What will stop this downturn?

I really am impartial to negative gearing as it really doesn't have as much impact here in Adelaide where yields of 5-8% are easily achieved.

Those that purchased at the peak of the Sydney market where i believe yields (and correct me if I'm wrong) where as low as 1-2%, were not investing but speculating. And there's nothing wrong with that if its purely done with your own money. But i also understand why some might take umbridge as an investor claims losses for possibly the next decade while yields rise to offset holding losses.

Government policy/intervention to support private investment in housing i dont believe is ultimately an efficient market mechanism. (There are plenty of other sorely needed areas where investment could be directed to by gov policy). I think the removal of NG will long term, create a more sustainable less volitile market condition, where yield and underlying economic factors are closer correlated to price rather than purely speculation.

 

They're rolled forward against future profits from the same source. If you decide to go into business for yourself, trading as a limited company, this is the way losses in the first few years - very possible for a business that takes time to build - are treated.

 

Thanks Tony,

Yep, it was more of a rhetoric question.

Comparing to company tax is misleading because a company can net its multiple sources of income into a single taxable income and tax rate. Losses offset gains, net tax is paid.

What the ALP is trying to do is quarantine investment property losses from salaried PAYG, so that they do not offset.

The result would be that you over-pay tax now, and recoup this in dribs and drabs over the coming years/decades. It's very wrong.

 

Out of curiosity how many other countries allow you to claim unlimited deductions against general income that is unrelated to the investment properties

 

- An interest rate cut or two.

- Government allowing FHB to use super as a deposit.

- Relaxing foreign buyer laws.

I can't see the RBA or government allowing it to crash and bring the whole economy down with it.

 

Reserve Bank says rate cuts and QE possible as Australian housing enters 'uncharted territory' - ABC News (Australian Broadcasting Corporation)

Signs already that the RBA May step in. Can’t say I agree with QE or rate cuts at this point. We need some real wage growth, given our current low unemployment this should be happening already. Seems it’s time to make a decision either that our housing is overpriced and let it fall to something sustainable or create an environment where wage growth is possible. Drive down wages, growing debt and home values we can’t have it both ways

 

You can't look in isolation as say that USA does not have a progressive Land tax system nwhich taxes the living day lights out of investors.
How many countries/cities have land tax that you pay $30,000 on 1 million purchase

 

With Sydney and Melbourne booming from around 2012 , just as wage growth came to a standstill and the banks started writing out bigger and bigger loans its highly likely the banks have just leant out to much money.
IO loans to investors kept the ball rolling for a few years , but the days of some of the banks writing out 50% of housing loans as IO are long gone.
According to a article in the AFR or Australian something like 35% of all outstanding Westpac resi home loans are IO with Comm bank only being slightly lower.
I wonder how many of those bought property based around only paying the IO component and a flawed system that worked out their cost of living expenses.
The real issue will be in future years as those next in line can only borrow 70-80 % of what was previously available
Never much of issue previously because workers were seeing almost 2% in real wage growth every year .
But for someone on 80k , after 5 years thats around 10k annually in pay rises that never happened.

 

Wonder if you could clarify this. Currently I hold an I/O loan with Westpac, which is due to become P/I in 2020. The loan officer told me this happens automatically, but from what you said, it sounds like in 2020, Westpac will reassess my financial status and there is a chance it might decide to not let it go into P/I? what is it going to do then? call in the loan?

 

It’s the reverse. Most people ask to extend the Interest only by getting a new loan written. If they don’t have the foundation they may not be able to get a new loan and are forced into the P and I portion of their current loan.

 

Thanks for your reply, now I get what oracle meant. Personally I just want to move into the P/I phase as originally specified in the loan document.

 

Loose Morals . . .
. . . I mean loose lending standards.
and "animal spirits"

 

My yearly property tax bill on my ppor in the U.S was about $14,000 p.a. And I bought at the bottom of the crash. Same house would be 20k + a year now.

 

2018’s Property Taxes by State

According to this table you are millions of that's your Land tax bill.

 

Nope. Paid 1m for the house.

Property tax in Cali works out at about about 1-2% of home value p.a, indefinitely.

No stamp duty though.

 

California state tax .79% States median house price $450,000. At median people pay $3500 per annum

Does your tax include the council fees?

Based on the $14,000 tax bill your house is worth almost $2,000,000 us dollars 5 X state average

 

When it's all said and done it's comes to about 1-2%. I lived there for 10 years. I know.

L.A you won't get a house in a decent area under 1mil.

 

$2,000,000 us
Is
$2,800,000 AUD so if you bought a home for this mux

Your stamp duty would be $145,000 in NSW.

I his is what I mean cant look at taxes in isolation

 

Yeah, I didn't buy a home for that much. You aren't making sense, mate. My personal figures aren't debatable, just my experience. Only posted them for perspective

 

You said you paid $14,000 in tax per annum I Land tax based tax.

I looked at Californian rate based on the .79,% than times tax rate by how much you paid.

This is how I worked out your home must be worth $2,000,000 US.

Not hard to make sense I hope.