stake in the housing sector, which can
develop a broad view of the housing sector and its role in the
macroeconomy."​

Request Rejected

It's an interesting read nearly 25 years after publication. Basically the report sets out a blueprint for the financialisation of housing. It would be interesting to go through the report in detail to see what the ideal was and whether it has worked as intended. Perhaps there has been unintended consequences?

A recent United Nations report on the right to adequate housing identifies the financialisation of housing as an issue of global importance. It defines the financialisation of housing as:

… structural changes in housing and financial markets and global investment whereby housing is treated as a commodity, a means of accumulating wealth and often as security for financial instruments that are traded and sold on global markets.

The UN Special Rapporteur on the Right to Housing argued that treating the house as a repository for capital – rather than a place for habitation – is a human rights issue.

The financialisation of housing has been central to wealth creation in Australian households since at least the second world war. Today, it underwrites the bank of mum and dad, amateur property investors as landlords, asset-based welfare, and foreign real estate investment.​

Explainer: the financialisation of housing and what can be done about it

This article links to a book In Defense of Housing - The Politics of Crisis, which again highlights this is an international problem.

In every major city in the world there is a housing crisis. How did this happen and what can we do about it?

Everyone needs and deserves housing. But today our homes are being transformed into commodities, making the inequalities of the city ever more acute. Profit has become more important than social need. The poor are forced to pay more for worse housing. Communities are faced with the violence of displacement and gentrification. And the benefits of decent housing are only available for those who can afford it.

In Defense of Housing is the definitive statement on this crisis from leading urban planner Peter Marcuse and sociologist David Madden. They look at the causes and consequences of the housing problem and detail the need for progressive alternatives. The housing crisis cannot be solved by minor policy shifts, they argue. Rather, the housing crisis has deep political and economic roots - and therefore requires a radical response.​

Verso

All of this could be the basis for a very interesting discussion.

 

This thread has completely derailed, filled with so much garbage.

I think NB does well with his personal banking, has timed it well, my concern is charging a fee for those looking to replicate.

Recommending clients to sell property, to purchase elsewhere. That's a decent amount of advise that I hope if it's given they're qualified to do so.

 

Well there you go. Emza's concerns about housing and wealth creation are correct according to the articles Perthguy just tabled.

 

Hey @emza I'm still waiting for your response. If you do hold investment properties, then you are robbing others from owning properties...I think that's what you said earlier? You said "Okay, so speculators buy five properties, which stops five couples buying their own home. They're forced to rent their entire lives because speculators keep outbidding them. They hit retirement age still renting." So what you are saying is that when a person buys 5 properties, he or she is a speculator. Yes? So, if you own 1 PPOR and 1 Investment property, still a speculator? So the question is are you a speculator yourself? Or a renter? Trying to understand where you are coming from. A lot of generalisations on this thread but that's fine.

 

Thanks @Angel. I put a lot of effort into sourcing those articles because this is something I am genuinely interested in. It's an important topic and the scale of the problem is much larger than we could have imagined. Of course none of my points have been addressed by someone who is just genuinely interested in engaging in discussion.

 

Apparently someone who buys and existing property not to improve but merely profit from an increase in value is a property speculator.

Is it then valid to apply these same principles to share investors? A person who buys shares at a point in time with the intention of later profiting from an increase in value is a speculator and rent seeker.

If it is true that property speculators are toxic to the economy, does it hold that share speculators are toxic to the economy? If property speculation is unproductive, is share speculation equally unproductive?

In 2016 an estimated USD$17 bn of capital flowed into Australia to be invested. If property speculation and share speculation are unproductive then the question is how can the USD$17 bn of capital be invested in a way that is productive to the economy?

This is the challenge facing super funds, which need to invest and get a return but are challenged to find productive ways to invest the funds being managed. It is a huge problem:

Superannuation assets in aggregate were $2,259 billion ($2.3 trillion rounded) at the end of the March 2017 quarter, up from the previous quarter which were $2,199 billion, and are now at an all time historical record level.​

Super statistics - ASFA

How can $2.3 trillion be invested in a way that is productive but does not risk the capital of superannuation fund holders? This problem is growing exponentially but I have seen no answers to this problem.

 

Come on, if you are going to argue this at least put up a real argument. The point is new vs existing. Find the stats about NEW businesses being created. You are arguing for a static market with no new businesses being created. Is that were all the money is going? Is BHP the same size as 20 years ago, has it not found new mineral deposits? There are more strawmen in this thread than...

"Doctor Who" The Family of Blood (TV Episode 2007) - IMDb

 

You are spot on, it is about new business. If I buy shares in a start up or a shares issued as part of capital raising then I am contributing to new business. If I simply trade existing shares, how much of money I use to buy the shares goes to BHP? None.

Buying shares in a start up or a shares issued as part of capital raising is contributing to new business and is productive.

Speculatively trading existing shares for a profit purpose is nothing more than speculation and rent seeking and is unproductive.

Property is the same: building new properties is productive and trading existing properties for profit purpose is nothing more than speculation and rent seeking and is unproductive.

In that case then trading properties should be discouraged and trading existing shares should be discouraged I guess.

 

Strawmen will not stay buried. Shares=/=Property, not even in the same post code when it comes to NG

• Unlike property, shares are not a basic human need. Easy to live without shares, house not so much.
  
• A share speculator does not take away the shelter from someone, a NG property on the other hand thrives on perpetuating homelessness (access and serviceability of debt, rental disparity leading to insufficient deposit, inequitable tax treatment....effectively enslaving the renters to dig their own grave). Cake anyone ? Have a read of Growth Mindset while you are at it.
  
• A better comparison for NG property would be allowing NG on food or water. The hoarding of life essentials by torch bearers of capital might be tested by the lynch mobs.
  
• Grattan report clearly identifies (2014-15) borrowings in property for NG to be 28.84 times that in shares. Usually 1 pumpkin =/= 1 grape...not too sure if it holds true when constructing strawmen.
  
• Even qualitatively, asset risks for property and share are different. Given the volatility in the share market, investors are far less likely to NG shares as compared to property.
  
• Margin lending is 2-3% expensive for shares as compared to property, so more draining to NG.

The labor policy actually acknowledged the largely speculative nature of shares and the borrowing costs were only allowed to be offset against the capital gain not against the income.

Labor's negative gearing plan could hit margin lending

 

Strawmen.

The issue I was addressing was whether trading existing properties is toxic to the economy. My question is whether trading existing shares is also toxic to the economy. In no other way did I compare property and shares.

 

Here you go @Skilled_Migrant.

This comment makes me wonder if share speculation (trading existing shares for profit) is also a toxin to our economy and society?

 

Bring back low doc and no doc loans, investing on steroids.... them were da good old days