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Alan Kohler spruiks the Oz housing bubble on the ABC; Negative gearing is a good investment he says
Topic Started: 28 Jul 2014, 11:09 AM (944 Views)
Barista
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http://www.abc.net.au/news/business/kohler-report/

Kohler reckons negative gearing adds $300 billion to house prices while only costing the government $4 billion in tax.

A good investment he says!

NG has been skillfully ignored by politicians who know it is a significant intergenerational rort when applied to existing real estate.

It's been skillfully used by virtually every other suburban accountant looking to reduce tax for someone with enough dough to afford the rort.

When applied to existing real estate it never has had a decent justification vis a vis its economic point, its value for money in promoting investment, or net return to the people of Australia.

If we are going to leave economic and social policy reform in the hands of accountants and other beneficiaries of a system which suits them, then all we are doing is loading up the shock required for reform, and telling a significant number of people that to reform the system and get an equitable outcome (let alone a competitive economy) they need to look outside the system.

I expect this to stir up comment from the property forum crowd!
Edited by Barista, 28 Jul 2014, 11:09 AM.
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Chris
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Kohler and other morons like him makes this calculation based on ridiculous assertion that negative gearing creates a revenue stream for the government through stamp duty and GST that it otherwise wouldn't see.

This is flat out moronic, if NG was removed then no one would invest in property ever again and the government will lose $300 billion???

It's a flawed argument that is used by vested interests.
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Admin
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Quote:
 
Negative gearing not the be all and end all

PUBLISHED: 06 Aug 2014
Richard Wakelin

Negative gearing. Was there ever a term in the otherwise dry world of investment that evoked such passion? Its mere utterance seems to place people on high alert; a signal to immediately muster at pre-ordained self-interested positions, assemble one’s rhetorical weapons, and prepare for battle.

Like a variation on Groundhog Day (the Accountant’s Cut), we’re in the ­latest iteration of this debate.

Former Commonwealth Bank of Australia chief executive David Murray, in his role as chair of a federal government-initiated review of the stability of the financial system, has floated the idea in an interim report that the exposure of the banks to the housing market is so great that it poses a systemic risk should house prices be subject to “prolonged and pronounced deflation”.

His report goes on to mention negative gearing as one of the reasons for banks’ exposure.

It is invariably assumed that as a property investment professional, I can be counted on to take up arms in defence of the negative gearing regime – as if negative gearing was some inalienable right for property investors, part of some age-old constitution I’d defend to the death.

Now it is certainly true that there are some great upsides to negative gearing, and I’ve found myself deploying these arguments from time to time. By allowing investors to offset the holding costs of an investment property, it helps with cash flow in the early years.

Good for the investor but, more importantly, on a macro level, this increases the supply of investment property and lowers rent relative to an environment without negative gearing.

I also understand the arguments against the tax break: by making investing more affordable, it raises property prices and crowds out first-home buyers; that it costs the Treasury several billion dollars a year in lost tax revenue (although many ignore the fact that the tax take would fall if the investor’s property was instead owned by a homeowner); and perhaps a little melodramatically, that it is an existentialist threat to life as we know it.

But I’ve come to the conclusion that collectively, we’ve missed the point, and become obsessed over something that actually isn’t that important. Negative gearing isn’t worth the angst and attention it gets. I can confidently say that the world of property investment would survive its abolition; that to invest in property would remain a wise decision even without the leg up.

I say this as someone who has seen numerous changes to taxation policy over the years: the introduction of capital gains tax, the introduction of GST, the introduction of stamp duty concessions for first home buyers; and subsequent amendments to these measures.

And guess what? Yes, changes in tax policy may see some short-term effects on activity and prices. But in the long-term they are just noise.

My view is reinforced by some economic modelling released by Moody’s a few days ago showing negative gearing adds 9 per cent to fair value of properties – a pretty underwhelming number in light of all the debate and torment and the length of time negative gearing has been in place. It’s equivalent to the past six months of capital growth in Sydney. For all its faults, at least negative gearing encourages people to do what they should be doing anyway – investing in a quality asset that has a propensity for capital growth.

Read more: http://www.afr.com/p/personal_finance/portfolio/negative_gearing_not_the_be_all_u96vT2xwX120QWPz4enUeM
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lulldapull
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Alan Kohler unfortunately is a disgraceful neoliberal.

He is our corporate media neoliberal mouthpiece much like Thomas Friedman.
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