Australian Housing Affordability Discussion

[CaptJCool]

Ah Sydney where 8,000 old Strata corps are slated for potential demolition, where the Castle Hill scenario is also happening on large allotments on the fringe. Some based on the Urban Activation Plan which is about density on rail lines ...Urban Taskforce ideas.... Whether the FIRB initiatives will dampen pricing I'm not sure but probably not, if anything it goes the way of London, Tokyo, NEW York, San Francisco luxury suburbs. $1.6 million is too little if the aggregated 20 x 700 square metre blocks will reap $4-6 million per owner.
Empty nesters baby boomers reaping endless cash. LMAO. NOW even in Sydney suburbs have quite different levels of home ownership. Some where there's huge amounts (45%-60%) of outright ownership where there's 70-80% houses in the suburb.... Which opens the chance for massive subdivision.

 

[Deleted member]

Or Margaret river and buy a vineyard

Edit: this was supposed to attach to post 258!

 

[andye]

The UK is going to phase in a massive change to property investment from 2017. In essence rental income will be taxed at full marginal rate (ie 45% for most) while only being able to claim a basic 20% relief for mortgage interest. Imagine what that cat would do to Australian pigeons!

 

[JohnK]

The UK is going to phase in a massive change to property investment from 2017. In essence rental income will be taxed at full marginal rate (ie 45% for most) while only being able to claim a basic 20% relief for mortgage interest. Imagine what that cat would do to Australian pigeons!

Greed! Total and utter stupidity.

I can totally understand how some people do not declare rental income.

 

[whatmeworry]

I wonder if I count as a mortgage owner, owing about $200 for the past few years. I'd pay it off but then I'd have to take out another loan if I needed money. Redraw is very handy but you have to be disciplined.

I would dread trying to buy now. What I can't understand in my own suburb is houses that appear to be just about the same go for $1.1 to $1.6 million - can't quite work out the reasons for the difference. Considering the same houses would have traded for $700K-900K two years ago I really can't understand how they've become so much more valuable.

If we sold we'd have to move to Brisbane or Adelaide to reap the benefit.

Friend is a Real Estate agent in the Carlton area, told me of one Townhouse home sold for 2.1 mil, 6 months later the Townhouse next door which was exactly the in terms of floor plan, interiors and exteriors sold for 2.7 mil. Even he thinks the MEL and SYD is ridiculous at the moment.

 

[alieninperth]

Greed! Total and utter stupidity.

I can totally understand how some people do not declare rental income.

I dont understand how this is greed. It's income being taxed in the same way that ordinary income is taxed. Revenue gained from an asset is still income whether it is a widget, a property, shares, a machine, or a person.

I don't know the full details of the new UK seem but it seems quite sensible really.

 

[Foreigner]

Should one consider mix of variable and fix interest rate on housing loan? Currently 3 year fixed is available for just under 4% p.a.

 

[Warks]

Our home loan just rolled over for another 3 years and was set at 4.44% by default. As we've got an almost negligible balance I wasn't too concerned but interesting to see lower than 4% being offered. Hard to see how much lower it could go. If you could fix for ten years at 4%...


We got a valuation of $1.25 million which is pretty much in line with expectations. I was thinking of selling up and moving down the south coast of NSW and buying an apartment near the beach for $250K and spend the million dollars left over for a few years... but of course there's a small matter of children's education for a few years. And a million dollars is not what it used to be.

 

[Foreigner]

I don't know about fixing for 10 year term or indeed if banks do offer anything over 5 years in fixed interest rate.

3 years is 3.99% whereas 5 years is 4.59%.

 

[JohnK]

I dont understand how this is greed. It's income being taxed in the same way that ordinary income is taxed. Revenue gained from an asset is still income whether it is a widget, a property, shares, a machine, or a person.

I don't know the full details of the new UK seem but it seems quite sensible really.

As I have said before taxing an asset without provision for every cost involved in maintaining that asset is stupidity.

Including negative gearing. Interest paid is a cost of maintaining the asset. If not for claiming tax loss in current year then at least a tax loss against future income.

 

[alieninperth]

As I have said before taxing an asset without provision for every cost involved in maintaining that asset is stupidity.

Including negative gearing. Interest paid is a cost of maintaining the asset. If not for claiming tax loss in current year then at least a tax loss against future income.

John,

I actually agree with the first part of your response. And this is true in both the Australian and UK systems, the costs of maintaining a property is deductible. By maintain, I mean major works, not cosmetics. Hot Water Systems, Heating/Cooling, Kitchens, bathrooms etc are all deductible here in Aus and for that matter in the UK.

The next point is where I disagree with you. Negative gearing and interest paid are not costs associated with maintaining a(n investment) property. Interest paid is the cost of purchasing the investment and negative gearing simply rewards/minimises the losses on, what is in real terms a bad investment, albeit in the short term.


Hi John K, I've re-read my post after I posted it and I can see how it may come across as rude. This was certainly not my intent, please accept my apologies if I have inadvertently caused offence.

 

[drron]

Interesting article in a newsletter today.SYDNEY HOUSING AFFORDABLE.
Of course if you are Chines and live in Beijing or Shanghai.

 

[Foreigner]

Interesting article in a newsletter today.SYDNEY HOUSING AFFORDABLE.
Of course if you are Chines and live in Beijing or Shanghai.

With exchange rate in favour of foreign money there's bound to be interest from overseas.

 

[drron]

With exchange rate in favour of foreign money there's bound to be interest from overseas.

Plus Sydney housing is considerably cheaper than Beijing or Shanghai.On top of that Sydney has something that neither Beijing or Shanghai has-blue sky.

 

[JohnK]

The next point is where I disagree with you. Negative gearing and interest paid are not costs associated with maintaining a(n investment) property. Interest paid is the cost of purchasing the investment and negative gearing simply rewards/minimises the losses on, what is in real terms a bad investment, albeit in the short term.

Hi John K, I've re-read my post after I posted it and I can see how it may come across as rude. This was certainly not my intent, please accept my apologies if I have inadvertently caused offence.

Don't see your post as rude.

I guess we'll have to disagree.

If I borrow $500,000 to purchase an apartment that I rent out for say $400/week then as far as I am concerned the interest I pay needs to be considered as an expense when calculating what tax I need to pay. If I make a loss then I pay no tax that year and the loss carries forward until such time as the investment makes a profit.

Any other solution is just not on and for me would be a major deterrent in purchasing investments.

Too many bludgers have reaped way too many benefits in this country and we should be encouraging people to invest for their future instead of discouraging them. Let's just say that with a decent salary since compulsory superannuation was introduced in 1992 and I may have $200,000 in superannuation when I retire where as my personal investment portfolio is worth at least 5x that amount and that is something I have done on my own without one piece of advice from a financial planner/advisor.

 

[burmans]

I think the notion that if you are running a venture to make money then any expense of running that venture is tax deductable is well established. In this line, interest borrowed to set up that venture usually takes on the nature of the venture itself, i.e. if this really is a profit-making venture then interets on establishing and running the venture is tax deductable.

However the general principle only applies if you are doing this with a view to making a profit. As such "hobbies" which are not intended to make profit are not treated in the same was as ventures which are run with that intent. And I should not that it is intent that matters, e.g. plenty of businesses dont eventually make much money (or lose money) but they were setup with the intent of doing so.

But there are plenty of precedents over the years of ventures which clearly aren't intending to make money, hobby farms being a good example, the precedent here is clear, unless there is a clear intent to make a profit (positive income) these are not tax deductable.

And this is exactly the case with negative gearing. The whole word negative implies these are not setup to generate positive income, so there is actually plenty of precedent in out system of taxation to disalow these deductions (or perhaps more fairly to carry them forward until such times as they do generate positive income).

 

[andye]

The concept of negative gearing makes sense to me if CGT is applied at the same rate (as the tax relief claimed) when a profit is realised. Otherwise it is just a market distortion that favours property over investing in a small business say

 

[alieninperth]

Hi JohnK,

Glad you didn't tale offense, but I could see how it could be taken that, so I felt a pre-emptive apology was appropriate.

back to the topic at hand. If you are considering all costs associated with a property then you also need to consider all income associated with it. For your hypothetical investment property, if you are considering interest as tax deductable then you would also need to consider capital appreciation (or otherwise) for the same time period, not at point of sale. This would then give a true picture of how that asset performed over the period.

 

[badseed]

Had a call from the agent who sold us our house in inner-suburban Melbourne to myself and my wife-to-bed almost exactly 12 months ago.

We paid just over $1.2m, and now we've got a private bidder wanting to offer us $1.55m. Apparently they inspected the house but couldn't get the capital together at the time.

Decisions decisions.

 

[amaroo]

Had a call from the agent who sold us our house in inner-suburban Melbourne to myself and my wife-to-bed almost exactly 12 months ago.

We paid just over $1.2m, and now we've got a private bidder wanting to offer us $1.55m. Apparently they inspected the house but couldn't get the capital together at the time.

Decisions decisions.

It's a nice feeling! We had a similar offer (similar numbers) when we purchased a place 12 years ago (before we even settled) ... FYI, we didn't take it and have no regrets 12 years later