Screw Property Investors

Discussion in 'Property Market Economics' started by MTR, 26th Apr, 2017.

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  1. Bayview

    Bayview Well-Known Member

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    This - unfortunately - is unlikely to happen in the next several years; we now have a proposal by Bill Shorten's labor to snip tax cuts for "big business", and has also made noise about an effective tax rate of 49.5% for "the rich", and with Malcolm Turnbull's Labor-style budget handed down on Tues of higher taxes and more spending, and an increased debt ceiling of $600B...they have both effectively sealed the lid on any significant industry investment in Aus.
    The obvious industries which are an easy one are coal and gas; but good luck with those two.
     
  2. dabbler

    dabbler Well-Known Member

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    Excuse me, I pay higher rates to lenders, pay councils and utilities and often also at a higher rate than locals, I employ people to do work and sometimes to build.

    Clearly, it does something to the economy, or we would have been in a depression.

    What I think should have been done, is regulated properly when things were on the way *down*.....no good turning all the screws now, it has already happened ! Blame your elected officials and the bodies they control, it was them that created the perfect storm & many here were talking about it.
     
  3. Zoolander

    Zoolander Well-Known Member

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    So... keeping a range of vendors im business ranging from rental agents, handymen and builders doesnt count as heavylifting, where does that place those why buy shares or use term deposits? How do they do "heavy lifting"?
    Just curious of the wider perspective of course- not faulting your view.
     
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  4. Cactus

    Cactus Well-Known Member

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    I have only a few IP I am holding but have built or caused to be built over 30 in the past two and a half years. Think I'm doing a bit of heavy lifting myself.
     
  5. Big Will

    Big Will Well-Known Member

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    No wonder why you got sacked from the wiggles.

    My recent purchase about 10km from Brisbane CBD was bought from a PPOR from an Asian family who moved back to China.

    My other properties I had out offers in or budded at auctions were all existing properties. It the vendors were selling as they were building a new home further out (needed bigger), old age (x2) retirement and one was a previous investment property.

    So from my recent purchasing sample it was 20% not changing rental supply but a whopping 80% of PPOR that would of changed to an IP all from existing properties.
     
  6. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    [​IMG]
     
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  7. Big Will

    Big Will Well-Known Member

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    [​IMG]
     
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  8. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Supply and demand has to be considered on total net Increase/decreases.

    When the net population increases.... there should be proportional increase in dwellings to maintain the balance.

    In an environment where salary growth is stagnant,
    disproportional rents rise due to limited supply hurts economic recovery.

    Hence tax dollar funded grants(NG) should be focussed on new dwelling increase.
     
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  9. kierank

    kierank Well-Known Member

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    That sounds like a BS (Bill Shorten) argument
     
  10. TheSackedWiggle

    TheSackedWiggle Well-Known Member

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    Damn... NG is indeed the holy cow of OZ :)
     
    Last edited: 24th May, 2017
  11. MTR

    MTR Well-Known Member

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    Has this one been mentioned proposed changes which will limit plant and equip depreciation deductions to only those expenses directly incurred by investors.

    Basically if you didn’t write the cheque yourself, you don’t get to depreciate it.

    This has the potential to shave several thousand dollars a year off a property’s cash-flow stream.

    Examples by Louis Christopher at SQM Research below

    On-selling a New Build

    Say you purchase a unit off the plan. There’s significant plant and equipment depreciation benefits that come with newly-built dwellings. We could easily be talking about five or six thousand dollars in the first year on a median priced unit in most cities. It tapers away after that, but even 6 or 7 years down the track we could still be talking about a couple of thousand a year.

    Over the life of the property, we’re talking about something like twenty grand.

    But under these changes, now, when you sell the property, the incoming buyer no longer has access to that depreciation stream. It’s gone.

    And say you’re circumstances change, and you have to sell after only one or two years. The incoming buyer has no capacity to claim a depreciation deduction, not just in the year they buy, but in all future years.

    They could lose up to twenty grand’s worth of value.

    Hard to say how much that will hurt you sale price, but it’s certainly not going to help.

    One thing that’s not clear is what happens if you flip the property before completion. Have you paid for the plant and equipment, or has the new buyer? The government needs to clarify this one.

    All New Builds?

    The above example assumes that the first buyer is the one paying for the plant and equipment. However, in the strictest sense of the word, the developer is the one who pays for it. In that sense, only the developer has a right to claim depreciation.

    This would be a pretty hardcore interpretation of the change – basically purchasers of off-the-plan developments wouldn’t be able to access any depreciation benefits.

    Most people think that this isn’t what the government intends, but now that the media has moved on, they might be able to slip it through. We’ll have to see.

    It also creates a bit of a grey area. If I do like a one into four townhouse build, and then sell each one individually, what do I need to do to make sure that the new purchaser is the one paying for the plant and equipment in the eyes of the law?

    The Fresh Reno

    Lastly, say I buy a nice little doer-upper and spend $200K on plant and equipment. If I now sell the property to you, even if the paint is still drying, you cannot depreciate any of the plant and equipment.

    No need to get any clarification here. This is exactly what the government has in mind.

    The Timing

    There’s a bit of ambiguity here that needs to be clarified. That clarification will happen when the budget passes through parliament over the next couple of months.

    However these changes are time-stamped with the budget on May 9. That means that these changes will affect any property bought and sold today, even though we still don’t quite know what the full ramifications are.

    That’s not ideal. Realistically, if you’re buying, you’re going to have to assume the worst – even though the worst is pretty hard-core for off-the-plans.

    If you’re selling, you’ll need to find a buyer that isn’t assuming the worst to get a premium price for your property.
     
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  12. kierank

    kierank Well-Known Member

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    Not for this bunny. We just learn the rules and play the games; if the Government changes the rules, we change our game. IMHO, all investors should do this and minimise the amount of tax they pay.

    Prior to the last election, our property portfolio was cashflow positive and we were happy to pay income tax on it. I thought BS might have won the last election so we made a serious property investment prior to the election which turn the whole portfolio cashflow negative. We were always going to buy such a property but our plan was to do it a lot later (in 10 to 15 years) when our portfolio was a lot more cash positive.

    Because BS was advising that he would change the rules and grandfather negative gearing, he "forced" us to buy this property in February last year. So, instead of paying tax on our property portfolio for the next 10 to 15 years, we are now accumulating some tax losses and will do so until we sell our current PPOR and move into our latest purchase.

    It wasn't our original plan but it is likely now that we won't be paying income tax for years to come. Australia can thank BS for that.

    Geez, next thing you will be telling us about that NG and CGT exemption is making property unaffordable in Australia. Another BS concept!!!
     
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  13. Perthguy

    Perthguy Well-Known Member

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    Come to Perth! According to the "alternative facts", cheap credit, negative gearing and the capital gains tax concession all drive up property prices and make housing unaffordable. Well, Perth has cheap credit, negative gearing and the capital gains tax concession. What has happened to property prices? Why are prices so low?

    I mean here is a solid 3x1 that is able to be renovated, retain and a back block created to sell or build and retain, 18km from the CBD in Perth. Asking price? $282,000. Cheap credit, negative gearing and CGT concessions have not improved the Perth market, so is it a universal truth that these things push up house prices? ;)

    72 Aldington Street Maddington WA 6109 - House for Sale #125524874 - realestate.com.au
     
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  14. kierank

    kierank Well-Known Member

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    Totally agree with you. Most of Australia is in the same boat - Darwin, Toowoomba, Moranbah, ...

    It is is just another one of those BS concepts from BS.
     
  15. Angel

    Angel Well-Known Member

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  16. Perthguy

    Perthguy Well-Known Member

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    I want it too but I am not buying any more this year. I need to focus on what I have! I really love retain and build projects though. Good fun. :)
     
  17. Jaggannath

    Jaggannath Well-Known Member

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    I don't mind 4 in capital cities, but what about if you can't rent something out in the country? As to neg gearing, instead of getting rid of it they need to consider saying it can only be business costs and depreciation (ie. not interest), or limit the ability to offset against other income, but then they idiots who serve as the justification will start asking banks to consult for $14000 and only charge $150 in interest or something ridiculous.
    I want politicians to have the same pension rules as everyone else. Even the military, on defined benefits, can't access money until retirement age.
    Thanks, I'm looking at the $4500 a year they sting me, and reflect happily on the $30000 of stamp duty they still saw fit to charge me a few years ago /sarcasm
     
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  18. Ted Varrick

    Ted Varrick Well-Known Member

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    Maybe consider opening a payroll services business charging 0% fees and specialising in Govt depts.

    And then just keep a heap of the tax payable, and spend it on a bunch of cool stuff like cars, bikes, houses, boats, holidays, nice looking partners, nightclubs, motor racing sponsorships, and partying.

    And the rest you can just waste.

    Didn't work for some, but imagine if your used some of your $165m to buy your own jet, to get out of Dodge, then who knows how it might work out?
     
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  19. weejimmy

    weejimmy Well-Known Member

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    [QUOTE="

    I mean here is a solid 3x1 that is able to be renovated, retain and a back block created to sell or build and retain, 18km from the CBD in Perth. Asking price? $282,000. Cheap credit, negative gearing and CGT concessions have not improved the Perth market, so is it a universal truth that these things push up house prices? ;)

    72 Aldington Street Maddington WA 6109 - House for Sale #125524874 - realestate.com.au[/QUOTE]

    Got me excited there but its zoned R17.5 booo
     
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  20. Perthguy

    Perthguy Well-Known Member

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    Sorry mate. I got that completely wrong. Not sure why I thought it was a retain and build? Space cadet :(
     

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