When rates are 9% NG matters, but below 5% I don't think it will be an issue for investors.
In 2012 rental income exceeded interest cost by $9 Billion What will that be in 2013 after rates fell and what will it be in the 2014 tax year.
Are you referring to the total rental income of all investors? It's only the negatively geared investors that are relevant but I take your point that NG is less of a factor now that IRs have fallen. Nevertheless I'd expect the majority of new investors would be NGd for at least a few years.
Are you referring to the total rental income of all investors? It's only the negatively geared investors that are relevant but I take your point that NG is less of a factor now that IRs have fallen. Nevertheless I'd expect the majority of new investors would be NGd for at least a few years.
Yes total rental and total interest cost - that's all the ATO have for us to analyse.
However most investors buy under 80% LVR - that may be 80% overall LVR if they use equity in other properties.
As long as they stay under 80% overall the NG aspect won't be a major tax factor for them, and any unclaimed tax deduction will be carried forward. That's for professional investors.
The guys it will affect are the amateurs who have one or maybe two high LVR IP's but they will be grandfathered anyway.
If NG is miraculously taken away from IP investors only, it will change investor behaviour just as a rule change in football changes player behaviour, but they will still line up to play the game.
If they are looking for a macroprudential tool to slow down house price rises while lowering IRs further then that is the obvious one. It is clear to see the effect of investors on prices in the Melbourne and Sydney markets. Elsewhere investors have been more restrained and there has been little change in prices.
When rates are 9% NG matters, but below 5% I don't think it will be an issue for investors.
In 2012 rental income exceeded interest cost by $9 Billion What will that be in 2013 after rates fell and what will it be in the 2014 tax year.
The problem with NG being applied to all property, is that it only benefits the investor when established property is purchased. If NG was applied only to new builds, this would create greater demand for new construction and the jobs that go with it.
Interest rates don't impact buying decisions. Repayment amounts are the only consideration. Any investor buying at any interest rate will be NG until rents rise enough to cover their outgoings.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
Yes total rental and total interest cost - that's all the ATO have for us to analyse.
However most investors buy under 80% LVR - that may be 80% overall LVR if they use equity in other properties.
As long as they stay under 80% overall the NG aspect won't be a major tax factor for them, and any unclaimed tax deduction will be carried forward. That's for professional investors.
The guys it will affect are the amateurs who have one or maybe two high LVR IP's but they will be grandfathered anyway.
If NG is miraculously taken away from IP investors only, it will change investor behaviour just as a rule change in football changes player behaviour, but they will still line up to play the game.
PS - there is no NG in London.
I thought there were figures available on the total tax deductions by investors? I personally don't think it will lead to any significant extra revenue being generated for the government as it will probably lower housing turnover as well. However, it's removal would help to keep a lid on prices, if the RBA continue to lower rates. There is a potential for a dangerous bubble to occur if investors keep piling in at even lower IRs. I have no doubt it will change investor behaviour but I don't think it will encourage greater risk taking with shares and it may just have the effect of increasing housing supply.
The problem with NG being applied to all property, is that it only benefits the investor when established property is purchased. If NG was applied only to new builds, this would create greater demand for new construction and the jobs that go with it.
Interest rates don't impact buying decisions. Repayment amounts are the only consideration. Any investor buying at any interest rate will be NG until rents rise enough to cover their outgoings.
NG only on new dwellings would promote apartments at the expense of fully detached homes, I don't see that as a big win for the housing supply do you?
Any expressed market opinion is my own and is not to be taken as financial advice
Personally, I don't think disallowing "NG" will make a whole lot of difference other than making tax law more complex, engendering a whole host of new tax avoidance schemes and perhaps driving a lot of rental housing into corporate structures. Price rises in rental stock will slow down a bit and rent rises would speed up a bit until a slightly higher gross yield equilibrium was reached.
Allowing losses to be claimed against other income immediately only for new builds would be a nightmarish policy error though. It would practically guarantee a big overbuild every time prices got a bit frothy and make the market less stable overall.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be rising.
I have no doubt it will change investor behaviour but I don't think it will encourage greater risk taking with shares and it may just have the effect of increasing housing supply.
I doubt it would increase the housing supply in general. Once you have a lot of empty renters the building would stop. But I am pretty sure there would be more overshoot and hence deeper and longer busts in the building industry as well as perhaps longer booms.
Any policy aimed at creating malinvestment (and the building of unneeded dwellings would have to be classed as malinvestment!) is just crackers.
The truth will set you free. But first, it will piss you off. --Gloria Steinem AREPS™
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