Passive income is a euphemism for unearned income - the most damaging of all income sources; The Great Real Estate Boom Ahead seminar, delivered by Australia's leading property spruiker Dymphna Boholt
Tweet Topic Started: 30 Aug 2013, 04:44 PM (2,459 Views)
By Karl Fitzgerald - posted Friday, 30 August 2013
Joe Hockey points to supply as the primary housing affordability issue. He should have been sitting in the Melbourne Sofitel last week to hear The Great Real Estate Boom Ahead seminar. It was delivered by Australia's leading property spruiker, Dymphna Boholt. Packed with 400 people on the edge of their seats, they were walked through the legal strategies to protect one's assets and avoid paying tax whilst profiting at hyperspeed.
The audience gushed at examples of those making $120,000 in four months. A young couple assembled 16 properties within three years to land a passive income of $350,000 each year. A single mom of four set up a passive income of $500,000 a year after three years using Boholt's techniques - 'so can you'. Boholt states on youtube that this $500,000 is set to increase each and every year through the ability of landlords to ratchet up rents. She actually said during the seminar 'I wanted money to come in that I didnt have to work for'.
Such behaviour is encouraged by housing policy at all levels of government. Passive income is the euphemism for what economists call unearned income - the most damaging of all income sources. Damaging because there is no constructive outcome for the income, instead forcing the productive sector into further debt to meet the payments, undermining competitiveness.
Investors chasing the elusive dollar jumped from 19% in 1993 to today's 36% of all housing loans.
In 1993 a first home owner was borrowing an average $80,000. Today it is $292,000.
There are 6.4 million renters to just 1.8 million investors. Could politicians ignore the affordability issue if 10,000 renters dedicated just a few hours a year to protest about the shocking state of housing affordability?
The figures continue to reveal the alarming pressure placed on a society steeped in debt, for longer and with fewer prospects of ever escaping it. The ABS writes: “Since 1994-95, the proportion of households that owned their home outright dropped from 42 to 31 per cent. Those with a mortgage increased from 30 to 37 per cent and households renting privately have increased from 18 to 25 per cent.”
Politicians have stumbled with awkward responses to housing questions during the election campaign. The Liberal Party handballs it to the states as a supply issue. The Labor Party points energetically to their miniscule dent on public-housing waiting lists. Neither side is willing to admit that lower interest rates will push the bubble higher. Nor are they willing to accept that negative gearing has failed to add to the new supply of homes. 92% of negative gearers buy existing properties, crowding out first home owners. Self Managed Super Funds are another policy trick, giving steep capital gains discounts to property investors. One might have thought that was the last of the incentives, until it was revealed this week that one can now earn frequent flyer points for buying an apartment.
Affordable housing was promised by Melbourne's urban growth boundary extension. The city has sprawled over once fertile farm land to provide space for 1.6 million new houses. The affordability nirvana of such supply-side reform is really a codeword for windfall gains. The bureaucrats' golden pen tick from farming to residential re-zoning creates overnight millionaires for those who own land in the right location.
In the March 2012 quarter something fishy occurred. Victorian land prices were falling significantly and there was a chance housing affordability might be possible in the sprawling outskirts. In the growth corridor of Whittlesea (Shire of Mitchell), developers removed 58% of the land from the market in just three months. This choking of supply ended the promise of affordability.
Saul Eslake is one of the few economists to speak up. He recently said "An investor-driven recovery is much more likely to put upward pressure on prices and is less likely to induce new dwelling supply, which is the opposite of what the Reserve Bank wants, and what the country needs,".
Similar investor-led 'recoveries' are occurring in the northern hemisphere, as if we've learnt nothing from the GFC. Much of this is spawning from the reality that Dymphna Boholt and her colleagues are doing exactly what the tax system tells them to do. Politicians will not look seriously at housing affordability until the locked out generations find their voice. Meanwhile Dymphna and her team continue their packed 15 stop national tour, building the supply of investors into an avalanche.
After a bubble has burst, no one denies that it existed. But before it does, the popular refrain is that though bubbles existed elsewhere in the world, “there’s no bubble here”. So housing bubbles are admitted to have existed in Japan, the USA, Spain and Ireland – because they’ve already burst.
There are 6.4 million renters to just 1.8 million investors. Could politicians ignore the affordability issue if 10,000 renters dedicated just a few hours a year to protest about the shocking state of housing affordability?
Here's what the renters are going to do:
They will either vote liberal or labor, like they have done for 50 years at state or federal level and wonder why nothing changes.
The more crazy ones will vote liberal to protest over labors handling of the GFC, in which the housing minister underpinned housing very effectively, while completely ignoring the previous record of credit growth Costello.
During the last 6 years of labor, prices are up no more then 30 percent nominal, last 6 years of Howard/Costello, places in Inala, eagleby, Kingston (all in qld) almost tripled in price.
No. The money on deposits flows into the economy providing growth. The capital invested buying property just sits in the property and adds no benefit to society.
Quote:
Passive income is the euphemism for what economists call unearned income - the most damaging of all income sources. Damaging because there is no constructive outcome for the income, instead forcing the productive sector into further debt to meet the payments, undermining competitiveness
This business of unearned income has always been employed and there is nothing wrong with it as long as the number of people doing it is very limited. An analogy would be illegal gambling. When most forms of gambling was illegal in Australia very little money was wasted on it. Today though we have casinos in every city, pokies in every club and pub and gold lotto every other night of the week. Aside from extra taxes and profits for the owners of gambling it provides nothing to the people of the nation other than entertainment. It is a total waste of wealth.
The same is true for current investment property trends. I laugh when people tell me they will retire on the passive income of 6 houses, as though everyone in the country can do it and somehow the wealth will be there to cover everyones desires. It is obvious that this is a pipe dream, just as the Dutch Tulip bubble was a pipe dream. As the Melbourne property boom was. Only the select few, the elite so to speak, can operate this way, and the current trend of evey aussie wanting to own 2 or 3 houses and get rich is just another means of these top dogs getting what they want. A passive income from all the millions of new landlords who are indebted to the banks.
As the wealth diverted to property repayments is not available to fund productive investment we will see unemployent continue to rise. We will see tennents squeezed and rents falling, further squeezing the income of landlords already strained by variable interest costs and no doubt higher taxes on these "rich landlords" Why will this happen? Because there is simply not enough wealth available to satisfy all the wanna-be rich as well as the already rich. The nation simply cannot afford to support them all.
This was the "PLAN" all along, a plan we have seen repeated over and over throughout history, yet every few generations people forget, and the plan is brought out, dusted off, and replayed. Amazing lol lol. That is why house prices have stalled and declined in real terms, it's why rents never rose to cover the cost of mortgage servicing. It's basically game over but the Bulls want to see a crash before they admit that. There doesn't need to be a crash though, and a crash would be damaging for the income streams of the elite who created the money and the concept of property as a winning investment in the first place.
Shadow was hopelessly wrong about the Gold Bull Market. What else is he wrong about?
No. The money on deposits flows into the economy providing growth. The capital invested buying property just sits in the property and adds no benefit to society.
I guess that you don't comprehend the issue. Money that flows into housing isn't captured and lost to the system, it merely changes hands and is still available for investment into any commercial or industry that warrants it.
You have been watching too many Peter Schiff videos.
Any expressed market opinion is my own and is not to be taken as financial advice
Passive income is the euphemism for what economists call unearned income - the most damaging of all income sources.
Damn, we're all complicit in assembling "damaging income sources" according to the OP. Every working person has statutorily acquired some passive investment capital in their working lives, from mandatory super if nothing else.
Damn, we're all complicit in assembling "damaging income sources" according to the OP. Every working person has statutorily acquired some passive investment capital in their working lives, from mandatory super if nothing else.
Again it's just supply and demand. If there was no supply for rental property, landlords would soon disappear. Peter :pop:
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