Rents to rise, house prices to decline under Labor’s negative gearing policy: SQM

Nah, This is a totally different economy from back then.

 

let's see

 

It certainly feels like this whole argument about NG "artificially inflating prices" is only one side of the coin and if we have a future where all the tax advantages are gone there is only one way for rents to go and that is up. Tenants will squeal when they do. The cycle continues. For those that have been watching it long enough it isn't surprising. Buying stronger / neutral cash flow properties now in place for growth demand from demographics and infrastructure (ie local ppor demand NOT investor demand) should weather the short term election storm best, be easiest to service and see above average growth AND rent growth medium term. Profits will be made now by savvy buyers. Oh and they will also have grandfathered tax advantages. Interesting times for sure.

 

Whether owner occupiers can NG and 50% CGT their home if they switch it to investment after Labor’s changes is something that doesnt seem covered much in the news.

If its not, we’ll probably see a spike in OO->IP transitions and more rentvesting. For investors who chose their home based on the best one for staying under land tax thresholds, this’ll be an extra burden at the next assessment

 

Good points. I can’t see why you would get a discount. In either case one would need to look at the numbers and consider the pita that moving is

 

I haven't heard anywhere that they are attacking the 6 year ppor cgt rule though?

 

There are all kinds of myths about the previous NG removal..most of it is so far wide of fact it's laughable. People have rusted on views that it drove rents up last time, when the facts suggest it did nothing of this sort except in SYD and PER, which were already trending up... And it pushed rents down in most markets when it was reintroduced. It basically did the opposite of what most rusted on arguments say it did... and it seems no amount of 1 + 1 = 2 facts will convince them otherwise... It just leads to silly arguments about what the proposed changes will mean... and the reality is no one really knows.

I would suggest investors have far more to be concerned about than NG. Prices are going to continue to slide with or without Labor's NG policy being introduced. Borrowing capacity is going to continue to stay capped and scrutiny of living expenses will remain tight. The entire business model underpinning most investors speculative growth focused "investing" has been APRA'd already ... But I guess people need /want someone to blame ... that's the way of the world in the internet/blog age. My point is, APRA has had a far bigger impact than the removal of NG may ( or may not) have.

What no one seems to be acknowledging is that construction jobs may well fall off a cliff soon as well, so there may well be some strong positives from the proposed changes. I think any balanced argument should take that into account ... consider this ; if NG remains and construction work stalls, spillover into the broader economy could potentially be significant, and prices have the potential to fall much further than the 16% SQM are arguing the NG changes will cause. And of course, the 16% "NG effect" may be way over the top

Point is , any policy driving new construction and jobs may not be a bad thing compared to the potential alternatives ....

And having said all of that - no one has won an election yet.... this NG stuff may never happen.

 

On a different note...

https://www.facebook.com/video.php?v=2184985214874062

 

If I could like this post more than once I would!

In the original post the poster stated something along the lines of we all want prices to rise to grow a large portfolio?
This is the exact reason we are in this predicament, prices rose so we borrowed to buy using even more debt, no wage increase, no large deposit of your own just leverage. I'm going to get shut down here but I don't care, I call that speculating not investing. I personally am happy to see prices continuing to drop, I would actually consider buying another property if this was to be the case and not direct so much of my capital into shares.
In all honesty the biggest issue with these prices coming off is people not spending and unemployment will start to rise (big big issues). In terms of growing a sizeable portfolio, a smart investor will be able to do so even in a falling market, a speculator needs 'equity mate'
My opinion and I'm entitled to it.
Regards

 

You forgot to say "hold my beer"

 

I have found in a boom that I quickly get priced out of the market. I have always bought in flat or falling market. I bought my last property in Perth a couple of years ago. I just got it appraised and its up about $40,000. Not bad for a falling market

 

I'll be looking into this if NG is to go. Move out of current PPR asap to maintain grandfathering rights. Have always planned to make it an IP, this will just hurry up the call to the agent.

Sure I won't be the only one

 

Bring on NRAS 2.0, and all that juicy negatively geared cash flow.

 

What's is your actual points in a few words pls?

 

That credit is all that matters . Everything else is a sideshow

Including NG and CGT.

 

Always has been always will be!

 

It’s an interesting theory and being relatively new to investing in always keen to learn more. I’m assuming this has been a long held opinion from those that have shared their views on it here.

What lead indicators, triggers, metrics etc. have you guys monitored to keep ahead of this and what corrective action have you taken to protect your portfolios?

Cheers

 

Rents are not linked to tax benefits for god sake....this is a fear propaganda....rents depends on a lot of things... if ppl can’t pay they will find alternatives.... they always do...

There are a lot of countries out there with no NG and rents are stable and reasonable....

More property prices will go down for good.... we need a 20-25% correction of peak, we are already near 15% in Sydney...

Inversorts will buy again given they can service the lower loans post correction with the current rentals....only losers are who bought thinking prices will never go down and will make a huge CG to offset the impact of cash flow

 

If you are still in the process of building a portfolio with a view to making several future purchases then in my view you need to make sure that whatever you purchase generates sufficient cash flow for you to pay P&I . This Leads to Debt reduction, which leads to improved borrowing capacity . You can’t rely on growth alone any more - there are borrowing limits in place nowadays making capital growth a far less reliable proposition.

If you do try to build a growth portfolio with weaker yield , you may face difficulties with holding costs when loans revert to P&I - and they will , one way or another . Maybe in 5 years. Maybe in 10 years . But they will. And you may also have difficulties with getting past X number of properties due to capped borrowing capacity. That’s also a near certainty under the current /new lending rules .

So instead , buy stuff that will pay itself off over time .
Cash cows aren’t all equal though. Don’t buy in one horse towns . Don’t buy stuff that’s difficult to finance , such as boarding houses or student accommodation. Just buy solid working dogs that will do the job all day long . For me - that was NRAS and is now DUAL OCCs . For you it may be something different - but as long as it can pay for itself you won’t go broke

 

People it is simple......

If labor remove NG...a lot of non-sophisticated investors would not invest. A lot of people are afraid of buying off the plan and building homes from scratch. Already the number of homes are coming off. If labor gets rid of NG..I can see rents rising 10-20%. This is because rental demand would outstrip supply. Australia is a high immigration country...without housing the economy will also be strife. I might cause another recession.

The funny thing is people like me will benefit either way...it should get interesting...