1 - that the report is some 9 years old ? December 2001, and cites sources that is older than that (as old as 1984, that is some 16 years )
Here is an RBA chart from 2006...
And here is a price/rent chart for the countries that support NG (Australia is the dark blue line in the middle on the right... colours are a bit hard to see)...
And here is a price/rent chart for the countries that support NG (Australia is the dark blue line in the middle on the right... colours are a bit hard to see)...
Thankyou Shadow.. (and Nelson)... I missed/forgot this thread completely.
edit: reading the docs and links now..
I hope you guys don't mind if I just carry on the topic on the other thread rather than (continuing) to derail this one with a topic that is better covered elsewhere.
The conclusion that the document Shadow was good enough to point me to was..
CONCLUSIONS
Both critics and supporters of negative gearing have based their arguments primarily on two critical assumptions. One is that negative gearing has increased house prices. The other is that negative gearing has increased housing stock. Both assumptions are misguided.
Ultimately there is no compelling policy reason why Australia should continue to retain the tax shelter. Negative gearing results in a significant loss in government revenue, measured in billions of dollars. In return it has provided few indisputable benefits. It appears that negative gearing has increased income inequality, and statistics also support the conclusion that it has had a major effect on housing finance, with a disproportionately high level of housing finance invested in rental properties. Its effect on interest rates is debatable and further research is needed.
(See other thread for it's details of why we should abolish the tax shelter of -ve gearing for IP's).
The removal of NG will do nothing to house prices over the medium term.
House prices will continue to reflect the cost of production (and relative cost of production). Whether investors get a tax break or not on interest will not alter how much ot costs to buy bricks and tiles.
What the removal of NG will do will is lift rents relative to house prices - since investors assess return on an after tax basis, net rents will need to rise more than normal before new supply is encouraged.
As usual the bears have it arse-about. NG is a subsidy to renters. Investors will be indifferent to its removal, but it is a boon for OO's, and the poor will get poorer.
Bullshit
When negative gearing was briefly removed by Keating back in the 80's ONLY Sydney and Perth had rising rents. Rents throughout the rest of Australia stayed static or fell
Another bullshit myth by a vested interest
What...? you are going to look a just a couple of years of evidence after a major tax chnage like that?
If you read my comment you will note that the change in rents would take years (medium term) to adjust after the renter subsidy (NG) is removed. The removal of NG under Keating was too short to show anything.
The fact of the matter is, Bears acknolwedge the after tax effect of property investing is important, which is why they rave on about NG. But when it become clear the after tax effect of removing NG will lift rents, they all claim it must be bullshit.
House prices will continue to reflect the cost of production (and relative cost of production). Whether investors get a tax break or not on interest will not alter how much ot costs to buy bricks and tiles.
If your b_besyian economic theory is true, we should never have loss-making companies ever again - because the market price of a product the company makes will always be equal or greater than the cost of production. :excited:
What rubbish.
Plenty of companies go broke and are replaced by new companies and / or industries.
The key with housing, is that it reflects critical infrastructure - so companies can go broke, but are replaced by new companies. But new companies will not form if prices < replacement cost. Supply will remain constrained until prices rise again.
Also, companies can show accounting profit (revenue - costs) but economics loss (ROIC < COC). In terms of true profitability, one needs to analysis economic loss since if ROIC < COC, capital will no longer become available to an industry.
What the removal of NG will do will is lift rents relative to house prices - since investors assess return on an after tax basis, net rents will need to rise more than normal before new supply is encouraged.
If landlords could just lift their rents then why not do it now with such low rental yields?
Landlords (if rational) will always maximise rent at any point in time.
The issue here is if the after tax return in existing stock falls (as will be tax case with the remaoval of NG), the marginal investor will no longer buy. More-over, many current investors will almost certainly sell.
This may all sound like great news to the bears...except for one thing....supply will stop.
Lack of supply will ensure rents will rise.....to the point where the after tax return for investors is restored.The lag effect between policy, building approvals, building completions, apopulation growth and rents is more than just a couple of years. It probably takes -7-10 years to flow through to the entire market. This is why earthsa is so confused.
The removal of NG will do nothing to house prices over the medium term.
House prices will continue to reflect the cost of production (and relative cost of production). Whether investors get a tax break or not on interest will not alter how much ot costs to buy bricks and tiles.
What the removal of NG will do will is lift rents relative to house prices - since investors assess return on an after tax basis, net rents will need to rise more than normal before new supply is encouraged.
As usual the bears have it arse-about. NG is a subsidy to renters. Investors will be indifferent to its removal, but it is a boon for OO's, and the poor will get poorer.
Bullshit
When negative gearing was briefly removed by Keating back in the 80's ONLY Sydney and Perth had rising rents. Rents throughout the rest of Australia stayed static or fell
Another bullshit myth by a vested interest
What...? you are going to look a just a couple of years of evidence after a major tax chnage like that?
If you read my comment you will note that the change in rents would take years (medium term) to adjust after the renter subsidy (NG) is removed. The removal of NG under Keating was too short to show anything.
The fact of the matter is, Bears acknolwedge the after tax effect of property investing is important, which is why they rave on about NG. But when it become clear the after tax effect of removing NG will lift rents, they all claim it must be bullshit.
As usual, bears are inconsistent.
So in other words, you have zero evidence on which to base your assertions
The removal of NG will do nothing to house prices over the medium term.
House prices will continue to reflect the cost of production (and relative cost of production). Whether investors get a tax break or not on interest will not alter how much ot costs to buy bricks and tiles.
What the removal of NG will do will is lift rents relative to house prices - since investors assess return on an after tax basis, net rents will need to rise more than normal before new supply is encouraged.
As usual the bears have it arse-about. NG is a subsidy to renters. Investors will be indifferent to its removal, but it is a boon for OO's, and the poor will get poorer.
Bullshit
When negative gearing was briefly removed by Keating back in the 80's ONLY Sydney and Perth had rising rents. Rents throughout the rest of Australia stayed static or fell
Another bullshit myth by a vested interest
What...? you are going to look a just a couple of years of evidence after a major tax chnage like that?
If you read my comment you will note that the change in rents would take years (medium term) to adjust after the renter subsidy (NG) is removed. The removal of NG under Keating was too short to show anything.
The fact of the matter is, Bears acknolwedge the after tax effect of property investing is important, which is why they rave on about NG. But when it become clear the after tax effect of removing NG will lift rents, they all claim it must be bullshit.
As usual, bears are inconsistent.
So in other words, you have zero evidence on which to base your assertions
Thanks
Nor do you.
Your welcome.
Edit: However, unlike you I have sound economic reasoning on my side.
Landlords (if rational) will always maximise rent at any point in time.
The issue here is if the after tax return in existing stock falls (as will be tax case with the remaoval of NG), the marginal investor will no longer buy. More-over, many current investors will almost certainly sell.
This may all sound like great news to the bears...except for one thing....supply will stop.
Lack of supply will ensure rents will rise.....to the point where the after tax return for investors is restored.The lag effect between policy, building approvals, building completions, apopulation growth and rents is more than just a couple of years. It probably takes -7-10 years to flow through to the entire market. This is why earthsa is so confused.
Or lower investor interest/sell offs will lead to lower house prices so those currently renting who wish to buy are in a better position to do so. Positively geared landlords would have no reason to sell. The system is set up in favour of investors, currently they have this great tax break to allow them to bid up prices pushing potential buyers out. Some rent for personal reasons, for a lot it's financial, to buy the equivalent property would just not be possible.
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