Negative Gearing Debate

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Sathias
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Re: Negative Gearing Debate

Post by Sathias » 25 Feb 2016, 19:00

I agree there needs to be some limits on NG, it's ridiculous that people can own 10+ properties and the government kicks in the lion's share of the investment. Investment should require... investment, not have the government pick up the tab. Framing it as allowing NG on new housing is pretty clever, it will help increase housing stocks (which is what NG was supposed to do to start with) while the grandfathering will mean people don't lose out on their current investments.

The CGT changes I'm not so keen on, having a discount for holding an asset for longer than a year gives the share market some stability and means you are rewarded for investing in companies rather than day-trading. The share market will become much more volatile if the CGT goes on shares IMO.
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Re: Negative Gearing Debate

Post by Yurtles » 25 Feb 2016, 19:17

At least it's not a GST increase on the table anymore. Not trying to Tony bash, but I reckon if he were still in power that'd still be front and centre and getting pushed for. Or then again maybe it was Hockey's idea? He had some cracking out of touch moments. Either way, I like the idea of people who have at least a little money to throw around losing out compared to the poor getting shafted.
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Re: Negative Gearing Debate

Post by Nekosan » 25 Feb 2016, 22:11

When i learned about negative Gearing back in about 1997 in highschool it seemed like a great idea and i promptly forgot it existed. Now that I'm 31, single and dreaming about being a homeowner it makes me wonder what the fuck they were ever thinking. The last 15 or so years this bulchit has contributed to house prices in my area being more than 4 times as high as they were when i was still a kiddie.


Honestly, i just get pissy now whenever someone mentions "investment properties" or foreign investors, real estate here is dramatically out of control. I sort of feel like you should need to live within x-kilometers of a property to be allowed to buy it as a non-primary residence which you're renting... too many assholes living in Sydney on Sydney salary/wages have butchered house prices in the rest of the country.

I deal with clients on a near daily basis that are dumb as a post and can't even tell you a properties street address because they own so many.
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n1cholas
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Re: Negative Gearing Debate

Post by n1cholas » 26 Feb 2016, 00:11

I don't think it is going to be easy for the government to easily mislead the electorate as it's credibility has never been lower and if the government runs a scare campaign Labor is likely to have a scare campaign of their own.

No credible economist or even anyone who has a decent understanding of economics will accept the status quo as being sustainable policy. I thought the GST debate was idiotic given the numbers never added up in a way Australians would accept as being fair or even efficient due to the compensation required but the negative gearing debate has surpassed it.

The Coalition spent years coming up with policies that pandered to vested interests and despite the fact that the culmination of said policies in the form of the 2014 federal budget was rejected thoroughly by the electorate the situation remains unchanged for the Coalition, they've just given up trying to reduce the deficit be it though spending cuts or raising additional revenue or both as they'd rather govern as a small target government than risk loosing office.
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Re: Negative Gearing Debate

Post by Spooler » 26 Feb 2016, 17:27

I'm all for negative gearing, for new developments.

If you're building the place than go for it you have your tax loop hole, the amount of growth you generated hiring those contractors and increasing the amount of properties on the market is great !

But as it stands now it's purely a tax loop hole and is just in general not cool.
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Re: Negative Gearing Debate

Post by Mugsy » 02 Mar 2016, 08:09

Interesting to see this amongst all the talk with limiting negative gearing:

http://www.domain.com.au/news/queenslan ... 27-gn5bre/

I'm still on the fence as to whether the proposed changes by Labour will have the effect people are saying. It's reducing incentives to purchase built properties but it's also disincentivising investors to sell an existing investments unless they're "trading in" for a newly build property. Supply could drop and if greater than the drop in demand in a region, we'd be worse off.

The Lib's suggestion makes more sense to me to limit the cap on negative gearing.
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Re: Negative Gearing Debate

Post by Matty » 02 Mar 2016, 18:13

This is because Domains only existence is to persuade people the market is fine and to buy houses, they are probably the most biased website around. I see only positives to removing it. This whole "there will be no houses and rents will go through the roof" is a load of bollocks.
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Forgetful_Lion
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Re: Negative Gearing Debate

Post by Forgetful_Lion » 03 Mar 2016, 11:48

The federal government has abandoned NG changes http://www.afr.com/news/politics/negati ... 301-gn7yoo

Also nice take down by ABC fact check of ScoMo's NG claims about people using NG on modest incomes http://www.abc.net.au/news/2016-03-03/s ... ct/7210828
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Re: Negative Gearing Debate

Post by Disruptor4 » 03 Mar 2016, 12:18

I wouldn't say I'm very surprised that they've abandoned any form of change.
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Re: Negative Gearing Debate

Post by Mugsy » 03 Mar 2016, 17:10

Forgetful_Lion wrote:The federal government has abandoned NG changes
And I was actually for the Libs' plan for lowering the cap.
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Re: Negative Gearing Debate

Post by Spooler » 03 Mar 2016, 17:15

Mugsy wrote:
Forgetful_Lion wrote:The federal government has abandoned NG changes
And I was actually for the Libs' plan for lowering the cap.

May I ask why ?

I mean the original purpose of NG was to increase real estate investment and thus grow the sector ... lowering the cap would seemingly be pointless when trying to achieve this ... I always thought the liberals solution missed the point.
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Re: Negative Gearing Debate

Post by Mugsy » 03 Mar 2016, 17:36

Spooler wrote:May I ask why ?

I mean the original purpose of NG was to increase real estate investment and thus grow the sector ... lowering the cap would seemingly be pointless when trying to achieve this ... I always thought the liberals solution missed the point.
It would have been a first step to start easing people off NG and let the market adjust gradually. It would have to be followed by ongoing reduction in the cap in subsequent years but you'd eventually be able to abolish NG altogether. Labour's somewhat more hard hitting approach introduces too much volatility and I see reasons for why rents/house prices could stay as is, go up or down.

Just my point of view as someone who's done a decent amount of public sector economics and policy work.

Whilst there are successful hard hitting policies in the past, there have been plenty of ones that didn't turn out the way they were planned.

When there's no result that the experts all agree on (I don't think anyone done the necessary modelling to work out how the market will react), I'd prefer a less risky approach.
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Re: Negative Gearing Debate

Post by storm84 » 03 Mar 2016, 18:54

I would agree with that generally, Mugsy, but do you think a gradual approach is something that can happen with our current election cycle the way it is? Look at the attempt to try to get superannuation to a more reasonable level - it starts the increase process, then a change of government kills it off. Sustained gradual change doesn't keep the political momentum that fostered the change in the first place.
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Re: Negative Gearing Debate

Post by Sathias » 03 Mar 2016, 18:57

Mugsy wrote:
Spooler wrote:May I ask why ?

I mean the original purpose of NG was to increase real estate investment and thus grow the sector ... lowering the cap would seemingly be pointless when trying to achieve this ... I always thought the liberals solution missed the point.
It would have been a first step to start easing people off NG and let the market adjust gradually. It would have to be followed by ongoing reduction in the cap in subsequent years but you'd eventually be able to abolish NG altogether. Labour's somewhat more hard hitting approach introduces too much volatility and I see reasons for why rents/house prices could stay as is, go up or down.

Just my point of view as someone who's done a decent amount of public sector economics and policy work.

Whilst there are successful hard hitting policies in the past, there have been plenty of ones that didn't turn out the way they were planned.

When there's no result that the experts all agree on (I don't think anyone done the necessary modelling to work out how the market will react), I'd prefer a less risky approach.
Labor's plan grandfathers existing investments though, so the amount of revenue saving over the first four years was quite modest, hence not a sudden shock.

If anything their plan might cause a brief spike in investment while people try to get in early so their investment is grandfathered.
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Mugsy
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Re: Negative Gearing Debate

Post by Mugsy » 03 Mar 2016, 19:36

storm84 wrote:I would agree with that generally, Mugsy, but do you think a gradual approach is something that can happen with our current election cycle the way it is? Look at the attempt to try to get superannuation to a more reasonable level - it starts the increase process, then a change of government kills it off. Sustained gradual change doesn't keep the political momentum that fostered the change in the first place.
Yes, I do agree that the political cycle doesn't help.

But say the Libs implement a gradual plan, and labour gets into power at the next elections, Labour will still implement their own plan. But if the Libs retain power, then that's another 3, possibly 4 years to continue implementing the gradual plan. If it works, I doubt Labour will mess with it.
Sathias wrote:If anything their plan might cause a brief spike in investment while people try to get in early so their investment is grandfathered.
My concern is that the grandfathering will make investors not want to offload their investments to upgrade to something else thus lowering stock of the more affordable properties (say 2brm units) in the more desirable locations. But by not grandfathering, it would be severely unfair for those who've not done anything illegal and only followed law that's been in place for a very long time.

Given that it's the upper end of the spectrum of crazy investors who over leverage that need to be discouraged, reducing the cap would do this whilst avoiding potential issues with the grandfathering approach.
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Re: Negative Gearing Debate

Post by Spooler » 03 Mar 2016, 20:09

I don't really agree with that, you're looking at it like the only purpose of NG is as a tax loop hole which is incorrect.

It was intended to drive growth in the market which limiting NG to new developments would do right ?
And then screw the taxation, it'll enable growth by incentivising housing development which is more important anyways.


In the short term prices would go up in the long term they'd go down which can only be good for people trying to get into the market.

I think a cap is great if all you care about is the revenue but it's worthless for driving growth.
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Re: Negative Gearing Debate

Post by Mugsy » 03 Mar 2016, 20:29

The growth element I was always skeptical about. On paper is sounds great and thought out but as the effects of the policy continue, you may have things come around in an adverse way. The BIS Shrapnel modelling resonates my concerns around this:
The report said it was unlikely that prices would fall enough to restore rental yields to compensate for the lost negative gearing concessions. But a fall in prices would reduce the feasibility of development, causing construction to fall and rental supply to dry up, “which in turn will drive up rents at a greater rate than otherwise’’. BIS Shrapnel said the effect would be mostly felt in the apartment sector.
Source: http://www.theaustralian.com.au/nationa ... aae729d40f

Usually BIS Shrapnel is pretty reliable and independent so I'm not buying Chris Bowen's claims atm. Will have to see the report for myself.
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Re: Negative Gearing Debate

Post by Spooler » 03 Mar 2016, 21:59

Again i think short run that's pretty spot on but long run i think it'd end up driving growth.
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Re: Negative Gearing Debate

Post by Matty » 04 Mar 2016, 00:08

Is anyone where who isn't an investor that supports negative gearing?
Last edited by Matty on 04 Mar 2016, 01:39, edited 1 time in total.
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Re: Negative Gearing Debate

Post by n1cholas » 04 Mar 2016, 00:33

The conversation has gone full retard thanks to the LNP, before long we'll be hearing changes to negative gearing will create an Australian GFC.

Negative gearing is a failed policy, it does nothing but inflate property prices which is great if you're a property owner or stand to gain from inflated property prices but terrible for society more broadly as like all market bubbles it will eventually correct itself potentially at an enormous cost to society as a whole.

The sense of entitlement is so strong in Australia and vision so lacking. It's all politics all the time and that's why Australia will stagnate or go backwards.

People seem to think the government can change the economy without any losers, those people are wishful, ignorant or idiots.

With cons like Dick Smith I can see why people are hesitant to invest on the stock market but the Australian economy has had it easy the past 20 years and it's time for politicians to grow a backbone and actually start reform not just austerity that is claimed to be reform.
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Re: Negative Gearing Debate

Post by Mugsy » 04 Mar 2016, 07:09

Spooler wrote:Again i think short run that's pretty spot on but long run i think it'd end up driving growth.
Personally, I'd like to see other industries targeted for growth. Whilst construction is important, residential housing isn't designed to directly facilitate growth or economic activity after a dwelling is built. At some point, housing construction will have to slow down (there's only so much land... obviously a situation that's a fair way off). A lot of people in housing construction will need to find work elsewhere... the question is will there be that work for them to move to?
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Re: Negative Gearing Debate

Post by Spooler » 04 Mar 2016, 08:40

You can definitely get more jobs growth in different markets, the problem is our population is expanding we need more houses.

Edit:
I think worrying about the far off point that we no longer have land to develop is pretty moot at this stage, it's kind of like saying "don't train disel mechanics because eventually we'll find a better fuel source."
Last edited by Spooler on 04 Mar 2016, 14:33, edited 1 time in total.
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Re: Negative Gearing Debate

Post by Disruptor4 » 04 Mar 2016, 11:50

Matty wrote:Is anyone where who isn't an investor that supports negative gearing?
Yes to a certain degree.
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Re: Negative Gearing Debate

Post by Mugsy » 04 Mar 2016, 15:02

Spooler wrote:You can definitely get more jobs growth in different markets, the problem is our population is expanding we need more houses.
Maybe I'm just seeing too much of the local market with my point of view. Brisbane has had excessive inner city developments to the point where there's too many new dwellings that developers have needed to start renting out their units/townhouses. Rental prices have been going backwards here due to oversupply so for Brisbane at least, encouraging more development via Labour's proposed policy isn't going to do us a whole lot of good... we're oversupplied as it is for the short run to potentially medium run.

Again, what works for one city/region won't work for another.
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Re: Negative Gearing Debate

Post by Spooler » 04 Mar 2016, 15:58

I don't think over supply is really that much of an issue right ?

Unless you're worried about the income from it ?
Because like for the population as a whole having more houses than people is totally not something that keeps me up at night the opposite does though. The more housing you have the more people you can attract the more consumers businesses have to draw from and so on and so on. In the short run it probably makes unemployment figures look bad because the unemployed are more attracted to the cheaper region.

Also it's important to remember that lowered house prices is kind of the aim of NG like the lower house prices are the easier the market is to enter.

Admittedly my economics knowledge is the 4 units that made up my econ minor, but I can't really see the risk here to anyone here ... other perhaps than existing property owners who's property might lose value but even then that's kind of the point.
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