neg gearing

HI Kp,

I do agree ‘never say never’ and if the time did arrive when there was a federal government rethink on the ‘negative gearing’ rules it would require some adjustment to my investment plans, timelines etc. – however all things being equal I find it difficult to imagine that I would not be still buying property.

Overseas is an interesting comparison – information (a little dated now) I have seen suggests that 8% of the Australian population lives in ‘public housing’ whereas the overseas ‘norm’ is 20% of the population living in public housing. I am sure the bean counter have factored this into their calculations along with the increased funds collected through changes to CGT and the imposition of GST when considering the long term future of ‘negative gearing’.

I also suspect the Federal Governments are very aware that a number of ‘close to retirees’ have a far wack of their wealth in residential property and as such ‘tinkering’ with related tax laws could create fallout in other areas.

As happened in the mid eighties the ‘herd’ stopped buying and/or left property – whereas seasoned, more informed investors kept buying. The growth rates in property values remained largely unaffected and continued their upward momentum during this two year period (albeit a couple of cities were flatish at the time) and ‘surged’ when the herd reentered the market in late 87.

At the same time rental returns were very high (around 10%) for metropolitan properties. Between high rent returns and depreciation claims a number of educated investors would have been cashflow popsitive anyway. Bear in mind the interest costs were the only disallowed claims – costs such as rates, taxes, management fees etc were still claimable.

But – to cut a long story short – at the end of the day property needs to be selected based on what it adds to our portfolio and not on tax benefits and over time rents do rise in actively managed properties.

Having said that I am quite comfortable using some of my money to create an asset base for my future. Jan Somers likens it to planting a seed, watering it, waiting and then harvesting the benefits in the future – and I have more than one tree to cover the untimely death of any other tree [exhappy].

Derek
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Property Investment Support Available. Ongoing and never stopping. PM welcome.

Thanks Derek and Kay for the responses.

Appreciate your replies.

I was thinking of yield as rent vs market price, hence 3% being more in the order for a capital city.

DD,
So its Brizzy…what a coincidence as we will be there later this week…maybe I will PM you..

KP

kp said:

“rent vs market price, hence 3% being more in the order for a capital city.”

I don’t know who is getting 3% or on what kind of property in, say sydney, but in the market I know, 6% – based on weekly rental : purchase price, is easily achievable. I think if people are buying now and getting only 3%, they could do much much better.

Rents in particular areas are significantly high in sydney.

kay henry

This is definitely a “cat among the pidgeons/chickens (whatever, birdlife pleases you)” topic Calvin, and in line with past disourse, I guess it relies on how/what one’s fundamentals are and their application of same!!!

Jo [sealed]

calvin,

Yes, it would be great if some properties got 10%… but not all of them do. So I sacrifice some cash in hand, because I want to buy specific kinds of properties. It isn’t all about the $20 in my hand today- I have a long-term approach.

In Australia in 2004, positively geared residential properties are fewer in number, and often in remote areas. I’d prefer to buy in areas of greater population, basically. I don’t rely on the income of properties to live on, and I make choices about where to buy- and location and population are two of the factors I make my choices on.

kay henry

It’s a discussion, Rod- not an argument :+P hehe- I don’t do arguments.

Rod, yes, there are creative ways to do deals- it’s why I referred to residential property in 2004 in Australia- I was thinking about “vanilla” buy and holds.

I still look at property as a piece of equipment, really. If one was buying, for example, a truck, to carry stuff in… the truck might not be positively geared, but it is the owner’s plan to one day pay it off- to reap the reards later. That’s my approach too- I am not into the one-minute millionaire mindset. I’d be happy to just own some property when I’m old. for others, they have different desires or needs.

Rod, one day my properties will put money in my pocket too- just not now they don’t. I’m happy to invest for my future, and forego the cash now. I still see property as a solid investment- whatever method one chooses to purchase it.

kay henry