I think it could work.


























If we lived inside a 500 watt vacuum cleaner.

log man said...
<snipo>

How about this..... The government removes housing as a form of investment by limiting the amount of housing anyone can own. OK, so you can own 2 houses a residence and a holiday house or farm or whatever and if you want to invest your money then invest in something meaningful like shares or whatever. I await my flogging!

I once mentioned to a colleague that I thought that they should remove negative gearing for existing houses, and he was completely aghast (what a word!) at the idea, obviously as he was heavily invested in this way. I can understand his point of view, as it is a very long term investment for some, and not fair to remove such a benefit at a moment's notice.

I think a Labor government went to remove it, or even removed it, and then changed their mind at the strong media response to it (not the supposed change in housing supply that was supposed to have followed this decision - it didn't).

I now suggest a different approach, that would not as obviously outrage my previous work colleague.

I suggest that the government give generous tax breaks to owner occupiers, that are at least equivalent to what a property investor can get. I think they actually do this in the USA.

Sound like a good idea? I think so, even though I also have an investment property. It would level the playing field and even though the prices might initially jump a little bit, with the tax benefits, they would actually be more affordable than they are now for owner occupiers.

Anyone that's an owner occupier and doesn't have an investment property think this is a bad idea?

stamp said...

FormulaNova said...



I suggest that the government give generous tax breaks to owner occupiers, that are at least equivalent to what a property investor can get.

It would level the playing field

isn't that what CGT is meant to do? isn't it designed to discourage property investors while rewarding owner occupiers when property is sold.

A lot of people only ever buy one house and never sell it at all, or sell it and buy another house with the money. There is no nett gain if they sell then buy another.

A property investor on the other hand can claim most of their costs, and then give a maximum of half of their profit to the government if they hold it for 12 (?) months, and they can still have their own house to live in.

At worst, property investors are at least better off. It certainly pushes up the prices though.

Hell, all I know is that a system that benefits the few at the expense of the others is a ****ed system.... get a better system

FormulaNova said...



I think a Labor government went to remove it, or even removed it, and then changed their mind at the strong media response to it (not the supposed change in housing supply that was supposed to have followed this decision - it didn't).

I vaguely recall some mutterings about this in some forum somewhere or other a while back - I can't remember if it was ever implemented but I seem to recall the idea tanking rather badly for some reason or other. Broke the system somehow or something.

^^^^

You can sure pick the young ones in the room!

Yes... pretty sure it was the Hawke Labor government in its early years. They scrapped the tax breaks then given to rental property investors. Rents skyrocketed as investors bailed out and there were very quickly eff all properties available for anyone to rent.

Sanity soon prevailed and Keating (re)introduced negative gearing on property and shares (among others). The thinking was exactly as someone here said - it's a business and so it should be treated as any other business. You pay tax on the income but can claim on your expenses. The capital gains are taxable on sale.

When it was introduced, CGT was much tougher - it was based on the CPI from when the property was bought to when it was sold. The tax office did (and probably still does) publish tables to use in working it out. It was later simplified to the current 50% taxable scheme that's currently in force by Little Johnny and his treasurer Scrooge McOstello.

So sayeth my memory... but it's Friday... and I've had some Friday beers. So my memory may be a little shyte. And so here endeth the lesson.

SomeOtherGuy said...

^^^^

You can sure pick the young ones in the room!

Yes... pretty sure it was the Hawke Labor government in its early years. They scrapped the tax breaks then given to rental property investors. Rents skyrocketed as investors bailed out and there were very quickly eff all properties available for anyone to rent.

<snip>

Did rents go up? Take a look at this graph from the ABS data and tell me what really happened, instead of what you heard?

The vertical dashed lines are when they got rid of negative gearing, and when they reinstated it.

In practice, if negative gearing is removed from existing housing stock, you don't just stop renting it out. If you sell it, the person buying it will also rent it out, or move in and make their old residence available for rent.

Similarly, if you increase the rent, the rental market will decide if its too high, and if it is, you won't get any tenants, unless your local area is already short of housing.

FN, I'm guessing your chart shows dollar rental values over time adjusted for 1972 dollar values. Looking at your chart, I wouldn't have wanted to be renting in Sydney or Perth. Sydney rents were already on the increase before the scrapping of negative gearing and they rose even more sharply afterwards. Rents in Perth also started rising when it was scrapped. The other capitals were either unaffected and in Brisbane they continued the fall that started before the event.

What you say about markets is all well and good over the long term. But rent/house situations can take years to turn around.

People who are renting either don't want to buy or can't afford to. Scrapping NG means more investors are likely to sell which increases supply and puts downward pressure on prices. So eventually, some renters can afford to buy that couldn't previously. BUT it can take significant time for them to raise a deposit, find a suitable property, find finance, etc, etc. So there is significant lag in the system.

If you think about it, it's also not true that selling a rental property just means that another one becomes available somewhere else. Sure, that'd be the case if there were a fixed number of houses and people in the market. But there isn't - population increases in most of our capitals which means that every year, more property is needed and only some of that will become available as a rental. If investing is unattractive, there is less demand to build new houses and so rental supply dries up. Again, there'd be significant lag in this.

Funnily enough I agree to a certain extent with both Pweedas and SomeOtherGuy. It makes sense that removing negative gearing for property will reduce the attractiveness of new property and over a period of time reduce the supply.

What I don't agree with is that the removal of it caused the immediate increase in rents, which is what is commonly claimed.

Either way, I also agree that removing it would be bad, and definitely political suicide. I do worry that the investors are getting an advantage that owner occupiers are denied and this skews the market towards investors and increases the prices.

It is interesting to me that the tax office allows a business to claim losses against their profits, but only for businesses that are intended to ultimately run at a profit.
Negative gearing on property seems to be an exception where it is fully expected that the properties won't ever return a positive income. Well, not in this decade at least. Not much of an investment, and very different to a regular business.

As an example, if I created a business to buy windsurfing equipment and rented it out (to myself) and ran at a loss, there is no way the tax office would allow this. It would be nice though.

So, allowing tax deductions for owner occupiers is probably the only practical way to increase the affordability of housing. Of course increasing the supply would help too. Why does such a big land like Australia have such an artificially limited supply of residential land?

renting out a house is not a business it's speculation. Speculation that the market will increase in value. If you run a hotel or a motel then that's a business.

Command economic systems have been proven to not meet the demands of people and just lead to waste and inefficiencies. Command economies allow the economy to be used as weapons against the enemies of those who are commanding the system.

A policy to limit house ownership in Australia would kill the residential building industry completely dead and financially ruin many Australians. Capital would flee Australia as investors would fear such a policy was the first step towards the government locking down and confiscating private property.

People would flee as before you know it food production and distribution would be controlled so everyone gets their "fair share". Of course some people deserve more than others. Those who are the enemy of the controllers would be deemed not to deserve food as they are enemies of the state.

Without investment the economy stops dead. You will all be unemployed have no wages no assets and be truly f Ed. End of story ........

"Command economic systems have been proven to not meet the demands of people and just lead to waste and inefficiencies"Yeah I know, people say things like that and also things like, "all white cats are blind", " Socialism doesn't work" and something about putting a spoon in the neck of a wine bottle. BUT.... how is it that we do somethings on a united national level(like going to war, having a central Bank etc ) and then on another level have to put up with a disorganised chaotic economic system that craps itself every 5 years.

Well no, haven't there been examples of monarchs or despotic rulers or marxist leaders that have dictated this and that in the economy? I just get a little bolshy when people say "well that's just the way it is"

Do yourself a favour and watch Money Masters. Handing over the control of the economy to bankers was the worst decision ever taken. This boom bust cycle is deliberate and concentrates wealth in the hands of the people who control not only the economy but every facet of our lives.

It has not been that way for much more than one hundred years so it is not as though there are not alternatives.

Jacques Fresco has spent his whole life looking at alternatives and I beleive that one day we will give it a whirl.