RBA Suggests Review of NG Laws

lets say 1,000,000 houses are receiving NG and 75% are established (I really am making up numbers here).

So 250,000 houses are new come with NG and deprecation.

The other 750,000 houses are being rented out to tenants and both the LL and the tenant are getting the benefit of NG (either directly or indirectly).

If they remove the NG on established the new houses will increase dramicatly (as the sums work out better) and if 1/2 the LL off load their houses as it isn't financially viable that leaves 375,000 being still rented.

If the 1/2 of the 375,000 (187,500) remaining increase their rents.

So now there is 375,000 houses that have been sold, lets again assume 1/2 go to PPOR and 1/2 go to investors there is still 187,500.

However how many PPOR people want to buy a 1bed near a uni? Lets say you bought a 4 bed house near a uni that would mean you now have 4 students looking for a place to rent. They cant rent houses as PPOR which then means they will look at 1 and 2 bed units (more demand).

I really cant be bothered explaining further through text, you make up your own mind. Talking about the NG changes on here will not change my thoughts and you can make up your own.

TLDR it wont work.

 

And you would only do it on the basis that other landlords were in a position to have similar discussions. Therefore, you'd be increasing rents based on the market. As the other guy said, it's the market that decides. If the interest rates shot up to 20% and there were 10 houses for every 1 tenant, there's nothing you could do to justify increasing the rent.

 

I think it is very well timed jaw boning, look at how APRA has tightened up investment lending recently, now it's in the headlines that the RBA thinks NG should change.

It's good timing in that it "might" make some investors nervous about increasing portfolios if they are tight on cash flow.

Interest rates will come down this year in my opinion, so ANY angle they can attack to TRY and lessen the speculation in the property market they think is happening, they will attack.

Interesting times...

 

Yep.

RBA's best weapon is to jawbone. Media laps it up, masses listen and react/panic accordingly. Much easier to get results by spouting off than formally imposing changes.

Expect many more "bubble", "crash", "overvalued", "unaffordable", "correction", "rule changes", "greedy investors pricing FHBs out" talk and media articles over the next 12-18 months as the cash rate heads south.

 

An inconvenient truth despite commentary to the contrary

 

No different to European countries with large amounts of social housing funded by the tax payer. Many people could never and will never be able to get a loan or don't want to. Lower rents are subsidized by the government to make it more attractive to investors to supply housing. At current interest rates many will find they are no longer NG anyway.

 

Nothing to see here... Walk on

 

What is the inconvenient truth?

Are you saying that they didn't remove the NG and then reinstate it?

Does anyone know why PK and BH reinstated it?

Serious question, because I don't know the answer.

 

Inconvenient truth for opponents NG.
I'm saying that I agree it was removed and quickly reinstated despite the carrot of a depreciation rate of 4% between July85 toSept87. Rents increased rapidly despite this being conveniently forgotten. Yes other forces were also at play but this appears to have had a major affect.

 

It was reinstated for political reasons, to win an election. Its removal did not increase rents, just a myth.

From Ross Gittins:
"The REIA began campaigning against the move to curtail negative gearing even before it was put into effect. The estate agents predicted that ending negative gearing would have dire consequences for renters, and they really stepped up their claims of disaster in the federal election campaign of July 1987.

They managed to win the support of the Labor governments of NSW, Victoria and Western Australia, and they put the frighteners on Bob Hawke to the point where, in just the last week of the campaign, he agreed to re-examine the issue."

http://www.smh.com.au/articles/2003/08/24/1061663676588.html

 

http://www.abc.net.au/news/2015-05-06/hockey-negative-gearing/6431100

The only trouble is currently rental vacancies are tight in pretty much every capital city so we'd likely see rents surge. The net result of negative gearing in theory is that the houses sold by investors will be snapped up by first home buyers. However, the barrier preventing most people from purchasing a house is the deposit and not the actual repayments.

 

Not really interested in a mammoth debate about NG, I don't particularly care as at current rates its a non sequitur. I'm more interested in how to make more money, whats your agenda?

 

Thats the theory, unfortunately a percentage of the population could never save for a deposit, don't have a stable income, are not ready to buy due to any number of reasons.
I actually think we are at risk of seeing rents soften in many places due to increased supply, there is a lot of building activity presently.

 

This is already happening in some suburbs, more supply and lower rates means more investors are out and more properties for rent. Parents on one of their units are getting $20 less than before (350ish mark).

 

Certainly in the case of apartments there is a threat for rents to soften. Houses should still remain well placed though due to population growth and land scarcity.

 

Generally speaking if they did axe NG, and I understand not everyone will follow this path, but generally speaking if a LL's IP is so finely geared that it no longer makes financial sense to hold onto then they will sell.

Those that plan to sell are adding to the housing stock for FHB and other investors to buy from. It's reasonable to assume that with more housing stock then there will be a movement from would-be-renters to FHB as oversupply pushes prices down.

I'm sure this is a very different economic climate to 1985-87 so I don't think we can use that as a test case as to what would happen now, it was 30 years ago! Anyhow, the idea that rents increased dramatically in those two years has been debunked as per wategos's article and the following (this one has a pretty graph which outlines clearly what rents did in those two years).

http://www.abc.net.au/news/2015-05-06/hockey-negative-gearing/6431100

 

Some people care about housing affordability and a "fair go" for younger generations, and recognize that encouraging housing speculation with tax breaks is bad policy. Others, including unfortunately most current politicians, care only about themselves, their votes and their property portfolios.

 

The graph shows real rents increased in all capitals except Bn and Adl. Note the graph conveniently only displays rents relative to inflation not actual rents. A graph showing actual rents for property would look slightly different but wouldn't have supported the proposition apparently?
Anyway I'm checking out of this thread as its a little pointless.

 

I would agree with it if they were able to cap the amount you could claim for mortgage/interest to the same amount as your rent.
Eg. IO $2,500/mth, rent $1,800/mth.
As I've said before, that's not a loss, it's bad business sense.
And leave the rest of NG the same (depreciation,maintenance/repairs etc...)

 

The barrier to saving a deposit is;

Lack of sacrifice and commitment to do what is required to save one.