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Good News: Treasury pushing remodel of Negative Gearing for only new homes!; Corrupt and vested real estate interest run for cover!
Topic Started: 14 Aug 2014, 09:26 PM (33,864 Views)
Aussiehouseprices
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skamy
25 Aug 2014, 01:02 PM
And are these people the ones you are claiming to be stupid? You did infer that Mum's and Dads were the stupid/naive investors, you did not say that you thought big business buyers of multiple properties were likely to be equally if not more stupid.

I specifically said I don't think they are stupid. They just don't take the time to learn the basics of investing before jumping in. There are heaps of things I haven't bothered to learn. Doesn't make me stupid.

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A lot of young Gen Y's bought investment properties in places like western Sydney a few years ago and they have done really well they were not stupid at all. In fact they were sensible not following the herd who were waiting on an even larger crash.

Without negative gearing young people will no longer get this opportunity to benefit from buying in a downturn and renting and waiting for capital gains. This is just another way that increases the difficulties for young people to ever get a foot in markets like Sydney.

I am sorry but I see this as a negative, as I see it as an attempt to decrease egalitarianism in property ownership and it could lead to a dangerous concentration of rentals owned by rich institutionalised investors, who can inadequately estimate risk as they are often not even dealing with their own money. They are also prone to gamble with larger sums and to take on greater risks.

Many people claim NG because they can, not because they need to, its removal just shuts out a certain low income type of investor who cannot afford to wait a few years to claim back a portion of their losses. I am sure the people most affected will be young people hoping to get a starter investor property.

A person would need to be exceptionally naive to think it will reduce prices in a hot market like Sydney. It may lower prices in Adelaide and Tasmania if an investor class is removed but never in a million years will it dent Sydney or Melbourne as these are driven by completely different forces.

Why are young people so willing to give up something that is to their own advantage on the bidding of the mass media with a stupid promise of a very very unlikely cheaper house?
This is where there really is naivety and even stupidity, these are very likely to be the same naive young people who believed charlatans like Steve Keen and that "don't buy now" eejit. Yet again they are disadvantaging themselves by falling for these News.com agendas.
Bit hard to follow the rest of your post, but I'm not sure I agree because the higher your income, the more attractive negative gearing becomes.
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Poontang
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skamy
25 Aug 2014, 01:02 PM
So the argument now becomes "property investment taxation should be changed so that lower income people who need NG can no longer engage in property investment"
Your reason being that these marginal investors may destabilise the market as they may have less buffer.

It is not what I was saying or getting at at all...

Economic conditions are likely to impact those areas harshly over the next few years.


Low relative yeilds, average incomes and capital gains on the low side (and likely to disappear). Those Mum and Dad investors may find themselves still paying for an investment property they no longer have.

If they have used the PPoR to help fund the purchase and are in an industry that is closing or likely to close in the next few years, the PPoR could be under threat too..


The read the glossy brochure, saw the TV shows and jumped on the IP wagon without due diligence or ignoring negatives...
There are some people who seem angry and continuously look for conflict.
Walk away, the battle they are fighting isn't with you, it's with themselves.

The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it.
The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.

Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
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skamy
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Lef-tee
25 Aug 2014, 01:53 PM
Restricting negative gearing to new builds only would impact on the demand for pre-existing houses as investment properties - I don't think there's much doubt there. To what extent I don't know but I am highly skeptical that it would be insignificant.

The argument that it's removal would lead to greatly increased concentration of ownership of the country's stock of dwellings by a handful of well-off, effectively creating a class of "landlord barons" is interesting. I guess there would probably be several million rentals in Australia - are a small number of institutional investors going to swoop in and buy them all?
That would be the long term effect as the 30% or so of the property stock required for renting gets bought up by people who do not have to worry about whether they claim tax this year or the next.

Why not lobby for increased Capital gains tax? That will affect rich people.

Removing negative gearing only affects poorer people and young people.

Mum and Dad investors cannot afford to build new as they tie up their capital without income for too long.

The trouble with buying new ie off the plan, is that this can really destabilise a market with people tying up a lot of money on predictions for a market a couple of years out.

I really don't get why people are so nasty about Mum and Dad investors calling them stupid etc don't you agree that it is distasteful and very likely to be wrong as these small investors are likely to be much more canny in their investment decisions than rich kids playing games with their parents money etc etc?

Aussiehouseprices
25 Aug 2014, 02:10 PM
I specifically said I don't think they are stupid. They just don't take the time to learn the basics of investing before jumping in. There are heaps of things I haven't bothered to learn. Doesn't make me stupid.


Bit hard to follow the rest of your post, but I'm not sure I agree because the higher your income, the more attractive negative gearing becomes.
This is not the way it is used however, only 4% of negative gearers are in the top tax bracket.

I disagree completely that a small time investor would study less before risking what to them is a huge sum of money and several years of losing money. It is far more likely that institutional investors take risks and with larger sums of money. It was certainly these big investors who destabilized Ireland and other markets.

I think if negative gearing is removed and small investors can no longer buy that is when the stupid money will come in.


You find me hard to understand as I am showing you that something that you honestly believed was a good thing is not a good thing at all, unless you have loads of money.

I hope that you will agree with me that removing negative gearing takes from the poor and gives to the rich, and that having a go at Mum and Dad investors is something you would expect from a pompous upper class twit, it is not good engage in this scapegoating sold by the tabloids.

If you seriously want a tax change that will shake up the rich investors go for capital gains. Why oh why are young people cutting off their own noses to spite their faces?

Poontang
26 Aug 2014, 12:15 AM
It is not what I was saying or getting at at all...

Economic conditions are likely to impact those areas harshly over the next few years.


Low relative yeilds, average incomes and capital gains on the low side (and likely to disappear). Those Mum and Dad investors may find themselves still paying for an investment property they no longer have.

If they have used the PPoR to help fund the purchase and are in an industry that is closing or likely to close in the next few years, the PPoR could be under threat too..


The read the glossy brochure, saw the TV shows and jumped on the IP wagon without due diligence or ignoring negatives...
So are you saying to remove negative gearing for the good of these rather silly people you think are investing in real estate.

Plenty of young people saved a 20% deposit and bought homes in Sydney and Melbourne which they rented out and they got great yields and capital gains. The people who were stupid IMHO are those who believed the ridiculous claims of people like Steve Keen.

They have missed out on the high rent period of the downturn and they have missed out on a period of significant growth and now they will miss out on the ability to negatively gear to help them get a foot on the market.

Listening to much to doom and gloom predictions can be seriously bad for your financial well being. Housing markets rarely crash and rarely even fall in nominal value.
Edited by skamy, 26 Aug 2014, 02:50 AM.
Definition of a doom and gloomer from 1993
The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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Poontang
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skamy
26 Aug 2014, 02:26 AM

So are you saying to remove negative gearing for the good of these rather silly people you think are investing in real estate.

I'm not saying anything about negative gearing in my comment.


My original comment was in reply about "stupid investors" only, not the OP in general..



The people I am talking about may well be intelligent people, I think they have been a little naive jumping onto the IP property market in those areas without any sort of diligence..
There are some people who seem angry and continuously look for conflict.
Walk away, the battle they are fighting isn't with you, it's with themselves.

The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it.
The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.

Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
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herbie
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Aussiehouseprices
25 Aug 2014, 02:10 PM
I specifically said I don't think they are stupid. They just don't take the time to learn the basics of investing before jumping in. There are heaps of things I haven't bothered to learn. Doesn't make me stupid.
Products of our times most likely - Rather than stupid as such:

* Means testing of the pension introduced in the mid 1980s to give us the hint we just might not get it
* And then super a bit afterwards to reinforce the hint
* With super coming in so late that it was obvious it wouldn't be that much use (average balance for even a 55 yo is only about $100K)
* And super was based on investing in shares anyway - With people of my gen having grown up with the family anecdotes/horror stories of what happened to 'smarties' who fancied their chances investing in that asset class
* Plus even knowing what had happened to those who had a flutter on gold around 1980

So forced to invest for retirement (with every spruiker out there - particularly the super industry ones - screaming You WON'T have enough!) around about the time loans became more freely available, when there was a general mindset (compared to other shite anyway) of "Safe as Houses". And yep, the RE industry spruiks were pushing the 'joys' of neg gearing - In what was a time of pretty high personal income tax rates for the middle class as I recall.

So yep, it doesn't surprise me too much in hindsight, that a reasonable number of my gen bought an IP.
Edited by herbie, 26 Aug 2014, 04:04 PM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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skamy
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Poontang
26 Aug 2014, 09:26 AM
I'm not saying anything about negative gearing in my comment.


My original comment was in reply about "stupid investors" only, not the OP in general..



The people I am talking about may well be intelligent people, I think they have been a little naive jumping onto the IP property market in those areas without any sort of diligence..
But why do you think they do not do due diligence? i would suspect that the buyer of a single investment property is much more likely to do due diligence than a rich speculator betting on an upturning market.

I know I am deliberately being argumentative but my point is that some people may think the market is going to fall and others may have an equally if not more likely view that the market will continue as usual in the way it has behaved for hundreds if not thousands of years.

IMHO, it would be a completely shocking event if the market took a downturn at this stage after such a long period of sustained savings and stagnating property prices. My own life has never witnessed such a thing.

So my view is that it is not a bad time to invest, prices are not inflated they are just returning to levels seen last in 2007. That tells me there is plenty of growth potential as our population has grown during that time. I think that is a very sensible and considered view. I do not get why so many bears call Mum and Dad investors like me fools, I have done really well on everything i bought in 2012, I think I was pretty smart or at least very far from stupid.

The kind of stupid behaviour you describe happens much later in the cycle when prices have grown for many years. If you seriously think that buyers today are ignoring the recent GFC and its effects, then you are out of touch with normal people.
Definition of a doom and gloomer from 1993
The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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Veritas
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Quote:
 
But why do you think they do not do due diligence? i would suspect that the buyer of a single investment property is much more likely to do due diligence than a rich speculator betting on an upturning market.


Based on what? Your instinct?

Quote:
 
I know I am deliberately being argumentative but my point is that some people may think the market is going to fall and others may have an equally if not more likely view that the market will continue as usual in the way it has behaved for hundreds if not thousands of years.


Indeed. My late Grandfather took his first job working the residential backed securities market in a major investment bank back in the 1940s. :re:

Quote:
 
IMHO, it would be a completely shocking event if the market took a downturn at this stage after such a long period of sustained savings and stagnating property prices. My own life has never witnessed such a thing.


Prepare to be shocked and amazed.

Quote:
 
So my view is that it is not a bad time to invest, prices are not inflated they are just returning to levels seen last in 2007. That tells me there is plenty of growth potential as our population has grown during that time. I think that is a very sensible and considered view. I do not get why so many bears call Mum and Dad investors like me fools, I have done really well on everything i bought in 2012, I think I was pretty smart or at least very far from stupid.


So notwithstanding the fact that WA property prices struggled to breach their 2007 highs during one of the greatest economic epochs in its history now, when the fundamentals are all turning negative, you expect prices to rise.

I will call it Skamy's law

Strong fundamentals +supply shortage = stagnation

Weakening fundamentals + increased supply= prices to the moon!


:lol



Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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Aussiehouseprices
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Aussiehouseprices
25 Aug 2014, 10:29 AM
A tax deduction now is more valuable and enticing than a possible (or even definite) tax deduction in the future. For this reason, it affects people’s behaviour.

For example, recently, the government allowed small business an immediate tax deduction of $6,500 for motor vehicles instead of having to spread that amount over several years. Why did that do that – to encourage business to buy cars. This cost the government money and now they are about to remove this incentive. Why bother with these changes if it works out exactly the same either way?

If it’s more valuable to the taxpayer, then by definition, the government loses out. And it’s for this reason that the government has put restrictions on claiming many types of losses immediately - the non-commercial loss rules for businesses, the inability to claim a capital losses against other income until you make a future capital gain and the inability for a trust or company to distribute a loss to an individual to offset against their other income.
Shadow, I was expecting a rebuttal. I haven't been on this forum for a while - have you gone part time here?
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Shadow
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Aussiehouseprices
26 Aug 2014, 10:59 PM
Shadow, I was expecting a rebuttal. I haven't been on this forum for a while - have you gone part time here?
The discussion began when Piccolo said taxpayers were subsidising property investors. I pointed out that the housing sector contributes $40 billion in net tax revenue for the government each year, $20 billion of which comes from investors, so in fact we highly taxed property investors and homeowners are subsidising low taxed renters like Piccolo.

Nobody subsidises negative gearing. It simply results in a deferred tax payment. It allows property investors, who already contribute $20 billion in taxes, to defer $4 billion until later.

If a shopper buys some groceries, pays $20 today and defers $4 until tomorrow, other shoppers don't subsidise that $4.

A tax break normally refers to something that avoids or reduces the tax payable. I don't consider deferring tax to be a 'tax break' regardless of the 'time value of money' argument. What if we had deflation instead of inflation? Then the 'time value' would work in reverse. At the end of the day, the nominal tax paid is the same whether losses are claimed immediately or deferred until later.
Edited by Shadow, 27 Aug 2014, 12:01 AM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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goldbug
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Nice bit of spin shadow but most of your 40 billion is offset by the rent assistance landlord subsidy the government pays out to millions of centerlink recipients. If that wasn't being paid many landlords would be getting substantially lower yields. Timo is 100% correct when he says landlords are a parasite species, sucking off the lifeblood of the nation.

It's why the average LL grows to become a bitter lonely individual. Deep in their gut they know the truth and it gnaws away at their soul knowing they are little more than a thief.
Shadow was hopelessly wrong about the Gold Bull Market.
What else is he wrong about?
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