What's your prediction on the Australian Dollar?

[drsmithy]

The pillar thing I mentioned up stream...

The construction economy would only be "destroyed" if all current and planned construction was speculative, rather than a response to real demand. If there is real demand - ie: people actually need new houses - then the construction industry will continue.

Or are you arguing we should ignore the distortive effects of negative gearing tax policy and its cost on the public purse to keep people employed ? Doesn't sound very free market to me...

 

[MEL_Traveller]

All tax is state-sanctioned theft. We need to get government back to doing the minimum that the market won't - that means national security, immigration/border control, quarantine, police, and courts.

Scrap all welfare and the minimum wage, to be replaced by a negative income tax. Get the federal government out of health and education altogether. No more free schooling or medical care. Even Sweden charges the equivalent of A$30 to see a doctor or go to the hospital emergency room.

I would suggest spending some time in America to see the effects of low/no welfare, no health cover unless you are employed, 'minimum wage' of as little as $2-$3 an hour in some states (relying on tips) and 'minimum' government involvement.

Not a place I would like to replicate, much as I love the country and its citizens.

Yes there is Obamacare... now. But a friend of mine is on it... 'keep your doctor' it promised... but no, they had to move to another doctor. Had to go to hospital two months ago for pneumonia. A $5000 deductible. They don't have that money. What happens? Could go to a debt collector.

Looking at the debate just before Obamacare was introduced and some commentators were outraged that Obamacare would encourage the poor to go to hospital for treatment. (I say that nicely... in essence they were worried the poor would now flood hospitals for tax-payer funded treatment, and they didn't want their taxes to go on that.)

What sort of a society is that?

 

[amaroo]

The construction economy would only be "destroyed" if all current and planned construction was speculative, rather than a response to real demand. If there is real demand - ie: people actually need new houses - then the construction industry will continue.

Or are you arguing we should ignore the distortive effects of negative gearing tax policy to keep people employed ? Doesn't sound very free market to me...

Sorry - I thought I read you wanted property price to fall by 50+pc

 

[drsmithy]

What sort of a society is that?

Near as I can tell, one that most Australian voters are eager to replicate.

 

[drsmithy]

Sorry - I thought I read you wanted property price to fall by 50+pc

I believe what I actually said was:

Returns are only negative because of our property bubble. If property prices reverted to mean (ca. 50%+ drops), then rental returns would not be negative.

I am struggling to understand why anyone would try to argue that a system which encourages people to "invest" in an asset at a loss for the purposes of reducing income tax is at all sane, let alone desirable.

 

[amaroo]

I believe what I actually said was:

I am struggling to understand why anyone would try to argue that a system which encourages people to "invest" in an asset at a loss for the purposes of reducing income tax is at all sane, let alone desirable.

Take a look at the many graphs I've posted :idea: The government can't sustain any additional increase in welfare/SS. It's massively reliant on the private sector providing accommodation.

Investing in something that makes a return is always going to better than pushing more money down the feed trough. Once investors leave the market - the market will fall, construction will stop, unemployment will rise, government housing will be overwhelmed ... sounds like fun.

 

[JohnK]

I wonder if negative gearing and proposals for its abolition are that well understood. I think those advocating for its abolition are not proposing to remove deductions against the income generated by the investment, but instead are advocating that losses from the investment should no longer be able to be deducted from other sources of income.

One of the things I budgeted on with investment property was being able to offset the losses in the first few years.

It has been a long time since I purchased and the market has changed a lot but I lost something like $12,000 in first year, $8,000 in second year and so on but now the properties have been making a sizeable profit for a number of year and I pay income tax on the profit. It was good that I was able to get back income tax I paid from those losses early on. Otherwise it is not worth it.

I think the same sort of property now is worth 3-4 times more so the losses in the first few years are higher.

I am sort of on the fence with it. However one thing that could be examined is deductible items. For example travel expenses. Why should someone who lives in Sydney who chooses to invest on a property in Broome (or someone who lives overseas and owns rental properties in Australia) get deduction for travelling to their property to check on it? You can't claim deductions for travelling to (regular) place of employment - source of employment income.

I think that is a flaw in income tax rules.

I cannot get a job in Sydney. I have been able to get a job in Brisbane but I do not want to live in Brisbane. The commute and accommodation is costing me ~$25,000/year and I pay income tax. Why shouldn't I be able to claim my expenses and reduce income tax paid. Can companies claim tax deductions for costs incurred when they send staff to various offices around Australia? I know any number of AFFers who are doing great out of it. Why is my situation different?

 

[serfty]

If your investment rental property is not making a book loss then you are not trying ...

 

[drsmithy]

Take a look at the many graphs I've posted :idea: The government can't sustain any additional increase in welfare/SS. It's massively reliant on the private sector providing accommodation.

The cognitive dissonance of people who on the one hand argue welfare costs can't increase but on the other hand argue massive tax concessions should continue always staggers me.

Investing in something that makes a return is always going to better than pushing more money down the feed trough. Once investors leave the market - the market will fall, construction will stop, unemployment will rise, government housing will be overwhelmed ... sounds like fun.

So where do the people currently priced out of the market fit into your model ?

The argument that there will be demand for housing, and spare capacity to build said housing, but nobody actually doing it seems... Odd.

 

[drsmithy]

One of the things I budgeted on with investment property was being able to offset the losses in the first few years.

It has been a long time since I purchased and the market has changed a lot but I lost something like $12,000 in first year, $8,000 in second year and so on but now the properties have been making a sizeable profit for a number of year and I pay income tax on the profit. It was good that I was able to get back income tax I paid from those losses early on. Otherwise it is not worth it.

I think the same sort of property now is worth 3-4 times more so the losses in the first few years are higher.

An awesomely succinct demonstration of how broken the Australia property market is.

 

[amaroo]

The cognitive dissonance of people who on the one hand argue welfare costs can't increase but on the other hand argue massive tax concessions should continue always staggers me.

LOL, why don't we start by lifting the numbers that actually pay tax:idea:

Be careful what you wish for - I'm sure you'd be one of the first whinging about the rich living in homes (more than you do now) once the housing system collapses under the strain of public only investment.

 

[drsmithy]

LOL, why don't we start by lifting the numbers that actually pay tax:idea:

That would be ideal.

Be careful what you wish for - I'm sure you'd be one of the first whinging about the rich living in homes (more than you do now) once the housing system collapses under the strain of public only investment.

What an absurd straw man. Nobody has come within a bull's roar of suggesting housing be "public only investment".

 

[footy99]

An awesomely succinct demonstration of how broken the Australia property market is.

You might be right. It'll resolve itself when interest rates and subsequently the AUD head back up. Until then, we have to deal with it. If they keep going the other way, expect bigger extremes before reversion.

 

[amaroo]

That would be ideal.

What an absurd straw man argument. Nobody has come within a bull's roar of suggesting housing be "public only investment".

What do you think will happen if the Gov withdraws incentives to invest in housing

 

[Awesom Andy]

What do you think will happen if the Gov withdraws incentives to invest in housing

Probably nothing. The Chinese will keep buying anyway.

 

[drsmithy]

What do you think will happen if the Gov withdraws incentives to invest in housing

What do you think happens to houses when "investors" don't buy them ? That they disappear in puffs of smoke ?

 

[drsmithy]

You might be right. It'll resolve itself when interest rates and subsequently the AUD head back up. Until then, we have to deal with it. If they keep going the other way, expect bigger extremes before reversion.

I think rising unemployment will be what triggers it, personally.

Hope y'all are ready for a bank bailout (or more likely, Cyprus-esque bail-in) !

 

[drron]

I am in broad agreement with drsmithy.
The current negative gearing policy is not encouraging investment in new housing.There have been many studies that show this.
So you either limit negative gearing to new builds or get rid of it.
Getting rid of negative gearing is not going to exacerbate the rental crisis.Owner occupiers will buy the existing housing thereby diminishing the numbers seeking to rent.
Foreign buyers are not the major cause of increased housing prices with the exception of high end housing in Sydney and Melbourne.The real risk is that they often leave those properties empty so taking them out of available rental stock.

The real problem is that negative gearing directs investment funds into non productive assets and thereby reduces the funds available for productive investment that could increase employment opportunities.

 

[medhead]

What do you think will happen if the Gov withdraws incentives to invest in housing

Well you seem to think people will no longer need to live in a house. If negative gearing is reduced/removed people are still going to want housing. If prices go down more people might be able to afford their own home.

 

[medhead]

I cannot get a job in Sydney. I have been able to get a job in Brisbane but I do not want to live in Brisbane. The commute and accommodation is costing me ~$25,000/year and I pay income tax. Why shouldn't I be able to claim my expenses and reduce income tax paid. Can companies claim tax deductions for costs incurred when they send staff to various offices around Australia? I know any number of AFFers who are doing great out of it. Why is my situation different?

Well you can claim some of that travel, or even much of it. But we've discussed that in the past and you've rejected the idea.

But perhaps you could take a lead from Joe Hockey. He lives in an investment property owned by his wife when in Canberra. Perhaps a family member could buy an investment property in Brisbane that you could rent.

I'm certainly considering an investment property in Sydney.