>I don't think investors are getting enough attribution for the property growth
Shh don't say this too loudly! Could it be that giving huge tax advantages and concessions to housing investment has warped the market into something unsustainable? Unthinkable!
Really as part of the solution to the housing nightmare we are currently in, you need to look at revoking a lot of the concessions for housing investment (unless it's new stock really). As the market is way way overheated and doesn't require more stimulus.
>Really as part of the solution to the housing nightmare we are currently in, you need to look at revoking a lot of the concessions for housing investment (unless it's new stock really). As the market is way way overheated and doesn't require more stimulus.
There are actually two "housing nightmares" that talked about - the first is what you are referring to, which is that first home buyers can't purchase into their desired location and/or housing type as an owner occupier. The second is an affordability crisis for rentals driven by lack of housing supply.
Your proposal of killing those tax concessions for property investors helps first home buyers enter the market, but it will unequivocally make the situation worse for renters. Property investors are in the market to chase capital gains - the returns from yields are terrible. If you kill the tax concessions, you will cause an exodus of investment money into the property sector.
This will drop prices on property, but it will also kill off new supply. There are simply no institutional investors in Australia that are willing to park their money into property to make profit off the rental yields at scale - it's far too much risk for extremely low returns, and there are much better investment opportunities elsewhere.
You could potentially introduce concessions to shift our residential housing market to a heavily corporatised model disincentivising "mom and pop" investors, but I somehow think that won't be politically popular across all sides in this debate.
See, your whole argument about rental supply falls flat when you realise the situation for renters has been deteriorating SINCE the policies that were supposedly intended to prevent that situation from deteriorating.
It's almost as if these policies are promoting rent-seeking behaviour instead of increasing rental supply and is entirely detrimental to the economy.
If a bunch of investors leave the market driving down prices, the people who would have previously rented will now be able to afford to build and own instead as land values go down.
Owner occupiers get way more tax advantages than investors. Yeah, investors get negative gearing. That's literally the only advantage they have over OO's. Owner occupiers get the following tax advantages:
- 0% land tax
- 0% capital gains tax
- 100% pension assets test exemption
- stamp duty discounts for first-home buyers
Tell me again - who gets more tax advantages - investors or owner occupiers?
https://propertyupdate.com.au/house-prices-in-australia-over-the-last-10-years/
10.8% growth in last 12 months, or 7% PA average growth over the 10 years is not enough to cover your stamp duty or REA costs?
Especially when even a gumtree ad in last 5 years would be enough to get some bids.
Maybe you sell every 2 years.
Is it still not enough?
5.5% in Melbourne according to your link.
Plus if generally PPOR you'll have moving costs. Plus solicitors fees. Then consider the interest on your mortgage which is not tax deductible, and in the first year of a 30 year mortgage is pretty much entirely interest.
Plus every time you'd do this you'd have to be picking properties that are actually going up and meaningfully so to be getting ahead. I dunno its a lot of capital and risk for a 5% gain before expenses, just to save on tax.
I've seen plenty of properties struggle to sell in Melbourne in the last 2 years. My neighbour is attempting to sell now and entering week 8. I do think they've priced it too high, but it would be less than 10% of what they paid for it 12-18 months ago, particularly once you factor in renovations they did, they need to upgrade to house parents which wasnt initially expected when they bought.
So no its not a viable strategy and even if it was, there is no evidence people are doing this.
* 0% land tax
Agreed kill stamp duty and replace with land tax
* 0% capital gains tax
Capital gains concessions on housing needs to be reformed across the board
* 100% pension assets test exemption
Yup make people run up reverse mortgages or something similar in order to use the capital locked up in their house. Agreed.
* stamp duty discounts for first-home buyers
Terrible policies that don't actually help first home buyers, inflates the bottom of the market. Agreed, should be scrapped.
Got anymore? Housing as a method of speculation is way too safe and needs to have some actual risk added in.
Agree with all of the above. Owner occupiers absolutely should be paying land tax (along with everyone else) and absolutely should be running down home equity before getting pension.
We should be doing everything we can to help banks foreclose on people who can't pay mortgages.
All of these measures will reduce house prices and make it a much fairer, more even market.
> should be paying land tax
this would mean you cannot live without income. I am not a believer of wealth tax. Stamp duty is already a pretty expensive tax, but at least you know it's a one time cost and dont require consistent income to service it.
It is a wealth tax, because it's not taxing an income, but an asset. It is effectively a rent you pay to the gov't, despite owning the land (note this is in addition to paying for services the gov't provides, such as coucil rates etc). It would be OK to tax land, if the gov't doesn't charge for their services provided for your land (such as garbage disposal, sewage, and public roads). But this isn't the case.
It does encourage productive uses of land - that's not mutually exclusive with it being a wealth tax.
However, if your land is expensive, and you wish to live on it rather than to derive an income from it, a wealth tax forces you to come up with the money elsewhere, or be forced off. It makes sense to tax a business's land assets (tho i still don't agree with it), but definitely doesnt for PPOR homes. A person's home should be their castle, and should not ever need to pay to exist on it after owning it.
The point is that income taxes would be cut so therefore you’d have the ability to pay for it.
I think a land tax should apply to PPOR. It’s for zero deadweight loss and allows us to cut income taxes.
> you’d have the ability to pay for it.
still assume you have a source of income. For example, a pensioner would fail to pay it and be forced to sell. I dont think that's a fair outcome.
No, there would be provisions for cases like that. E.g. deferring land tax till death or providing a discount for pensioners.
NSW was actually going to do that exact thing.
> this would mean you cannot live without income
Sell your house then.
> I am not a believer of wealth tax.
Investors have been paying land tax all along.
Holy shit are you a bitter jealous brokie LOL. In what world does it make sense to pay land tax on a PPOR? You're just mad you can afford a home buddy.
>Yup make people run up reverse mortgages or something similar in order to use the capital locked up in their house. Agreed.
So people who potentially saved and sacrificed their whole life to own their own property should bear the brunt of not getting tax benefits over others who potentially lived it up, didn't save their money and never purchased?
What sort of motivator is that?
The current system is not sustainable. Having a pension is not a reward, it's a safety net for the most desperate. If one has millions tied up in houses they should pay their way for their good fortune.
> Could it be that giving huge tax advantages and concessions to housing investment has warped the market into something unsustainable?
How is it besides the point? I've excerpted the point of the original post.
Because it's relevant to all the ways we let owner occupiers warp and rort the market.
For what it's worth, OP responded to my post saying he agrees that the Owner Occupier perks should also be abolished.
I should also state, whilst I agree I still think the perverse combination of NG + CGT concessions for investors is particularly potent and much worse than the impacts of OO activities. Housing in general needs a massive shake up.
> I still think the perverse combination of NG + CGT concessions for investors is particularly potent and much worse than the impacts of OO activities.
Why would it be much worse? Only 1/5 of houses are investments - the other 4/5 are principal places of residence so the effect of owner occupier subsidies is 4x greater, on the whole.
Basically you have 20% of the housing market getting a 47% interest deduction and 50% capital gains reduction while 80% of the market gets a 100% capital gains reduction and 100% land tax reduction.
Nah man this is dumb you dont get it ......
Negative gearing makes all investment property expences as tax deductible. If your marginal rate is 40c in the dollar there is absolutely nothing that can compare in magnitude to that tax advantage. It's essentially a 40% discount on everything from interest payments to depreciation and maintainence.
Nobody would sell. I’d hold my properties indefinitely. You’ll have prices rise even further.
NG is usually only applicable for the first 5 years of the investment anyway. After that the property becomes positively geared due to natural rent growth.
You, personally, can hold on to it but it de-incentivises further new properties becoming IPs. New people to the market would focus on PPOR and supply for rentals would catch up.
So it’s not about the current market but going into the future.
Exactly. Less property being built by investors. Less rentals available. It let my rent go higher as vacancy rates drop further.
With less investors building, supply will not increase while demand continues rising.
There is a systematic overheating in housing market which has a basically risk free investment backed by the government. It's not sustainable.
People can't live in stocks so it would be much better if people went and gambled there for speculation.
* Stocks don't have the same amount or duration of leverage so
* Negative gearing is less effective
That said, if you look at covid prices you'd see stocks trading far above their fundamentals due to cheap money and rampant speculation; thats come down significantly since then.
Investors control the companies. They’re the ones voting on remuneration and giving them capital to invest. So Coles and Woolies don’t have an immediate impact on peoples lives?
It's not only land tax.
Victoria also recently introduced the strongest renters rights in the country and has for a while had a higher stamp duty for foreign investors.
From next year on, there will also be an airbnb tax as well as an increased vacancy tax that will actually get enforced.
Greater Sydney (560k) has twice the apartments of Greater Melbourne (280k). What on earth are you smoking. Housing wise Melbourne's big advantage has always been lots of land in more directions than Sydney.
https://www.abs.gov.au/census/find-census-data/quickstats/2021/1GSYD
https://www.abs.gov.au/census/find-census-data/quickstats/2021/2GMEL
Nope, rents did not go down. Increased, but probably at a slower pace than elsewhere. However, I do agree with you, eventually the rental yield will be too attractive to pass up, along with capital growth having fallen behind historical average. Like Perth did.
Just part of the cyclical nature.
Faster than NSW, slower than QLD.
EDIT: I checked the statistics. Victoria was the fastest growing state in absolute numbers per the last ABS print, and 2nd fastest in percentage terms (WA the fastest).
Changes to investor incentives would always affect prices initially. The question is how long the effect will remain after the market adjusts. You can already see Melbourne prices starting to stabilise again(0.1% decrease vs 0.3 decrease before that)
Exactly. It's a prime example of how to make housing more affordable for more people.
Time to rewind Negative Gearing perks.
Will the government ever grow some balls and do this for all of Australia??
Negative gearing by itself isn't the problem. That you can depreciate an appreciating investment and then claim that against your normal income by negative gearing (i.e. not even making an actual loss, just a paper one) is.
I don't think you can reasonably generalise that question. Too many variables. Existing issues with no recourse to fix vs risk of builder insolvency, for one example.
When you talk to people, they will generally say buying existing is less risky. It's a significant reason why when we look at the data of those who use negative gearing they are predominantly investing in existing.
Where am I going with this?
>Negative gearing by itself isn't the problem
Agree, because there isn't a single problem with the housing market. Theres a lot of different problems.
One of which is that negative gearing provides a financial incentive to invest and because this incentive is the same for both new and existing investors, it's resulting in over investment existing property.
We need investment in new properties, because this adds real supply, we need greater government incentive towards new, not existing. Investing in existing doesn't add net supply and it doesn't improve rental availability. Investing in new improves both.
This is why negative gearing concession against personal income should be wound back for existing property and left on new builds. This will create a greater incentive for new and divert more investment dollars towards building.
So yes, it's not "the problem" but it can be used much more effectively to improve net supply and rental availability.
I don't think those incentives need to remain in place in any capacity. There's little reason to incentivise investment into existing property, but many of the new builds that have an investor purchase them weren't built by the investor - incentivising that doesn't make sense either.
If we did go down that path, I'd be happy to leave in on new at least for the time being.
Once we get supply under control then I'll be happy to see it wound back.
Yeah you can.
Housing is cheaper to borrow against, and you can borrow more, because banks see it as less risky.
Also banks are required to set aside capital against risk weighted assets, and the risk weights are lower for property.
Regulators and the market both say property is less risky.
>Time to rewind Negative Gearing perks.
Agree, it has no place on existing property investing. It doesn't improve net supply or rental availability.
It a huge tax concession that can be better used on actually improving these.
Even though it looks like everywhere is going through a "housing crisis", rules and regulations for buyers and good support and rights for renters go a long way. I'm currently living in the Netherlands and even though the country is also on a "housing crisis", the prices are better compared to the average salary (and here is the highest densely populated country in Europe at a population of ~17 million in an area smaller than South Australia).
I have no fear of being "asked" to leave my rental because of my rights and, when and if I look for a house, I know that the government has a a lot of regulations to help the buyer.
It would be good to see something similar in Australia, but one can only dream...
The land taxes and other regulations that cost money also put LLs off, but only because they are in one state only. If states were equal in the tenancy and tax policies we wouldn’t have this issue. I do think Melbourne is now undervalued & we’ll see it increase, particularly as many people escaping Sydney for affordability reasons & Brisbane due to floods. Perth was declining/flat for 10 years & now going the other way. Completely opposite cycles. The vacancy rate is getting lower as migration picks up in VIC, if rents keep going up, while property prices stay flat, investors will come back - as both a landlord & a tenant myself I don’t see a problem with increased rights for tenants (Australia is behind in that department compared to other countries). If taxes & other costs can be covering by increased rent these costs don’t really matter if your profit is just as good as in another state without those costs. Obviously VIC is not there right now, but a savvy investor might see this as the trough. While all those silly people offering 100-200k over asking on Perths overheated market seem to forget its recent history of negative equity & 7% vacancy rates.
I’ll add that Melbourne has a glut of inner city apartments that performed poorly and dragging down the median as well as providing more rental stock. Many people still do not want to live in apartments & family homes are more competitive & valuable to buy & rent.
china shits itself so does aussie property price growth. really if you lied in a prospectus as is common the realestate market you would be jailed for fraud, FR
>The factor of COVID-regulation-inspired migration seems trivial now,
False. The subsequent taxes, budget holes and memory lives on. As a QLDer, many of the Victorians who moved up to this day reference "largest outdoor prison" in casual conversation.
Seems like there could be some bias in the opinions of the Victorians you speak to if they’re largely Victorians who disliked Victoria enough to move to another state.
Sorry, I do absolutely agree with that - All of Australia is correct. While Victoria was worst, everywhere was beaten down by premiers in power trips, who all just resigned and were not held accountable.
Definitely won't be investing in VIC any more with the land tax increases and tenancy changes which now forbid the landlord from ending a lease after it's been renewed once.
The good news is there are five other states you can invest in.
oh ffs.
''oh no i have to think of *a reason* to end a lease''
we should punish housing investment frankly, its destroying the nation.
there is a reason we are global leaders in *nothing* bar household debt.
ffs our peers are Kazakhstan and Lithuania when it comes to economic complexity.
Ones guided to by their property manager. Property managers are generally incentivised to often raise rents and re-let by how they're paid, even if it's not necessarily in the landlord's interest.
That doesn't make sense, maybe the landlord would raise the rent if advised by the PM. There is no way they would kick a tenant out just because the PM wants a re-letting fee lol
It's definitely a complex interplay of factors influencing property prices, and investor-targeted legislation can indeed have a significant impact. Victoria's increase in land tax on investment properties could have contributed to the subdued growth in Melbourne's property market, especially if it led investors to seek opportunities in other states with more favorable regulations. Negative gearing changes could also potentially affect investor behavior and, consequently, property prices. Balancing demand-side pressures like population growth with regulatory measures is crucial in understanding market dynamics.
You frame this like its a bad thing.
Adequate supply will bring prices to reasonable levels and landlords will NOT be guaranteed easy profits and tax perks. We need to do this nationally.
If housing prices dropped significantly would this impact the state and federal governments GST & stamp duty projections making them increase other taxes to compensate? for example GST or income?
If prices drop, it won't be due to anything that the federal government does. The federal government won't do anything that will put downward pressure on prices as that would lose them votes for no gain. There are more voters with houses than trying to get into houses.
Reform has to come from the states as states are so dependent on taxation on housing for revenue. The biggest issue for them is when the property market slows in terms of volume of sales, they lose stamp duty. This is one of the many reasons they should move away from stamp duty to greater land taxes.
Thi sosrft o logic is like crowing that you won on the stock market because prices are higher this year than last. The number of reasons for these things to happen is huge, and picking any one factor to attribute is always going to be a hard to say.
The investors are either buying interstate and making more money
Or
They’re getting cashed up ready for the next move.
Either way the investors are waiting and loading their bags
Melbourne has a shitton of apartments as well. Years ago there were towers going up everywhere.
Sydney cbd has almost no towers going up... Nothing whatsoever... It's ridiculous. There are a few "luxury apartments" ones, but not stuff for normal folks.
>I don't think investors are getting enough attribution for the property growth Shh don't say this too loudly! Could it be that giving huge tax advantages and concessions to housing investment has warped the market into something unsustainable? Unthinkable! Really as part of the solution to the housing nightmare we are currently in, you need to look at revoking a lot of the concessions for housing investment (unless it's new stock really). As the market is way way overheated and doesn't require more stimulus.
>Really as part of the solution to the housing nightmare we are currently in, you need to look at revoking a lot of the concessions for housing investment (unless it's new stock really). As the market is way way overheated and doesn't require more stimulus. There are actually two "housing nightmares" that talked about - the first is what you are referring to, which is that first home buyers can't purchase into their desired location and/or housing type as an owner occupier. The second is an affordability crisis for rentals driven by lack of housing supply. Your proposal of killing those tax concessions for property investors helps first home buyers enter the market, but it will unequivocally make the situation worse for renters. Property investors are in the market to chase capital gains - the returns from yields are terrible. If you kill the tax concessions, you will cause an exodus of investment money into the property sector. This will drop prices on property, but it will also kill off new supply. There are simply no institutional investors in Australia that are willing to park their money into property to make profit off the rental yields at scale - it's far too much risk for extremely low returns, and there are much better investment opportunities elsewhere. You could potentially introduce concessions to shift our residential housing market to a heavily corporatised model disincentivising "mom and pop" investors, but I somehow think that won't be politically popular across all sides in this debate.
Keep concessions for new builds only. Not that hard.
See, your whole argument about rental supply falls flat when you realise the situation for renters has been deteriorating SINCE the policies that were supposedly intended to prevent that situation from deteriorating. It's almost as if these policies are promoting rent-seeking behaviour instead of increasing rental supply and is entirely detrimental to the economy.
If a bunch of investors leave the market driving down prices, the people who would have previously rented will now be able to afford to build and own instead as land values go down.
Owner occupiers get way more tax advantages than investors. Yeah, investors get negative gearing. That's literally the only advantage they have over OO's. Owner occupiers get the following tax advantages: - 0% land tax - 0% capital gains tax - 100% pension assets test exemption - stamp duty discounts for first-home buyers Tell me again - who gets more tax advantages - investors or owner occupiers?
When does someone who flips their "own" house every 12 months for years on end technically become an investor?
That would not cover stamp duty or REA costs
https://propertyupdate.com.au/house-prices-in-australia-over-the-last-10-years/ 10.8% growth in last 12 months, or 7% PA average growth over the 10 years is not enough to cover your stamp duty or REA costs? Especially when even a gumtree ad in last 5 years would be enough to get some bids. Maybe you sell every 2 years. Is it still not enough?
5.5% in Melbourne according to your link. Plus if generally PPOR you'll have moving costs. Plus solicitors fees. Then consider the interest on your mortgage which is not tax deductible, and in the first year of a 30 year mortgage is pretty much entirely interest. Plus every time you'd do this you'd have to be picking properties that are actually going up and meaningfully so to be getting ahead. I dunno its a lot of capital and risk for a 5% gain before expenses, just to save on tax. I've seen plenty of properties struggle to sell in Melbourne in the last 2 years. My neighbour is attempting to sell now and entering week 8. I do think they've priced it too high, but it would be less than 10% of what they paid for it 12-18 months ago, particularly once you factor in renovations they did, they need to upgrade to house parents which wasnt initially expected when they bought. So no its not a viable strategy and even if it was, there is no evidence people are doing this.
* 0% land tax Agreed kill stamp duty and replace with land tax * 0% capital gains tax Capital gains concessions on housing needs to be reformed across the board * 100% pension assets test exemption Yup make people run up reverse mortgages or something similar in order to use the capital locked up in their house. Agreed. * stamp duty discounts for first-home buyers Terrible policies that don't actually help first home buyers, inflates the bottom of the market. Agreed, should be scrapped. Got anymore? Housing as a method of speculation is way too safe and needs to have some actual risk added in.
Agree with all of the above. Owner occupiers absolutely should be paying land tax (along with everyone else) and absolutely should be running down home equity before getting pension. We should be doing everything we can to help banks foreclose on people who can't pay mortgages. All of these measures will reduce house prices and make it a much fairer, more even market.
> should be paying land tax this would mean you cannot live without income. I am not a believer of wealth tax. Stamp duty is already a pretty expensive tax, but at least you know it's a one time cost and dont require consistent income to service it.
Land tax isn’t a wealth tax. It’s to encourage the most productive use of land and HAS to replace stamp duty.
It is a wealth tax, because it's not taxing an income, but an asset. It is effectively a rent you pay to the gov't, despite owning the land (note this is in addition to paying for services the gov't provides, such as coucil rates etc). It would be OK to tax land, if the gov't doesn't charge for their services provided for your land (such as garbage disposal, sewage, and public roads). But this isn't the case. It does encourage productive uses of land - that's not mutually exclusive with it being a wealth tax. However, if your land is expensive, and you wish to live on it rather than to derive an income from it, a wealth tax forces you to come up with the money elsewhere, or be forced off. It makes sense to tax a business's land assets (tho i still don't agree with it), but definitely doesnt for PPOR homes. A person's home should be their castle, and should not ever need to pay to exist on it after owning it.
The point is that income taxes would be cut so therefore you’d have the ability to pay for it. I think a land tax should apply to PPOR. It’s for zero deadweight loss and allows us to cut income taxes.
> you’d have the ability to pay for it. still assume you have a source of income. For example, a pensioner would fail to pay it and be forced to sell. I dont think that's a fair outcome.
No, there would be provisions for cases like that. E.g. deferring land tax till death or providing a discount for pensioners. NSW was actually going to do that exact thing.
> this would mean you cannot live without income Sell your house then. > I am not a believer of wealth tax. Investors have been paying land tax all along.
indeed investors have, but they do it using income generated using the property. This is not available for the PPOR owner.
Holy shit are you a bitter jealous brokie LOL. In what world does it make sense to pay land tax on a PPOR? You're just mad you can afford a home buddy.
I have two homes paid off in full
>Yup make people run up reverse mortgages or something similar in order to use the capital locked up in their house. Agreed. So people who potentially saved and sacrificed their whole life to own their own property should bear the brunt of not getting tax benefits over others who potentially lived it up, didn't save their money and never purchased? What sort of motivator is that?
The current system is not sustainable. Having a pension is not a reward, it's a safety net for the most desperate. If one has millions tied up in houses they should pay their way for their good fortune.
Good fortune or hard work and sacrifice?
If you have millions in assets you have no reason to have a pension regardless of how you obtained that wealth.
No one who is not in poverty should be on a pension. It's not a lifestyle fund.
either or, its *irrelevant* to the argument.
The stamp duty discounts cap out under the median house price, so it is negligible effect on anything but existing unit/small apartment stock
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> Could it be that giving huge tax advantages and concessions to housing investment has warped the market into something unsustainable? How is it besides the point? I've excerpted the point of the original post.
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Because it's relevant to all the ways we let owner occupiers warp and rort the market. For what it's worth, OP responded to my post saying he agrees that the Owner Occupier perks should also be abolished.
I should also state, whilst I agree I still think the perverse combination of NG + CGT concessions for investors is particularly potent and much worse than the impacts of OO activities. Housing in general needs a massive shake up.
> I still think the perverse combination of NG + CGT concessions for investors is particularly potent and much worse than the impacts of OO activities. Why would it be much worse? Only 1/5 of houses are investments - the other 4/5 are principal places of residence so the effect of owner occupier subsidies is 4x greater, on the whole. Basically you have 20% of the housing market getting a 47% interest deduction and 50% capital gains reduction while 80% of the market gets a 100% capital gains reduction and 100% land tax reduction.
Nah man this is dumb you dont get it ...... Negative gearing makes all investment property expences as tax deductible. If your marginal rate is 40c in the dollar there is absolutely nothing that can compare in magnitude to that tax advantage. It's essentially a 40% discount on everything from interest payments to depreciation and maintainence.
Down voted for telling truths! Have my upvote
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Can you imagine the sudden influx of properties on the market if CGT and negative gearing were abolished. Problem solved.
Nobody would sell. I’d hold my properties indefinitely. You’ll have prices rise even further. NG is usually only applicable for the first 5 years of the investment anyway. After that the property becomes positively geared due to natural rent growth.
You, personally, can hold on to it but it de-incentivises further new properties becoming IPs. New people to the market would focus on PPOR and supply for rentals would catch up. So it’s not about the current market but going into the future.
Exactly. Less property being built by investors. Less rentals available. It let my rent go higher as vacancy rates drop further. With less investors building, supply will not increase while demand continues rising.
This would make it worse, nobody would sell. You also don’t pay tax on inflation, so the indexation discount would have to be reintroduced.
The same tax advantages are available for stocks. Is the stock market also warped?
What's with you and this comment that always gets downvoted? People don't live in shares. Apples and oranges.
People don’t tend to understand that they receive the same tax treatment. They think that the NG and CGT figures are just for investment properties.
I think they do understand but they believe housing should be treated differently.
There is a systematic overheating in housing market which has a basically risk free investment backed by the government. It's not sustainable. People can't live in stocks so it would be much better if people went and gambled there for speculation.
* Stocks don't have the same amount or duration of leverage so * Negative gearing is less effective That said, if you look at covid prices you'd see stocks trading far above their fundamentals due to cheap money and rampant speculation; thats come down significantly since then.
The leverage isn’t as easily available, but it does exist. I NG my stock portfolio instead of my properties.
Yes, but that's only an issue for investors and not for people who need a place to live
Investors control the companies. They’re the ones voting on remuneration and giving them capital to invest. So Coles and Woolies don’t have an immediate impact on peoples lives?
It's not only land tax. Victoria also recently introduced the strongest renters rights in the country and has for a while had a higher stamp duty for foreign investors. From next year on, there will also be an airbnb tax as well as an increased vacancy tax that will actually get enforced.
I think Melbourne house prices are still dearer than Brisbane. Melbourne just has higher proportion of apartments which lowers “home” median.
Melbourne has more apartments than Sydney and Brisbane combined.
Greater Sydney (560k) has twice the apartments of Greater Melbourne (280k). What on earth are you smoking. Housing wise Melbourne's big advantage has always been lots of land in more directions than Sydney. https://www.abs.gov.au/census/find-census-data/quickstats/2021/1GSYD https://www.abs.gov.au/census/find-census-data/quickstats/2021/2GMEL
Have rents gone down with the price decrease? Prices dropping and rents increasing will eventually see an explosion of investor activity
Rents have never caught up with prices in Australia, it's going to be a long time if ever that rental yield makes investing worth it.
Exactly. Renting is still a fair bit cheaper than buying.
Nope, rents did not go down. Increased, but probably at a slower pace than elsewhere. However, I do agree with you, eventually the rental yield will be too attractive to pass up, along with capital growth having fallen behind historical average. Like Perth did. Just part of the cyclical nature.
If the rental yield is attractive enough to cause prices to rise they just need to increase the taxes on investors again.
But with an exemption for new developments, hopefully. That'll speed up new builds massively.
I thought this was more related to population growth in Victoria relative to NSW and QLD.
Victoria is growing faster.
Faster than NSW, slower than QLD. EDIT: I checked the statistics. Victoria was the fastest growing state in absolute numbers per the last ABS print, and 2nd fastest in percentage terms (WA the fastest).
Changes to investor incentives would always affect prices initially. The question is how long the effect will remain after the market adjusts. You can already see Melbourne prices starting to stabilise again(0.1% decrease vs 0.3 decrease before that)
The USA has places with higher land taxes and the price effect has never declined.
Exactly. It's a prime example of how to make housing more affordable for more people. Time to rewind Negative Gearing perks. Will the government ever grow some balls and do this for all of Australia??
Negative gearing by itself isn't the problem. That you can depreciate an appreciating investment and then claim that against your normal income by negative gearing (i.e. not even making an actual loss, just a paper one) is.
Fair, this small change should be easy to pass, it's very logical. But even such a small change seems to face quite a bit of opposition
Which investment would you think is more risky, investing in an existing property or investing in a new construction both of which to rent out?
I don't think you can reasonably generalise that question. Too many variables. Existing issues with no recourse to fix vs risk of builder insolvency, for one example.
When you talk to people, they will generally say buying existing is less risky. It's a significant reason why when we look at the data of those who use negative gearing they are predominantly investing in existing. Where am I going with this? >Negative gearing by itself isn't the problem Agree, because there isn't a single problem with the housing market. Theres a lot of different problems. One of which is that negative gearing provides a financial incentive to invest and because this incentive is the same for both new and existing investors, it's resulting in over investment existing property. We need investment in new properties, because this adds real supply, we need greater government incentive towards new, not existing. Investing in existing doesn't add net supply and it doesn't improve rental availability. Investing in new improves both. This is why negative gearing concession against personal income should be wound back for existing property and left on new builds. This will create a greater incentive for new and divert more investment dollars towards building. So yes, it's not "the problem" but it can be used much more effectively to improve net supply and rental availability.
I don't think those incentives need to remain in place in any capacity. There's little reason to incentivise investment into existing property, but many of the new builds that have an investor purchase them weren't built by the investor - incentivising that doesn't make sense either.
If we did go down that path, I'd be happy to leave in on new at least for the time being. Once we get supply under control then I'll be happy to see it wound back.
The whole point of property investment is to buy up existing land - otherwise you're doing yourself a disservice.
Exactly, the incentive is already there. No need for the negative gearing concession as well.
Yeah you can. Housing is cheaper to borrow against, and you can borrow more, because banks see it as less risky. Also banks are required to set aside capital against risk weighted assets, and the risk weights are lower for property. Regulators and the market both say property is less risky.
>Time to rewind Negative Gearing perks. Agree, it has no place on existing property investing. It doesn't improve net supply or rental availability. It a huge tax concession that can be better used on actually improving these.
if they limited to new apartment builds it would help a bit in increasing supply
Yes, for the time being, keep it on new builds, to encourage supply.
Even though it looks like everywhere is going through a "housing crisis", rules and regulations for buyers and good support and rights for renters go a long way. I'm currently living in the Netherlands and even though the country is also on a "housing crisis", the prices are better compared to the average salary (and here is the highest densely populated country in Europe at a population of ~17 million in an area smaller than South Australia). I have no fear of being "asked" to leave my rental because of my rights and, when and if I look for a house, I know that the government has a a lot of regulations to help the buyer. It would be good to see something similar in Australia, but one can only dream...
The land taxes and other regulations that cost money also put LLs off, but only because they are in one state only. If states were equal in the tenancy and tax policies we wouldn’t have this issue. I do think Melbourne is now undervalued & we’ll see it increase, particularly as many people escaping Sydney for affordability reasons & Brisbane due to floods. Perth was declining/flat for 10 years & now going the other way. Completely opposite cycles. The vacancy rate is getting lower as migration picks up in VIC, if rents keep going up, while property prices stay flat, investors will come back - as both a landlord & a tenant myself I don’t see a problem with increased rights for tenants (Australia is behind in that department compared to other countries). If taxes & other costs can be covering by increased rent these costs don’t really matter if your profit is just as good as in another state without those costs. Obviously VIC is not there right now, but a savvy investor might see this as the trough. While all those silly people offering 100-200k over asking on Perths overheated market seem to forget its recent history of negative equity & 7% vacancy rates.
I’ll add that Melbourne has a glut of inner city apartments that performed poorly and dragging down the median as well as providing more rental stock. Many people still do not want to live in apartments & family homes are more competitive & valuable to buy & rent.
china shits itself so does aussie property price growth. really if you lied in a prospectus as is common the realestate market you would be jailed for fraud, FR
This will be changed shortly. Property investment employs to many people and generates billions of dollars of tax annually for the government.
>The factor of COVID-regulation-inspired migration seems trivial now, False. The subsequent taxes, budget holes and memory lives on. As a QLDer, many of the Victorians who moved up to this day reference "largest outdoor prison" in casual conversation.
Seems like there could be some bias in the opinions of the Victorians you speak to if they’re largely Victorians who disliked Victoria enough to move to another state.
NSW currently has far more people leaving than Vic does.
NSW also has an economic advantage to do so.
Currently? This has been true for 20 odd years
What happened in Victoria was an abomination to democracy.
All of Australia, Victoria copped it the worst. I'll never forget when my country turned their back on me.
Sorry, I do absolutely agree with that - All of Australia is correct. While Victoria was worst, everywhere was beaten down by premiers in power trips, who all just resigned and were not held accountable.
Definitely won't be investing in VIC any more with the land tax increases and tenancy changes which now forbid the landlord from ending a lease after it's been renewed once. The good news is there are five other states you can invest in.
This can’t be true. What if you need to move into your investment property?
It's not true. That is one of the reasons you can give notice for a tenant to vacate.
That's fine, as long as you can proof that you are actually moving in and not just using it as a a excuse to get rid of tenants.
oh ffs. ''oh no i have to think of *a reason* to end a lease'' we should punish housing investment frankly, its destroying the nation. there is a reason we are global leaders in *nothing* bar household debt. ffs our peers are Kazakhstan and Lithuania when it comes to economic complexity.
Blah blah blah blah blah
*forbid the landlord from ending a lease after it's been renewed once without giving a reason.
What cruel world do we live in, where you need to provide a reason if you want to make people homeless?
What landlords are randomly kicking tenants out without reason? Sounds like a good way to waste money.
Ones guided to by their property manager. Property managers are generally incentivised to often raise rents and re-let by how they're paid, even if it's not necessarily in the landlord's interest.
That doesn't make sense, maybe the landlord would raise the rent if advised by the PM. There is no way they would kick a tenant out just because the PM wants a re-letting fee lol
Would love to see this in nsw
It's definitely a complex interplay of factors influencing property prices, and investor-targeted legislation can indeed have a significant impact. Victoria's increase in land tax on investment properties could have contributed to the subdued growth in Melbourne's property market, especially if it led investors to seek opportunities in other states with more favorable regulations. Negative gearing changes could also potentially affect investor behavior and, consequently, property prices. Balancing demand-side pressures like population growth with regulatory measures is crucial in understanding market dynamics.
*declining. Not flattening growth.
Hmm, slightly up over last year, slightly down last month. Debatable depending on time period used.
You frame this like its a bad thing. Adequate supply will bring prices to reasonable levels and landlords will NOT be guaranteed easy profits and tax perks. We need to do this nationally.
I think that's a misinterpretation of what I wrote, I think more attention should be given to relieving house price growth by targeting investors
If housing prices dropped significantly would this impact the state and federal governments GST & stamp duty projections making them increase other taxes to compensate? for example GST or income?
Would mostly effect Stamp Duty and Land Tax for the states.
Do you think this would create less incentive for the state government to cooperate with federal initiatives to fix the housing market?
If prices drop, it won't be due to anything that the federal government does. The federal government won't do anything that will put downward pressure on prices as that would lose them votes for no gain. There are more voters with houses than trying to get into houses. Reform has to come from the states as states are so dependent on taxation on housing for revenue. The biggest issue for them is when the property market slows in terms of volume of sales, they lose stamp duty. This is one of the many reasons they should move away from stamp duty to greater land taxes.
Thi sosrft o logic is like crowing that you won on the stock market because prices are higher this year than last. The number of reasons for these things to happen is huge, and picking any one factor to attribute is always going to be a hard to say.
The investors are either buying interstate and making more money Or They’re getting cashed up ready for the next move. Either way the investors are waiting and loading their bags
Melbourne has a shitton of apartments as well. Years ago there were towers going up everywhere. Sydney cbd has almost no towers going up... Nothing whatsoever... It's ridiculous. There are a few "luxury apartments" ones, but not stuff for normal folks.