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Negative gearing

edited February 2007 in architecture
There's an interesting post in the fairfax blogs today, with even more interesting comments following. The boom in property prices is pinned on the tax laws in Australia, which rather uniquely reward landlords for losing money on property they don't live in. Rental investors won $3.9B in tax deductions in the 2004-5 year. This creates an artificial demand for property from investors keen to lose money for a while, then sell up and pay Capital Gains Tax on only half the booty (thanks Mr Costello for this last refinement).

It's all terribly weird and complex for an economics numb skull like me, but worth attempting to understand for the next time this government tries to pin increased housing prices on urban growth boundaries.

THE AGE 13.02.07

Butterpaper forums - housing affordability


  • peter_j
    edited April 2010

    The Age, March 2010:
    "Negative gearing top tax break"
    By the time final figures are in (for 2007/8), the cost to revenue is likely to be about $5 billion. That means, in effect, this tax break paid landlords 4 per cent of all income tax collected.

    All known and measured.


    The Hun, April 2010:
    "Prime Minister Kevin Rudd slams door on Asian raiders"
    FOREIGN students and temporary residents will face tough new rules when buying a house and will have to sell on leaving Australia.

    The Federal Government's crackdown, to be announced today, reverses its December 2008 decision to relax foreign ownership rules.

    Bowing to public pressure, the Government will also introduce a hotline for concerned locals to "dob in" foreigners they suspect of breaching the rules...

    The Government is concerned by anecdotal reports that foreigners are "collecting" houses... Treasury is investigating 50 suspicious residential buys by foreigners in Melbourne.
    There is no data showing how many properties have been bought by temporary residents.
    No data, but lets do it anyway as the tabloids will like it?

    Still no word on the role negative gearing has distorting housing prices.

    Bad timing for developers and architects in Melbourne's Outer East throwing up new multires to satisfy chinese buy-off-the-plan demand. This is about as much warning as the insulation industry got.
  • hairdresser
    edited April 2010
    ^ re hun story.
    i fell ova a statistic in the salon rack.
    recent. will try 2 retrieve wot was a reputable source and the data.
    in relation to QLD apartments. across the market/state.
    was either 7% or 15% of buyers were aus nationals. wos surprisingly low.
    35% were offshore chinese.
    dunno about marxico market.

    it is true that v. large quantities of $china r being parked here big time in the property bank.
    the $ have left the US - where there was a bubble?
  • luke
    edited November -1
    Hard to see why anyone would think this housing market was a secure bank?
  • luke
    edited April 2010
    ^^^ The hun story is anecdotal and short on facts Peter. But real estate mates say the money is pouring in like a waterfall. Rudd gave Australians no warning in 2008 might be the other way to look at it.
  • hairdresser
    edited April 2010
    negative gearing was short man johnny's idea 4 how to privatise public housing?
    will be recalled dickheadsian gearing 50 years from now.

    unregulated foreign investment is another story - very thick icing on a cake full of air.
  • peter_j
    edited November -1
    Not a great surprise to read that the anecdotal evidence leading to the change in policy last month was baseless.

    The Age: FOI documents, "reveal how political the decisions appear to be and how piecemeal monitoring of foreign buyers was."

    Let's see how H. Sun reports this...
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