Property market not geared for Labor negative gearing ban

House market not geared for ALP
(Behind paywall)

 

There is a silver lining here.......I can see rents go up 20%..in places like Brisbane....Melbourne...Geelong....and Sydney eventually.....

ALP have got this policy wrong this time around..this will also affect the economy...

 

Yes that is the silver lining

But it is worrisome that borrowing capacity cuts are only going to get worse if this policy change occurs

Will impact Sydney and Melbourne a great deal more than other cities due to the higher proportion of investors in the market

Less buyers due to capacity cut = further capital price depreciation

 

Negative gearing only for new homes which are usually part of housing estates on the outskirts of cities. Most renters would want rentals available close to where they work and good transport which means cities. I dont think BS and his party have thought this through ... Am inclined to agree with Sash ...

 

Prolly worth mentioning that they have to get it through the house of reps and the senate too..

With this election looking a lot closer than people predicted and the growth of the minor parties, getting this passed won't exactly be a piece of cake...

 

Yeah good point

Wouldn't be surprised if some labor pollies are counting on this and behind the scenes they really don't want it implemented

 

I'm wondering how the negative gearing changes proposed by Labor will apply for infill development scenarios - councils across Sydney are preparing for the changes.

Sydney councils scrambling ahead of deadline for medium density code
https://www.smh.com.au/national/nsw/planning-changes-sydney-medium-density-20180405-p4z7ys.html

In a scenario of 1 existing house knocked down and 4 replacement dwellings built, how many dwellings would qualify for negative gearing as "new housing"? All 4 dwellings or just 3?

Will this make properties suitable for infill development even more popular among developer-investors (even after 1 January 2020) ... because of the negative gearing? ( any individuals buying new dwellings from pre-sales would qualify for negative gearing and dwellings retained by the developer would also qualify for negative gearing )

Also, does this make the Labor argument of less competition among Owner Occupiers and Investors a moot point in suburbs where infill development can occur? ( due to competition with developer-investors )

For reference, this is the Labor policy: Positive plan to help housing affordability

 

It will be Sydney which is smashed as the oversupply will be more pronounced. The reason is more people are leaving due to high living costs. Same thing in parts of Melbourne. But this is exactly what I am counting on!

The people who were crowing about Sydney...will see a market which has not been seen for 40 years...expect further price drops in Sydney.

You are correct about there cities they are in a much better position due to lower costs and better returns.

Housing in Outer burbs with good infrastructure will do well. But agree labor are idiots..they have not thought this through...it is very possible they could lose. The betting agencies had it 5:1...for labor...now 1.35:1......

 

I am praying and hoping that they lose .

I would rather they get defeated in the polls than me come out of retirement to change my property and share investments, just to defeat their policies .

 

It has been shown that the last time negative gearing was removed it did not cause rental increases. (See ABC fact checker).

Not sure why people keep on insisting it will do so this time...

 

It will reduce the number of people buying "second hand" houses in a number of areas and renting them out. The reduction of rental supply will lead to rent increase in these areas?
Even buying a new property will be a little less desirable as an investment/rental as future buyers will most likely only be home owners (ppor)

 

I was saying this someone yesterday. There’s just no way anyone rational who understands the basics can think this is a good idea at this current time, even if they think it’s a reasonable idea overall. The timing of the policy is as important than the policy itself. It wouldn’t surprise me if deep down Labor knows this which is why they are sticking to it at such a precarious time - they too know it’s not going to pass.

We are all up in arms over it but at this point with what will probably be a very hostile senate and more independents than ever, it will be surprising if it is passed in Labor’s form anyway.

We could all be huffing and puffing over not much.

- Andrew

 

I think this is partly due to the fact it was only abolished for two years. These sorts of policies will take time to work their way through and would depend on population growth at the time. Just because it didn’t push rents up then doesn’t mean it won’t now and vice versa.

What will undoubtedly cause rents to rise is that if we continue to see large population growth and because of the changes investors simply stop buying established property then over time the supply of rental accommodation will dry up and push rents up. Who knows how long this will take but it’s fairly basic economics - if the supply dries up and the demand for rental accommodation increases through population growth, there will be a smaller pool of properties that more people are fighting for.

Of course, this will be offset by stagnant or falling prices that more people can then afford to buy but that also has a big effect on the greater economy - lower spending, less job creation etc so less people can afford to buy even in a cheaper environment.

I guess no one really knows at this stage as the abolition in 1985 doesn’t make for a good test case given the time frame but my hunch is that if this gets through and holds for the long term we will see rents rise.

- Andrew

 

Trust me it will people are like leemings. ...property investment will stop for 2 to 3 years. They lay off a lot of peoplr then it takes a decade to bring back supply

 

Yes more home owners buying, that's what labor is supporting isn't it? So less people looking to rent in the short term since they would be able to buy their ppor. So why would rents increase?

 

Every market in Australia is different.

Houses in many areas of Perth are already super cheap. Less than replacement cost.
People don't seem to like buying in a falling market.
On Perth Facebook pages/groups lots of people complain that houses are too expensive and they can't afford them.
Not sure where these new home-buyers are going to get their money from.
If you can't afford in Perth now at sub 4% loans I doubt you ever will be able to.
If people can't currently afford housing in Perth I struggle to see how they would be able to afford Sydney and Melbourne.

Again on Perth FB rental groups. I see a lot of people wanting houses less than $300 a week to rent. If you can only afford $300 a week rent they will struggle with buying/owning a home.

 

Firstly, don't cut and post full articles from the Australian (firstly because it's actually breaking the law with respects to copyright (Copyright in social media, websites and blogs, About, La Trobe University) and second it's the Australian which is a terrible source of unbiased information)
The argument for fair use does not apply because you really having done anything but cut and paste the content into another commercial website.

No details on model, not validated by anyone else. It's less that useful.

Opinion dressed up as fact.

FALSE. ALP not banning negative gearing. Changing policy to exclude existing house stock as the direction they want is NEW housing stock.

No details on how this figure came around, not validated by anyone else. It's less that useful. I would argue that only the 20+ would be significant.

There are lots of opinions but one thing is not an opinion, Negative gearing is not going to be banned. Probably more FHB in the market, might spur price lift or might not.

Willing...sure....Able is really up to their partners for credit. They are not locked out, simply delayed until they get their finances in order.

ALP is not banning negative gearing. This is simply false.

 

Do ya work for the ALP noddies?

The ALP has no clue! I voted ALP ...not now.....I doubt most people over 40 would....

 

No. I don't work for the ALP. Just pointing how flawed this article is.

 

I see the following effects from the policy:
1. Renters will live further from the city. I say this because owner occupiers determine upper edge of house prices not investors, and the homes close to town will still be preferred for PPRs for lifestyle and prestige. The following individuals here who's choices will be affected:
a. 'I have an investment property and want to rent it': I can't claim my loss, but its still worth a fair amount to an owner occupier. The landlord decides to offer the home at low yield or sell and put his $$ in a higher earning vehicle.
b. 'I'm about to rent': The average Joe won't pay more rent to make the investor's purchase worth while if he doesn't earn more money, he'll just spend 15-30 min more in travel time each morning and afternoon
c. 'I'm about to buy investment property': I can no longer afford to hold this investment grade property at the price its worth to an owner occupier, I can't afford to front the cash to develop, I'll buy further out.

2. NG will be a benefit for the 'rich'. No longer will the mum and dad investor benefit from this. The investor spread will become less broad and favour the elite. The 90%+ of investors will not be able to afford to supply infil housing and will access NG through knock downs or land releases.