Warning Negative Gearing is a Dead Duck

Discussion in 'Investment Strategy' started by MTR, 5th Jul, 2018.

Join Australia's most dynamic and respected property investment community
  1. hobartchic

    hobartchic Well-Known Member

    Joined:
    11th Sep, 2017
    Posts:
    1,513
    Location:
    Hobart
    I did not say that. Encouraging home ownership has been done historically very well. We are a historic low in terms of home ownership. The idea that an apprentice or graduate does not want to own their own home is nonsensical. Why do you think people work that hard? To rent til death?
     
  2. Francesco

    Francesco Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    647
    Location:
    Canberra, Brisbane
    I say be realistic. Realistically speaking in order of what apprentices (would be within first few years of working life?) want would be something like: mobile phone, tools of trade, car, spending with friends. During the apprenticeship, how many would change course? Not very reliable candidate to get a loan from a bank. I guess also that not many would want straight off to saving big for a deposit and curbing deeply on expenses on take away coffee, partying, etc. Of course, it is a truism that everybody wants. not only house, holidays, more, etc...
     
  3. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,786
    Location:
    My World
    Yes been huge
    I would say Guru Stevev Mcknight opened Aussie eyes....investors to strategy of positive cash flow
     
  4. MTR

    MTR Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    27,786
    Location:
    My World
    My take on this is NG is great in rising markets.... but look at selling down prior to peak, reduce debt and risk
     
  5. Francesco

    Francesco Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    647
    Location:
    Canberra, Brisbane
    Historically, broad ownership rate of residential properties is about 70%, ie there are many people who want to rent and they rely on 30% of residential properties.

    For example, from Trends in home ownership in Australia: a quick guide – Parliament of Australia

    Census data indicates that overall household home ownership rates (including those dwellings where there is a mortgage over the property, as well as those dwellings owned outright) have not changed substantially since the 1960s, hovering around 70 per cent over the past 50 years. The following table shows the five yearly rates from 1947 to 2016.

    Proportion of owner occupied private dwellings, based on Census data


    1947 1954 1961 1966 1971 1976 1981 1986 1991 1996 2001 2006 2011 2016
    %

    53.4 63.3 70.2 71.4 68.8 68.4 70.1 70.4 68.9 69.0 69.5 69.8 68.5 67.1

    However, within the ownership of residential properties, there has been a shift of more ownership of residential properties to the older age groups at the expense of the younger age groups. Hence, the 'affordability' issue, aspiring FHBs have been raising, with many keen to support the Labor agenda on negative gearing and capital gains.
     
    Perthguy likes this.
  6. Sackie

    Sackie Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    25,034
    Location:
    Vaucluse, Sydney.
    I hear what you're saying and as for me I'd only buy a NG deal if I could add value. But there are people on good incomes who can afford the negative shortfall, and its especially worth it if they buy good stock in good OO markets AND the NG is not a huge amount. Speculation is required. Getting in on the perfect timing (consistently) is almost impossible. Personally I believe all investing is speculation.

    But its the same thing as buying CF positive real estate. You need to speculate that the asset will rise in time because the CF is usually peanuts. The real value is in waiting for the equity to grow. And usually (not always) these types of properties are in second rate locations where CG is slower or harder to predict. As always there isn't one way best for all.

    Just my take.
     
    samiam and MTR like this.
  7. hobartchic

    hobartchic Well-Known Member

    Joined:
    11th Sep, 2017
    Posts:
    1,513
    Location:
    Hobart
    I can see where you are coming from. Is all investing speculation though? Surely, if you want to invest you need to look at data and history, and predict accordingly. It is risky, but it's a calculated risk based on information.

    Do most people that call themselves investors speculate? At the moment, I would say yes.
     
  8. hobartchic

    hobartchic Well-Known Member

    Joined:
    11th Sep, 2017
    Posts:
    1,513
    Location:
    Hobart
    Most apprentices now struggle to eat, forget about affording a house and holidays. My dad had an apprenticeship with the government when they provided effectively full employment and was able to look after three children, a wife and pay a mortgage. Admittedly the holidays were character building. That's a heck of a change in a generation.
     
  9. hobartchic

    hobartchic Well-Known Member

    Joined:
    11th Sep, 2017
    Posts:
    1,513
    Location:
    Hobart
    Sure, 30 per cent of housing is rental. Historically though the government provided that housing. That's a major change. It was affordable and could be bought by clients for very little. One way that home ownership was encouraged.

    I don't know about your neighbourhood but in Hobart apartments of public housing are quietly taking over the CBD and inner burbs and the University has bought a Hotel. Investors in the inner suburbs have lost some of their market share as a result. I'm watching Sandy Bay and West and South Hobart with interest.
     
  10. Illusivedreams

    Illusivedreams Well-Known Member

    Joined:
    3rd Oct, 2017
    Posts:
    2,454
    Location:
    Sydney
    It's funny an apprentice Plumber/electrician /brick will Make $5_$600 per week.

    A University student will have to. Pay $250 per week to uni and do night shift at McDonald's to survive and listen to tradesman compliant why apprenticeship pay so little
     
    hobartchic likes this.
  11. hobartchic

    hobartchic Well-Known Member

    Joined:
    11th Sep, 2017
    Posts:
    1,513
    Location:
    Hobart
    The trades doing 38+ hours of work a week. The Uni student has 6-12 hours contact and a few more hours study.

    I'm not convinced that Uni is worth the cost now anyway. I would not easily recommend it to this generation.
     
  12. Sackie

    Sackie Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    25,034
    Location:
    Vaucluse, Sydney.
    Personally I think its all speculation. No one knows 100% what any asset/market will do. It all requires DD and then assumptions made. The main difference between 'speculating' and 'investing' imo is the amount of risk undertaken. Lower risk is often seen as 'investing' and higher risk is often seen as 'speculating', but really its just all speculating - some is higher risk and some lower. That's my take on it.
     
    kierank likes this.
  13. hobartchic

    hobartchic Well-Known Member

    Joined:
    11th Sep, 2017
    Posts:
    1,513
    Location:
    Hobart
    See that's what I'm getting to. Someone who does DD is not someone that I would call a speculator. By definition they are sourcing information and at least trying to manage risk. They might do well, they might not. They are doing DD because they are not arrogant enough to not try and mitigate risk. That's smart.

    Someone who spends money on something blindly, who talks about "passion" and ignores risk, is a speculator.

    They are different things.
     
    Kangabanga likes this.
  14. Sackie

    Sackie Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    25,034
    Location:
    Vaucluse, Sydney.
    My view on speculation is probably different to most so we may need to agree to disagree :)

    What we can agree on is we're both night owls !
     
  15. hobartchic

    hobartchic Well-Known Member

    Joined:
    11th Sep, 2017
    Posts:
    1,513
    Location:
    Hobart
    Lol, sometimes :D
     
    Sackie likes this.
  16. Illusivedreams

    Illusivedreams Well-Known Member

    Joined:
    3rd Oct, 2017
    Posts:
    2,454
    Location:
    Sydney
    @hobartchic

    Only arts. Degrees have 12.contact hours
    Engineering degrees, Medicine, Law will have 30+ not To Mention 30 hours on top at the library 60 hours per week. And you are paying for it as well as working minimum wage after uni to survive

    Trades in Australia are paid outrageous amounts. I'm talking in relation to construction industry . Plumbers working out of a van $120,000 Sparkys are not far behind. Their education was paid for by government and employer.

    We are one of the few countries in the world where a bricklayer makes more(by a lot) than a Theater Nurse with years of education and huge responsibility.


    I'm referring to construction trade . Automotive is very different
    [/QUOTE]
     
    Last edited: 9th Jul, 2018
    samiam, tee and Eric Wu like this.
  17. hobartchic

    hobartchic Well-Known Member

    Joined:
    11th Sep, 2017
    Posts:
    1,513
    Location:
    Hobart
    [/QUOTE]
    I worked in admin with sparkies and mechanics, neither get paid anywhere near the figures you quote. Insurance and business costs bring their pay way down. Also, plenty of customers do not pay their bills. It's less frequent with mechanical bills but does happen frequently with houses.
     
  18. Perthguy

    Perthguy Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    11,767
    Location:
    Perth
    Yeah, na. Your contact hours and study hours are way off.

    Source: I have 2 degrees
     
    kierank and Indifference like this.
  19. Indifference

    Indifference Well-Known Member

    Joined:
    30th Jul, 2015
    Posts:
    977
    Location:
    Banana Republic
    That’s rubbish.... I’ve done both trade & uni. 6-12 contact hrs a week maybe for some toilet paper degrees but not for engineering, medicine, law etc...

    I ‘ll also add that for each contact hour about another 1-3 hrs of private study / reading / assignment / assessment is required. If you don’t believe me, enrol in a full study load of engineering for just one semester.... trade training / work was far easier.
     
    Last edited: 9th Jul, 2018
    Perthguy likes this.
  20. Indifference

    Indifference Well-Known Member

    Joined:
    30th Jul, 2015
    Posts:
    977
    Location:
    Banana Republic
    This whole NG discussion has been quite amusing....

    What if I told you that a property can be NG & cashflow positive? ...... I can hear the wails now :)
     
    MWI and Perthguy like this.