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The Negative Gearing Thread: RBA Bulletin - Negative Gearing available in many countries
Topic Started: 10 Mar 2011, 12:10 PM (32,807 Views)
Rastus2
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Shadow
16 Mar 2011, 09:49 PM
Actually, here you go...

Strindberg

The cost of negative gearing is pitifully tiny in the context of social housing.

The claimed net rental income for 2007-8 was minus $8.6b (see here ). The maximum tax cost of those claims would be about $3b at 30% to 45% tax rates. Some of those negative amounts would not even lead to tax costs where the claimant wasn't paying that much tax. So the cost of NG is about $3b a year. $3b will buy about 10,000 social homes at the most, representing about 0.1% of housing stock.
In Australia about 5% of stock is public rented and about 25% of stock is private rented.
In the UK a massive 18% of stock is public rented and only about 12% is private rented. On top of the huge cost of public rented stock (including all the massive loss making housing association stuff) which is all rented out at a huge loss, the UK is now paying 20 billion pounds a year just for housing benefit to the poor and unemployed.
The $3b spent on NG in Australia is money well spent.


http://australianpropertyforum.com/topic/8153259/2/



I appreciate the maths that you Strindberg has done on this topic... however the document shows a great deal of historic data, and it does not support your conclusions..

It in fact, says the complete opposite.

In relation to house prices, in the absence of statistical correlation, the better view is that house prices rise anyway, regardless of negative gearing, and can be explained by other factors.

In relation to housing stock, although statistics indicate that negative gearing has led to an increase in real estate investment, they contradict the argument that negative gearing has led to an increase in the number of dwellings.

Arguments based on these false assumptions are flawed. There is no empirical foundation for arguing in support of negative gearing that it rewards home ownership or that it results in lower rents or increased activity in the construction industry.

Can you demonstrate where this person has got it wrong in his workings ? Perhaps point me to the charts/data that are wrong in his paper ?


Edit.. Sorry, attributed the maths to yourself and it was Strindberg (corrected).

Strindberg

The cost of negative gearing is pitifully tiny in the context of social housing.

Edited by Rastus2, 16 Mar 2011, 10:02 PM.
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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Shadow
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Which part of the document do you think I don't agree with?
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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Rastus2
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Shadow
16 Mar 2011, 10:00 PM
I don't think negative gearing in its current form leads to more dwellings overall.

I do think it encourages rental dwellings to be privately owned rather than government owned (i.e. public housing).

So, same amount of rentals overall, but owned by landlords rather than the government. If the government removed NG for any substantial length of time, then I believe landlords would be less inclined to buy investment property, and the government would eventually need to step in to provide public housing.

You might respond to say that if NG was removed then house prices would fall and people wouldn't need to rent. I don't agree with that. Yes, there would be downward pressure on house prices until prices reached a new equilibrium, but there will always be a large section of the population who need to rent regardless of house prices (look at any other country... the countries without NG or with lower house prices still have plenty of renters). Those people, the unemployed, the poor, the disadvantaged, disabled, pensioners, people who squander their money on booze and gambling... all those people will always exist in any society and they need to be housed. In the UK they are in public housing. The Australian government would be forced to provide much more public housing for these people if NG was removed.



I see what you are saying..

however I see no evidence in this document to support your theory..

What I do see in the document (to answer this and your more recent post's question):


quote:
In relation to housing stock, although statistics indicate that negative gearing has led to an increase in real estate investment, they contradict the argument that negative gearing has led to an increase in the number of dwellings.

Arguments based on these false assumptions are flawed. There is no empirical foundation for arguing in support of negative gearing that it rewards home ownership or that it results in lower rents or increased activity in the construction industry


Endquote:

If rents were not lowered, and no significant increased activity of construction were caused by -ve gearing IP's, then your assumption that the Gov. has not gained by having IP's take up the slack ...

Edited by Rastus2, 16 Mar 2011, 10:10 PM.
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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Shadow
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My theory doesn't need to be backed up by a document. It is backed up by logic. Up to you whether you agree with it or not.

Australia and the UK both have 30% of dwellings as rental stock.

In Australia this is 5% public and 25% private

In the UK it is 18% public and 12% private

Having to provide all this public housing costs the UK a lot of money, and because it is usually concentrated in slums/ghettos it also leads to costly social problems.

I believe Australia has the much greater percentage of private rentals because Australia encourages private landlords through negative gearing, and I believe the Australian government does this because it costs them less in the long run, and leads to better quality, better integrated rental stock, with fewer social problems.

That's my theory, based on my logic. Take it or leave it. I don't have evidence and I don't need it to be backed up by a document. It's just a theory.
Edited by Shadow, 16 Mar 2011, 10:15 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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Rastus2
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Shadow
16 Mar 2011, 10:14 PM
My theory doesn't need to be backed up by a document. It is backed up by logic. Up to you whether you agree with it or not.

Australia and the UK both have 30% of dwellings as rental stock.

In Australia this is 5% public and 25% private

In the UK it is 18% public and 12% private

Having to provide all this public housing costs the UK a lot of money, and because it is usually concentrated in slums/ghettos it also leads to costly social problems.

I believe Australia has the much greater percentage of private rentals because Australia encourages private landlords through negative gearing, and I believe the Australian government does this because it costs them less in the long run, and leads to better quality, better integrated rental stock, with fewer social problems.

That's my theory, based on my logic. Take it or leave it. I don't have evidence and I don't need it to be backed up by a document. It's just a theory.


Well, your theory might well be backed up by logic, but oddly enough, the author of the rather large document you linked did not find logic in your theory.

Any chance that he is right and you are wrong ?

(What with him being a tax expert and all ?)



I'm sure that you do not have a problem with me asking you to back up your theories with more evidence, I know you are a fan of this.


After all, we are just after the truth here...


Can you find the error in the document to show he was wrong in his conclusions ? Perhaps you could cut and paste the section he got it wrong if it's not too much trouble.

Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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Shadow
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Rastus2
16 Mar 2011, 10:19 PM
your theory might well be backed up by logic, but oddly enough, the author of the rather large document you linked did not find logic in your theory.
There is nothing in the document to refute my theory. The author did not consider my theory at all, or even mention it in his document.

Perhaps if he had considered my theory then he would have arrived at another conclusion.

What is your own opinion on my theory... does it make sense to you?
Edited by Shadow, 16 Mar 2011, 10:28 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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Shadow
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Also, Rastus, I should point out that the document you are referring to was written by...

Quote:
 
Jim O’Donnell is a Solicitor at Jackson McDonald Lawyers. The views expressed in this paper are his personal views only and are not to be taken as the views of his firm. This paper arises from an MTax project undertaken by the author as a UNSW student at Atax.


We have no idea what his agenda is or was while he compiled this document as a student.

Why don't you discuss your own views on my theory, rather than Jim's views (not that he actually has any views on my theory anyway).
Edited by Shadow, 16 Mar 2011, 10:37 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.
Profile "REPLY WITH QUOTE" Go to top
 
Rastus2
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Shadow
16 Mar 2011, 10:27 PM
There is nothing in the document to refute my theory. The author did not consider my theory at all, or even mention it in his document.

Perhaps if he had considered my theory then he would have arrived at another conclusion.

What is your own opinion on my theory... does it make sense to you?


I note your observation of the author's caveat. (I also note that it was you that linked the document for me to support a claim you made earlier in the alternate thread). I have not seen anything to make me conclude that the author had an ulterior motive. It seems balanced to me.. do you have an issue with any of it's data or observations ?


To be frank, regarding your theory...
I would need to see more data & evidence to support your theory before I could comment... I'm sure you understand.

While I am sure you are keen for me to comment on your theory, since it is absent of hard data and evidence, and Jim's is, it is probably best to continue to discuss his until the situation is revised.. Otherwise it becomes a game of 'I think", "you think", but neither of us know.

As you have already stated that you do not have the evidence, I think I would need to wait for it to appear.


It is possible that your theory is correct.. however there is not enough evidence to prove it.


I find it odd that such a major effort on the part of the author of that document did not consider your theory... it is possible that he did not consider it worthy of comment because there is no evidence to support it... or perhaps it simply does not stand up to consideration for someone who knows the numbers better than you or I ...


I still feel he has undermined (completely negated?) your theory with his conclusion.. how do you under his conclusion to still allow your theory to be valid ?

There is no empirical foundation for arguing in support of negative gearing that it rewards home ownership or that it results in lower rents or increased activity in the construction industry.


No evidence of increased activity in construction industry (to me) means that it has not resulted in construction of additional rentals ... how do you read this ?



Edited by Rastus2, 16 Mar 2011, 11:01 PM.
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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Shadow
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Rastus2
16 Mar 2011, 10:57 PM
I also note that it was you that linked the document for me to support a claim you made earlier in the alternate thread

I find it odd that such a major effort on the part of the author of that document did not consider your theory
First of all, I have no idea where you got the document from, but it was never linked by me, so stop making stuff up.

Secondly, yes I do find it strange that the student talks about the 'cost' of negative gearing, but omits to explain who will provide and pay for the rental accommodation if we move to a UK style system of public housing rather than private rental accommodation. I also find it strange that he omits to discuss the social implications of distributed versus centralised low cost rental accommodation. To me it looks like the student set out with an agenda of proving that negative gearing is 'bad', and included only the pieces of information necessary to prove that case. But in the end, this student's views are clearly not aligned with the views of our government, so they are of little consequence.
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.
Profile "REPLY WITH QUOTE" Go to top
 
Rastus2
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Shadow
16 Mar 2011, 11:04 PM
First of all, I have no idea where you got the document from, but it was never linked by me, so stop making stuff up.

Secondly, yes I do find it strange that the student talks about the 'cost' of negative gearing, but omits to explain who will provide and pay for the rental accommodation if we move to a UK style system of public housing rather than private rental accommodation. I also find it strange that he omits to discuss the social implications of distributed versus centralised low cost rental accommodation. To me it looks like the student set out with an agenda of proving that negative gearing is 'bad', and included only the pieces of information necessary to prove that case. But in the end, this student's views are clearly not aligned with the views of our government, so they are of little consequence.


Apologies.. You are indeed correct in that you did not directly give me the link.. In fact you gave me the link to the thread where KennyJaiz had posted the Link ... No need to get upset Shadow, the link came from a bull and supported his post at the time. No bull saw it fit to cast doubt on the author, his motivations or his background at that time, so one must ask, why the sudden keenness from yourself to discredit him now ?


So, it seems the discussion over the last couple of days has morphed from one where the data is more important, to one where the motivation of the author is most important.. funny as I never hear you say this about bullish publications.

I see a vast wealth of data in this publication... I am yet to see your pull his data to pieces, this is something that yourself and Strindberg are (in all honesty) very good at.. which, I must say, makes that data still valid.

You might want to take the time to notice not all of his conclusions were damning of -ve gearing.. in particular the conclusion that there is no proof of it's effect to rise house prices. Interestingly positive conclusion for -ve gearing IMHO.


As for the question of who should pay for the cost of rental accommodation if we move to a UK style system of public housing... why should he comment on that ? The data he gives speaks for itself on the myths proposed by both the proponents and opponents of -ve gearing.. Why comment on how alternatives should be set up ?

I did not notice him pushing the UK model of public housing in the document, so why do you keep bringing it up ? I'm sure there are other models around the world.. it's not like we only have a binary choice of -ve gearing or UK public housing model to choose from.


As for social implications... why would he ? Did he discuss the social implications of people not being able to afford to buy their own house ? nope... it is not directly relevant to the discussion..


I disagree with your theory of the author's agenda... I am, however, open to any hard evidence you have to support this theory also.


The student's views are not (currently) aligned with our governments views... this comment, however, does little to support your theories, it is simply a fall back position for someone who is unable to substantiate their own position.

Dismissing valid data and conclusions with that kind of comment is hardly the act of someone open to a balanced point of view... it sounds far more like someone entrenched in their own position and unwilling/unable to see outside the box.
Edited by Rastus2, 16 Mar 2011, 11:27 PM.
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
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