Hi,
Just found this from: http://www.abc.net.au/am/content/2003/s894837.htm
Democrats back suggestion for negative gearing review PRINT FRIENDLY EMAIL STORY
AM – Friday, 4 July , 2003 08:27:42
Reporter: Louise Yaxley
LINDA MOTTRAM: There’s continuing fallout for the Federal Opposition over comments by its new Treasury Spokesman, Mark Latham, about negative gearing in the tax system.Opposition Leader Simon Crean’s bid to hose the issue down hasn’t stopped the Australian Democrats from backing Mr Latham’s suggestion that negative gearing could be reviewed by Labor.
Louise Yaxley reports.
LOUISE YAXLEY: Negative gearing caused a hiccup for Mr Latham on his first day in his new job, and the Treasurer Peter Costello couldn’t resist pouncing.
PETER COSTELLO: Even Mr Crean had to repudiate his own spokesman within 24 hours.
LOUISE YAXLEY: But Senator Murray says negative gearing is a flawed policy which should be re-examined.
ANDREW MURRAY: What Mr Latham has done, thank goodness, is at last taken Labor away from a carping, whinging, small target kind of mentality and said hang on, here’s a major policy which has a major effect, let’s re-examine it. And as soon as he tries to do so, Mr Crean, who was guilty of the small target policy, wants to stamp on him, and we think that’s wrong.
LOUISE YAXLEY: Andrew Murray says there are three main problems with negative gearing.
ANDREW MURRAY: As a tax concession it’s very, very costly.
The second effect is that it drives investment into the wrong sort of properties. People keep claiming that what you’ve got to do is generate investment in low-cost housing and provide low-cost rental income, but if you talk to people like ACOSS (The Australian Council of Social Service), you will find that that’s not happening at all and nearly all the speculative investment is going into high-rise apartments and that sort of thing.
The third effect of it of course is to artificially heat up the economy.
LOUISE YAXLEY: Simon Crean said yesterday it’s not being reviewed, and said when the Hawke Government changed negative gearing there were serious consequences for the building industry.
Senator Murray argues there are other ways to support housing construction.
ANDREW MURRAY: One of the ways you can do it, of course, is to address the needs to low-cost housing by a direct tax credit approach and a direct incentive approach, in the sense of grants, which are far more effective methods of promoting low-cost housing than through this indirect method where most of the speculative investment is not in fact directed to low-cost housing, and if you tell me that the effects of this are good for Australia, tell me why rentals are roaring up and property prices are roaring up at unsustainable levels.
LINDA MOTTRAM: Democrats Senator Andrew Murray speaking to Louise Yaxley.
However, to help calm the nerves in the short-term, this was quoted in the Herald Sun on 13th May:
Deputy commissioner Mark Konza stressed yesterday that the tax office was not seeking to crack down on negative gearing, which he said was a legitimate expense.
Did anyone hear anything further about what Latham wanted to do?
Bye,
Steve McKnight
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Steve M,
Pure politics at work.First day in the job for Mark Latham.What does he doe for some profile?
Jumps on the issue of the day.Makes what he knows is a contentious statement and sits back and enjoys.Silly Democracts fall for it and help him get more press.
Dont worry, more liberals vote labour than liberal party.
Bye,
JoffConsidering the fuss it caused in 1985, it would be political suicide for labor to promote such a policy, or even discuss it for that matter
Imagine the problems it will cause in the rental market as negatively geared investors start to drop out of the market in a big hurry. It could cause a large drop in prices just like what happened in the US.
PS.. I would love to see lower prices, and would actually welcome them stamping out negative gearing, as it would provide ripe hunting fields for the real investors out there!..
One mans trash is another mans treasure
If investors pull out due to negative gearing changes, they may dump property stock, but demand for new investment development will also fall so initially yes prices may fall as a flow on effect in the rental market. But longer term when stock becomes consumed at lower prices and less new stock available due to lack of investors interest, prices may rise again. I expect it might take a full 12 month cycle to feel the full affects.
Eventually the market will correct itself, but prices may end up higher than ever as its easier to for investors to stop investing than it is for developers to start developing new stock to meet the rental demand, hence a mid to longer term shortage of property stock and sky rocketing rental prices again possibly worse than at present. This will hold true if the population grows and it normally does.
If people cant make a dollar out of property then developers wont risk building and stock shortages will mean, rents and public housing queues will go up. This is exactly what the government does not want.
Just a thought.
I find this comment interesting from Senator Murray…
“tell me why rentals are roaring up and property prices are roaring up at unsustainable levels”
I’d love to know where rentals are roaring up, everything I’ve seen and heard suggests that in most areas there’s actually an oversupply and rents are dropping.
But although I do agree that negative gearing doesn’t always help the lower end of the market, taking it away certainly didn’t help in the 80s, rents went up by around 25% in under 2 years. I don’t see how that will help anybody.
I think some sort of capping perhaps (because most of the big NG is on top end properties) is perhaps achievable though, and certainly would be unlikely to affect the lower end as much.Keep smiling
FelicityI was investing in property in the middle 80’s when the labour govt abolished negative gearing.
At that stage I was pretty heavily negatively geared.
What happened then was that you could continue negatively gearing properties that you have bought prior to the change in legislation, but you could not write off property losses from new purchases against other income. You could carry forward the losses and eventually use them against profit from properties in future years – so you did not really loose the full benefit. It was just a timing issue.
The effect of this was a disincentive to buy invetment property and provide housing for tenants. There were fewer rental properties available, rents shot up and in general property investors who were already in the market were happy.
The legislation backfired, because the aussie battler, who the labour party were meant to represent, had to pay more rent and the govt withdrew the legislation and allowed negative gearing again within about 18 months.
Michael Yardney
Metropole PropertiesHi Michael
Its a pleasure to see you in this forum
Cheers
Rob WP.S you never rang back
“Every family is born with a father as the banker.
If the govt could be bothered, they could provide incentives for more investment in affordable housing, but I think that if this means a compromise in quality of building infrastructure then it could eventually prove more costly that we imagine longer term.
The main thing driving housing costs is not the housing construction cost, but the land value. Builders today are more cost efficient than ever before. So to some extent I see little to be gained by focusing lower cost housing any more than necessary.
If we make houses more affordable that last 20 years less than normal, due to cheaper construction methods, one has to ask where the cost efficiency really is. I see the point, but these other factors need to be considered. In reality lower cost usually translates to lower quality. So I guess the real focus could perhaps be higher quality at lower cost through innovative design and construction.
I also see the point about housing commission style lower cost developments, which I think carry many hidden costs in terms of quality of living by higher density designs. In any event there is plenty of affordable housing around, it just doesn’t exist in the CBD and surrounding suburbs. This issue is not construction cost but availability of land that effects the price. But purely in terms of construction cost, cheap doesn’t always mean good or livable.
I think greater decentralization of government and private public goods and services may go some way towards making living in more distant zones more attractive and affordable, due to lower land costs.
Land appreciates buildings depreciate.
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