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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 (33,859 Views)
Aussiehouseprices
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propertymogul
28 Aug 2014, 05:59 PM
Having said that I will agree with both of you that the survey is of limited use if
Why is it of limited use? Isn't the purpose of a survey to take a sample and extrapolate the result across the entire population? Do we know how this survey was done?
Edited by Aussiehouseprices, 28 Aug 2014, 06:03 PM.
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Shadow
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propertymogul
28 Aug 2014, 05:52 PM
Do you think that most PIs hold for longer than 10 years? If that is the case then why are most negatively geared?
The pool will always be skewed towards those making a loss because the number of new 'loss making' investors joining the pool rises every year, whereas any older investors who sell while making a rental profit will no longer appear in the pool.

If you could somehow stop anyone new from joining the pool, then over time the entire pool would turn cash flow positive. It is only the hordes of new entrants to the pool each year that make the pool negative overall.


Aussiehouseprices
28 Aug 2014, 06:03 PM
Why is it of limited use? Isn't the purpose of a survey to take a sample and extrapolate the result across the entire population? Do we know how this survey was done?
If we extrapolate it like that we get the obviously silly conclusion that 750,000 IPs are bought/sold every year.

I can't find the actual survey anywhere - just the second hand account of the results published by 'Equiti'.
Edited by Shadow, 28 Aug 2014, 06:16 PM.
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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Aussiehouseprices
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Shadow
28 Aug 2014, 06:11 PM
If we extrapolate it like that we get the obviously silly conclusion that 750,000 IPs are bought/sold every year.
They way I read it is that 25% of surveyed property investors sell with in 12 months of buying and 50% sell with 5 years.

Extrapolating, it would be that 25% of all property investors sell with in 12 months of buying and 50% sell with 5 years.

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Shadow
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Aussiehouseprices
28 Aug 2014, 06:22 PM
Extrapolating, it would be that 25% of all property investors sell with in 12 months of buying
Yes, but if 25% of all property investors sell within 12 months of buying that would mean a turnover of 750,000 investment properties every year.

We would need to see the actual survey questions and the demographic of the respondents to make any sense of it.
Edited by Shadow, 28 Aug 2014, 06:26 PM.
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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Aussiehouseprices
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Shadow
28 Aug 2014, 06:24 PM
Yes, but if 25% of all property investors sell within 12 months of buying that would mean a turnover of 750,000 investment properties every year.

How do you work that out?
Quote:
 
We would need to see the actual survey questions and the demographic of the respondents to make any sense of it.
True.
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Trojan
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propertymogul
28 Aug 2014, 05:52 PM
What is your position then Trojan? Australia wide all PIs are claiming a net rental loss in the billions. 62% of properties are negatively geared. Do you think that most PIs hold for longer than 10 years? If that is the case then why are most negatively geared?
My position?

No I do not think most property investors hold for longer than 10 years. I think most PI's aren't very sophisticated and never work out why they should bother holding a property which loses them money every year and never past 1 investment property. However, I think the out of the remaining property investors, they know what they are doing, how to subdivide, renovate, build granny flats and other ways to increase yield and these guys hold the majority of investment properties out there. And these are the guys who are accumulating more properties and holding on for more than 10 years.

Why are most negatively geared? The same same answer as above - same unsophisticated PIs who were sold the lie that negative gearing was something to aim for.


Let me ask you the same question but using small businesses.
Do you think most small businesses lasts more than 10 years? Why do most small businesses claim operating losses?
But no one in their right mind would suggests that small businesses don't contribute to the tax coffers overall (and to the economy in general) and that is why the government encourages small businesses and property investors.

I think that is the point Shadow is making.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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propertymogul
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Shadow
28 Aug 2014, 05:39 PM
In that case the survey is of no use to this debate. If it ignores the vast bulk of existing investment properties (3 million of them) and only focuses on IPs that transacted around the year of the survey, then all the long term buy and hold investors were excluded from the survey. There are millions of investment properties in Australia. I expect the bulk them have been held for decades and were cashflow positive a long long time ago by the time they sell. Your survey is focusing on the 'churn' rather than the entire stock of IPs.
Your claim is still as follows - There are millions of investment properties in Australia. I expect the bulk them have been held for decades and were cashflow positive a long long time ago by the time they sell.

So lets get your position straight. You think
1. That the average time to turn a rental profit is around 7 years
2. The average PI holds for longer than 10 years.
3. The bulk of the 3 million investment properties in Australia have been held for decades and were cashflow positive a long long time ago

Yet despite this net rental losses across all IPs is in the billions each year, and 62% of PIs are negatively geared.

So out of the rental properties bought from 2003 - 2007 by your logic most of these would still be held and would be turning a rental profit. You say the bulk will have been held for decades before selling so for properties bought from 1990 - 2003 could we say that at least 25% of those would still be held and all would be turning a rental profit by your logic? And you think the losses from the properties purchased from 2008 - 2014 outweigh all the gains being made by all the properties still being held (that is the only conclusion to be drawn from you claims)?

You and Troj have said 500,000 properties transacted per year, and 1/3 are PIs. So over the last 6 years approx 900,000 PIs have been purchased, lets assume 80% (to be generous) are still held which gives you 720,000 negatively geared properties. And out of the 3 million investment properties, you therefore believe that 2,280,000 are turning a rental profit. So you think the profits from the 2.3m profitable investment properties are outweighed by the losses from the 720,000 investment properties?

Can you see that somewhere along the way your logic is failing? Either the average hold time is much shorter, or the average time to turn a profit is much longer, or both. Over $50B in rental losses claimed since 2001, so how long do we wait for this "bulk" of properties that "have been held for decades" and were "cashflow positive a long long time ago" to kick in. The 6 years worth of new properties making losses surely would be outweighed by this horde of money makers?
Trojan
28 Aug 2014, 06:30 PM
My position?

No I do not think most property investors hold for longer than 10 years. I think most PI's aren't very sophisticated and never work out why they should bother holding a property which loses them money every year and never past 1 investment property. However, I think the out of the remaining property investors, they know what they are doing, how to subdivide, renovate, build granny flats and other ways to increase yield and these guys hold the majority of investment properties out there. And these are the guys who are accumulating more properties and holding on for more than 10 years.

Why are most negatively geared? The same same answer as above - same unsophisticated PIs who were sold the lie that negative gearing was something to aim for.


Let me ask you the same question but using small businesses.
Do you think most small businesses lasts more than 10 years? Why do most small businesses claim operating losses?
But no one in their right mind would suggests that small businesses don't contribute to the tax coffers overall (and to the economy in general) and that is why the government encourages small businesses and property investors.

I think that is the point Shadow is making.
Thanks for the honest answer. I agree most PIs would not hold for longer than 10 years, and that is the reason most are negatively geared. Now we just need Shadow to come around and see the light!

On the small businesses - no I know for a fact most small businesses don't last more than 10 years.

In terms of tax contribution however small business contribute more. Like PIs they will pay tax on their profits. However out of their costs they often pay wages of which a portion goes to the ATO in the form of PAYG. On their sales they charge the consumer GST which is passed onto the ATO. They often pay payroll tax. They also pay stamp duty when buying the business like property. There is a lot more but as an example:
A business has $1m revenue, $900k costs. On their profit they pay $30,000 income tax. Their costs include $500,000 wages on which $120,000 is paid to the government in PAYG. On their $1m revenue they collect $100,000 in GST which is passed onto the ATO. There is likely to be a small payroll tax portion as well. So they've made $100k profit but their $1m in revenue has generated at least $250,000 in tax for the government or 2.5X their profit!

Comparing a neutrally geared PI with $25,000 in rental income. After their deductions no tax to the government. The property manager's portion of PAYG for that property might be $200.

There are many more intricacies but we know what we are getting at.
Edited by propertymogul, 28 Aug 2014, 06:45 PM.
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Trojan
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propertymogul
28 Aug 2014, 06:31 PM
You and Troj have said 500,000 properties transacted per year, and 1/3 are PIs. So over the last 6 years approx 900,000 PIs have been purchased,
I did not say that - you (incorrectly) extrapolated that yourself.
I said 500,000 properties were sold every year and investment properties comprise of roughly 1/3 of all properties in Australia.
As an extreme example why you can't extrapolate that way, its possible every single property sold in 1 year was by an investor (and bought by another investor). Or it was all done by owner occupiers. And the 1/3 properties being investment properties will remain constant.
Edited by Trojan, 28 Aug 2014, 06:50 PM.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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propertymogul
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Trojan
28 Aug 2014, 06:47 PM
I did not say that - you (incorrectly) extrapolated that yourself.
I said 500,000 properties were sold every year and investment properties comprise of roughly 1/3 of all properties in Australia.
As an extreme example why you can't extrapolate that way, its possible every single property sold was by an investor (and bought by another investor). Or it was all done by owner occupiers.
Fair enough, but it's probably available data to get the percentages? Even at 50% (would seem very high if only 1/3 of all properties are investment properties?) it would be 1.5m investment properties purchased over the last 6 years, and definitely not all would still be held. 80% is probably reasonable (?) which would give 1.2m negatively geared properties, and 1.8m positively geared. Still doesn't stack up.
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Trojan
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propertymogul
28 Aug 2014, 06:31 PM
Thanks for the honest answer. I agree most PIs would not hold for longer than 10 years, and that is the reason most are negatively geared. Now we just need Shadow to come around and see the light!
As long as you understand that most property investors does not equal most investment properties, you will realise what I said does not contradict what Shadow said.
I put trolls and time wasters on my ignore list so if I don't respond to you, you are probably on it ....
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