When Labor Win - Crystal ball Gazing

Discussion in 'Property Market Economics' started by See Change, 11th Oct, 2018.

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  1. See Change

    See Change Well-Known Member

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    Ok , trying to work out what might happen if labor implement their changes

    • Negative gearing stays on new properties
    • Negative gearing stays for existing owners
    • Negative gearing goes for purchases of existing properties .
    • Capital gains tax increased - don't think thing they've said who this will be introduced ? only for future purchases
    So obvious initial reactions will be ( from unsophisticated owners )
    1. people to be less likely to sell as they don't get as much benefit from capital growth ,
    2. when they buy , more likely to buy new .
    How will this impact the market ?

    Less supply in established areas , but less demand ....

    In expensive areas ( which traditionally rely on negative gearing ) , in-particular if the CGT is quarantined for existing owners , I'd expect a gradual decrease in the supply of rentals as current owners gradually sell , and new investors don't buy in those areas . Decreased supply -- > Increased rents , which may make it more attractive for people to buy in these areas ..

    In green field areas , People will still buy for the Negative gearing , but as there maybe a rush to buy in these areas , there may well be an oversupply of properties and with vacancies , even with negative gearing there will be some distressed sales . Those people find that no one wants to buy their properties as the new owner won't get negative gearing and there's an over supply of rental properties . Could be some serious pain in some places . We don't buy for negative gearing , but if you did , youd want to make sure it's not in an area where there's mass development . Pick small infill developments . '

    Just a couple of thoughts here .'

    One thing that may happen is that some people may decide to buy before the election so they can lock in their negative gearing , so there might be a mini boom prior to the election . Of course the uncertainty might put some people off ...

    Swings and roundabouts .

    I'm wondering if we might see a period of adjustment as people pull their heads in to see what happens and I also wonder whether there may be less property investing and those left , switch from Capital gain to Rental return as their way to generate money , but that might take a few years to work through .

    Reality is the economy would be better served if we spent less on our homes and more on investing else where , in businesses etc . Maybe this will lead to a change in the structure of the economy and will be better for us in the long run

    Cliff
     
  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    My quick reactions are:

    Less turnover of stock in established areas, a modest price adjustment to compensate, but this could be either up or down depending on the location. Rents likely to increase a little as people still want to live in established areas but will have less incentive to purchase there.

    More reliance on new stock. Developers increase profit margins to compensate for higher demand. Rents stagnate somewhat as it's attractive to buy.

    Overall a period of adjustment but things settle down eventually. Those who've been in the market for a long time already probably won't be badly affected. Some chaos for new investors though.

    Depending on how the changes are implemented and what they are, there could be a mini-boom in some areas.
     
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  3. Propertunity

    Propertunity Well-Known Member

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    When Labor win, I'm guessing there will be a leadership spill within 12 months. :p
    Neg gearing of existing arrangements will be grandfathered. More unsophisticated investors buying new property in greenfield locations. Possible higher demand from investors between now and May 2019 as some rush to lock in neg gearing grandfathered arrangements.
    Labor spends the cash, borrows to handout to all & sundry, increase taxes, goes seriously into debt (as per usual), Moodys & S&P downgrade AU credit rating, interest rates go up, followed by an early election before they serve full term. Libs voted back in, crisis averted, steadily repay debt...... property cycle continues as per normal. After a few years voters tire of the conservatives, vote Labor back in - lather, rinse and repeat. (Am I getting cynical?)
     
    Last edited: 11th Oct, 2018
  4. Shogun

    Shogun Well-Known Member

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    Australia will be utopia. Team Billy is already making the promises of great benefits to all.
     
  5. Perthguy

    Perthguy Well-Known Member

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    It depends on how investors have structure their portfolios. The current policy is that negative gearing can offset "other investment income" whether this be from residential rent, commercial rent, shares or other.

    Investors with a currently, fully negatively geared portfolio will have no incentive to invest further in existing residential stock. They may look at commercial, new residential or listed securities.

    Investors with a currently cashflow positive portfolio will have an incentive to pick up a negatively geared residential property (if the actual investment makes sense of course) because they can use the negative gearing to reduce their tax bill from their investment portfolio.

    Some clear winners and losers here. Of course this all depends on how the policy is implemented (if at all). Interestingly, I started restructuring my investment portfolio in 2014 from fully negatively geared to currently cashflow positive. It suits me to a T if Labor get in a implement this policy. If house prices really come down, and I can find a deal that stacks up, they will pay me to buy another investment property. That's very generous of them ;)
     
  6. Scott No Mates

    Scott No Mates Well-Known Member

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    There'll be a new subject in the public school curriculum focussing on property divestment and cutting down tall poppies. Gotta spend that $14B somewhere.

    Gonna reinstate company tax on small business to 30%
     
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  7. Car tart

    Car tart Well-Known Member

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    When the greens come in;
    Homosexuality will be compulsory.
    Anybody earning more than anyone else will be penalised by the equalisation tax.
    Private vehicles will be banned.
    Housing will revert to treehouses On Nonnative trees only.
    Power and water will be all you can make at home.
     
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  8. Ted Varrick

    Ted Varrick Well-Known Member

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    This doesn't sound like a coal investor's paradise... and does the equalisation tax (or it's future amendment) mean that everyone outside Sydney will need to "share" (and I use the term loosely) in the contributions to all of the toll roads?
     
  9. Scott No Mates

    Scott No Mates Well-Known Member

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    "rich food" will be banned
    "poor life choices" compulsory
    "free education" will cost more
    "the gravy train" will be derailed
    "1 bike & 1 bus lane on main roads and one lane for cars" utuopic :oops:
     
  10. Kangabanga

    Kangabanga Well-Known Member

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    Looking forward to another rap battle with BS and Fitzy, only this time it would be about whupping scomos *** :p

    Sorry OT here, imho partially scaling down NG and CG just means slightly less incentive for investors to be in property. Sure u could switch to new stock to use NG but that was the whole point of NG wasnt it? To provide an incentive for investing into and increasing new stock to help with supply.

    Unfortunately new stock is abundant now that the housing cycle has turned so investors arent going to be keen to pick up new stock. Other options like commercial etc are not what the mass of residential based investors would be looking at.

    Imho this change in policy is not going to affect property prices much now that we are in a downcycle.

    More importantly, what direction is our economy heading in next 5 to 10 yrs? At the moment i dont see anything that points towards another boom or even sustained growth, we could very well be entering a 20 yr supercycle downwards..
     
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  11. See Change

    See Change Well-Known Member

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    Hey Kanga

    Thanks for making a worthwhile contribution.

    Not sure about 20 years , but last two Sydney peaks were around 14 years apart , so maybe another 10 years down , sideways for Sydney / Melbourne . 2-3 terms for labor , they get kicked out and then takes a few years for libs to get the house in order and back on track .

    One thing I would like to see labour entrench is a change to renewables to the point where it doesn’t make sense for the labs to want to promote more coal .

    In a sense , that’s almost the defining long term issue at this stage and if labor had a half leader and other policies I might just vote for them and hope it wasn’t a con job the way Rudd was .

    Cliff
     
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  12. ollidrac nosaj

    ollidrac nosaj Well-Known Member

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    Yes, this!
     
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  13. Scott No Mates

    Scott No Mates Well-Known Member

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    Massive conflict of interest for Labor here - they're the party for the workers but coal creates mining jobs (for CFMEU) solar, wind etc are manufactured offshore and don't create jobs for locals other than in the minor (ununionised) installation side.

    The Libs, I heard the other day, were looking to cut incentives to go to renewables by 2025-30 (ish) on the basis that reforms had been undertaken by consumers and industry and so were no longer required. Tge technology is getting cheaper so the incentives aren't required. I can understand the logic ie why keep providing the same incentives when early adopters need it but those late to the party are benefiting from the mass market price reductions.
     
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  14. Befuddled

    Befuddled Well-Known Member

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    Highly convinced that any negative gearing or CGT rules changes would be grandfathered. It's political suicide to retrospectively apply changes to the asset class most people have the majority of their net worth tied up in.

    Far less convinced now than a few months ago of the probability of the mini-boom phenomenon to lock in existing negative gearing rules. Negative gearing benefits has the greatest appeal to unsophisticated investors. The same folks are more likely to get spooked by the prevailing negative sentiment in the media. Reasonably confident the fear of possible price drops outweigh the tax benefits in the minds of that cohort.
     
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  15. kierank

    kierank Well-Known Member

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    The ALP has form/experience in this area (not grandfathering changes). The “World Greatest Treasurer”, Paul Keating, did it to us.

    I wouldn’t trust the *******s as far as I can pee (and I have bladder problems :eek:)!!!!!
     
  16. Befuddled

    Befuddled Well-Known Member

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    It's possible, but a big big call.

    Frankly don't think the current mob have the courage to do it. Anyone remember the GP co-payment saga? That was a groundbreaker wasn't it? ;)
     
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  17. Scott No Mates

    Scott No Mates Well-Known Member

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    Anything slightly logical gets voted down in the cross benches (or controversial pulled by the shaky leaders).
     
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  18. Angel

    Angel Well-Known Member

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    By next May the plebs will have forgotten what's happened this year. The election will be won by the media company who runs the biggest scare campaign. "Children overboard" hysteria killed one mob. "Negative gearing will cause your family home to drop in value" did it last time.

    "Privatise Medicare", "Pensions to be scrapped" or "7 Mosques to be built"
     
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  19. Big Lez

    Big Lez Well-Known Member

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    I reckon next election, there will be a lot more right wing independents winning seats in the senate which will make it super difficult for Labor to implement any of their policies. I have a gut feeling, a large proportion of the traditional liberal party support base are going to vote Katter, Hanson and Bernardi in the senate.
     
  20. marmot

    marmot Well-Known Member

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    I thought the whole idea of getting rid of Turnbull was to win back voters from one nation and getting back onside with the Catholic Church and the conservative base..
     
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